Personal FIN Ch. 7
The financial variables to consider when determining an appropriate amount for your housing expenses include which of the following?
Income home cost take-home pay
A condominium is a type of building structure and not a legal form of ownership.
False
True or false: Monthly payments are typically the same across 15-, 20-, and 30-year loans.
False
One of the reasons why renting offers fewer financial benefits than home ownership is that rent is not tax deductible while the interest on mortgage payments is.
True
The importance of preparing your home for sale is that it can make for a fast and financially favorable sale.
True
True or false: A security deposit covers the cost of damages that may be done to a rental unit.
True
True or false: Buying a house is the most expensive decision that most people will ever make.
True
True or false: Factors that impact the asking price for a home include recent selling prices of comparable homes in your area.
True
True or false: Location is considered the most important factor when buying a home.
True
True or false: Negotiating the purchase price for a home may involve an offer and several counteroffers.
True
True or false: Points are prepaid interest charged by the lender and one point is equal to 1 percent of the loan amount.
True
When purchasing a home, the buyer (not the seller) can expect to pay closing costs such as:
appraisal fee. termite inspection. title search fee.
A ___________ deposit is usually one month's rent that is held by the landlord to cover the cost of any damages to the rented property.
security
Factors such as the material quality and condition of the building, the condition of the foundation, roof and gutters, and the type of chimney are part of the:
exterior construction
The main benefit of a conventional 30-year mortgage is:
fixed payments.
The benefits of an adjustable rate mortgage include all of the following except:
fixed rates on loans.
Which of the following are the important considerations when evaluating a local school system?
Percentage of students who go to college Achievement level of students Program quality
Which of the following best describes the rights of residents of cooperative housing?
The right to occupy the unit for as long as stock is owned
Which of the following best describes the role of a home inspector?
To review the interior and exterior construction, facilities, and design of a potential home purchase
True or false: Homeowners without children do not need to be concerned with school system in which their home is located.
False
True or false: You should consider refinancing costs in relation to the savings gained with a lower monthly payment before moving forward with refinancing.
True; consider whether the benefits outweigh the costs
Tenants are protected from a rent _____ during the term of the lease unless the lease contains a provision allowing it.
increases
An adjustable-rate mortgage usually has a rate cap and a _________ cap.
payment
Tenants are often subjected to restrictions regarding ______ and remodeling.
pets
Despite its fixed payments, some borrowers will select an adjustable rate mortgage over a conventional mortgage because:
the adjustable rate mortgage has lower initial payments
What are some of the disadvantages of home ownership?
Higher living expenses than renting Limited mobility when compared to renting Significant financial commitment
Common sources of down payment funds to purchase a home include:
assistance from relatives personal savings the sale of investments
If a __________ is only slightly lower than the asking price, then you are expected to move closer to that price with your next offer.
counteroffer
The advantages of owning a manufactured home (mobile home) include which of the following?
Less expensive than other options Offer features such as fully equipped kitchen and fireplace
Interior construction can include all of the following:
ease and operation of windows condition of plumbing fixtures
Your ______, needs, desires, and attitudes are reflected in your choice of a home.
lifestyle
One way that an interest-only mortgage benefits the borrower is by:
offering lower payments.
The advantages of owning a home include:
personalized living location stability of residence tax benefits
It is a good idea for home buyers to go first to a mortgage company and _____.
pre-qualify
The tenant is protected from rental increases during the lease term unless the lease contains a(n) ______ allowing for increases.
provision
In the context of the home inspection as part of the home-buying process, identify elements of exterior facilities.
Appropriate drainage system Condition of patio or porch
Previously owned houses, new houses and custom-built houses are often referred to as:
single-family dwellings
Which of the following are the common terms (years) of home mortgages?
10 15 20 30
Private mortgage insurance (PMI) is required when the down payment is less than Blank______ of the purchase price of the home.
20 percent
Traditional guidelines suggest spending no more than ___ times your annual income on housing.
2½
Payments on a mortgage are usually made over a time period ranging from 10 to __________ years.
30; thirty
Reverse mortgages provide homeowners who are _____ or older with tax-free income in the form of a loan that is paid back when the home is old or the homeowner dies.
62
Factors such as the size and arrangement of rooms, layout of kitchen, and the location of bedrooms, closets, and storage space should be considered when inspecting the ______ of a home.
interior design
One way that an interest-only mortgage benefits the borrower is by:
making the loan more easily affordable.
Renters have a financial disadvantage because they cannot take tax deductions for __________ interest.
mortgage
Which of the following is not part of the interior construction that is evaluated during a home inspection?
Size and arrangement of rooms
During which step of the mortgage loan application process does the lender obtain a credit report and verify your application and financial status?
Step 2
Educators recommend that schools be evaluated based on which of the following? Percentage of faculty who attended the school Number of sports teams Student achievement level
Student achievement level
Which of the following can affect mortgage affordability?
The amount of income you earn Mortgage rates Your down payment The length of the loan
True or false: Some of the factors to consider when determining a price for a home include the owner's need to sell, the time the home has been on the market, and the features and condition of the home.
True
When it comes to the size of manufactured homes, which one of the following is true?
Typically these homes are smaller than 1,000 square feet
In the context of the home inspection as part of the home-buying process, identify elements of interior design.
Ventilation for cooking Adequate laundry area Accessibility to basement and attic
True or false: Home equity loan interest is only tax deductible as long as the proceeds are spent on education with the risk being that a default on the equity loan could mean foreclosure.
False
How could the tax benefit and risk of a home equity loan best be described?
Interest is tax deductible, but default could mean foreclosure.
Which of the following is not a service provided by a real estate agent?
Obtaining financing for you
Which of the following is NOT true?
The government provides mortgage money on VA and FHA loans.
A drawback of 30-year conventional mortgages is:
you will pay higher initial rates than with adjustable mortgages.
The benefits of a conventional 15-year or 20-year mortgage usually include:
a quicker pay-off of the loan than a 30-year amortization a lower rate than a 30-year mortgage a faster equity build-up than a 30-year mortgage
The most common sources for a down payment include all of the following except:
checking account funds.
Which of the following are the advantages associated with renting an apartment?
easy to move; mobility less maintenance than owning minimal financial commitment
A trained home __________ reviews the interior and exterior construction, facilities, and design of a potential home purchase.
inspector
Which of the following statements is NOT true?
A point equals 5 percent of the loan amount.
Which of the following is NOT included among closing or settlement costs? One of these is incurred at the beginning of the process and not at the closing.
Credit report
Who is most likely to benefit from a reverse mortgage?
Elderly home owners who can take the funds in the form of a tax-free loan to live on and pay back the loan when the home is sold
What are some of the expenses (other than the rent payment) that you would incur if you were to rent a unit?
Electricity Heat Cable television
Which of the following is NOT true?
The initial rate offered by ARMS is usually higher than conventional mortgages.
When renting, it is not recommended that one should get insurance coverage on personal property.
False
When thinking of buying your first home it is important to (Check all that apply)
consider a handy-man's special at a lower price realize you may not get everything you want in the first house
Homeowners can request that PMI be removed once equity has grown to 22 percent of the _____ of a home.
current market value.
What are the disadvantages of owning a condominium?
Monthly fees No ownership of the outside grounds
Although the interest-only mortgage has lower interest payments, it does not allow the borrower to (select all the options that apply):
decrease the amount that is owed. build equity unless the home increases in value.
Quality of landscaping, trees, and shrubs are part of the:
exterior facilities in a house.
Potential home owners without children should evaluate school systems of the municipalities where they might live because:
good schools translate to rising property values
The one drawback of a conventional 15-year or 20-year mortgage when compared to a 30-year mortgage is:
higher monthly payments
Generally speaking, the ________ the credit score the ________ the mortgage rate
higher, lower; lower, higher
FHA/VA fixed-rate mortgage typically have _________ (low/high) down payment requirements.
low
The benefits of a FHA/VA fixed-rate mortgage include:
low down payment may be assumable with no prepayment penalties
Early in a person' s career, renting is advantageous because renting offers:
mobility
The Homeowner Protection Act requires that a PMI policy be terminated when the equity reaches ______ of the property value at the time the mortgage was executed.
22 percent
Which of the following are the main services offered by a real estate agent?
Helping you negotiate a price for a home Recommending other advisers to help you with the process of buying or selling a home
A drawback of an interest-only mortgage is that it does not enable the borrower to build ____________ unless the home value increases.
equity
Conventional 15- or 20-year mortgages have faster __________ buildup, which is a key advantage over a 30-year mortgage.
equity
Single-family dwellings include which of the following?
Previously owned houses
Which of the following is not something the government agency does through government-guaranteed financing programs?
Provide the mortgage money
The most important factor when buying a home is said to be the home's ______.
location
___________ mortgage insurance is usually required if the down payment is less than 20 percent.
Private
Which of the following are advantages of buying housing?
Significant tax benefits Many remodeling or customization possibilities
While residents in cooperative housing do not own the units, they have the legal right to occupy their unit as long as they own ___________ in the cooperative association.
stock
Place the steps of the mortgage process in the sequence in which they occur.
1. Complete the mortgage application and present evidence of income, etc. 2. Lender gets credit report, confirms financial aspects 3. Mortgage is approved or denied
Which of the following are disadvantages of buying housing?
Significant financial commitment Limited mobility (difficult to move)
Current mortgage interest rates, your income, and funds available to make monthly payments can impact the amount you can spend on a home.
True
Every buying decision is a statement about your lifestyle.
True
Which of the following factors have an impact on the amount you can spend to acquire a home of your own?
Your current living expenses Your income (salary, wages, investment income, etc.) The amount of the down payment you can make
Factors such as the appearance of the neighborhood, the quality of landscaping, the condition of the driveway, and the outdoor lighting are part of the:
exterior facilities
Conventional 30-year mortgages provide certainty regarding principal and _________ payments.
interest
The amount of money offered for a home depends on (select all that apply):
recent selling prices of homes in the area. the time the home has been on the market. features of the home.
Which of the following captures the main factor to consider when refinancing a loan at a lower rate?
The cost of refinancing versus the benefits (savings) of lower monthly payments
The benefits of an adjustable rate mortgage include which of the following?
Lower initial rates than fixed-rate loans
Restrictions regarding pets and _____ are often enforced on tenants by landlords.
decorating
Which of the following home improvements are the most desirable (i.e., they will have the greatest positive impact on the asking price)?
Remodeled bathroom Remodeled kitchen New energy-efficient features