YOUR MONEY & CREDIT CH5

Kurt has $4,500 for a down payment and thinks he can afford monthly payments of $300. If Kurt can finance a vehicle with a 7 percent, 4-year loan from the automobile dealer, what is the maximum amount he can afford to spend on the car? (Round off the answer to nearest units place.) $18,028 $12,528 $16,028 $14,400 $17,028

$17,028

The purchase price of the house you are buying is $140,000. A loan-to-value ratio of 80 percent will require a down payment of

$28,000

_____ are loans offering low payments for the first few years, gradually increasing until year three or five, and then remaining fixed. Reverse-annuity mortgages Graduated-payment mortgages Adjustable-rate mortgages Rollover mortgages Fixed-rate mortgages

Graduated-payment mortgages

The loss in the value of an automobile over time is called: the market price. reinsurance. depreciation. the acquisition payment. the repurchase commission.

depreciation

You made a $900 mortgage payment. The interest of $925 on the mortgage for this month leads to an increase in the principal balance. You have

experienced a negative amortization

In a co-op, the buyer receives title to a unit and joint ownership of the common areas. false true

false

The job of a mortgage banker is to locate conventional loans for clients. false true

false

A buydown refers to: financing made available by a builder or seller to a potential new-home buyer at well below market interest rates, often only for a short period. a mortgage that requires the borrower to pay only interest; typically used to finance the purchase of more expensive properties. a loan on which payments that equal half the regular annual interest amount are made every six months. a mortgage that starts with unusually low payments that rise over several years to a fixed payment. a fixed-rate mortgage with payments that increase over a specific period.

financing made available by a builder or seller to a potential new-home buyer at well below market interest rates, often only for a short period.

Janet is considering the purchase of a condo for $150,000 during a recession phase, partly financed by a mortgage. She is due to retire in a few years. If she cannot make her mortgage payments on time, she is bound to incur a

foreclosure of her house

When canceling a credit card, you should cut up the card and _____ that you are canceling your account. inform the future lender in writing call and inform the issuer inform the credit bureau in writing call and inform the credit bureau inform the issuer in writing

inform the issuer in writing

The Real Estate Settlement Procedures Act governs on owner-occupied houses, condominiums, and apartment buildings of four units or fewer.

mortgage closings

Fees charged by lenders as a condition of a mortgage loan that raises the effective rate of interest are called: loan discounts. commissions. mortgage points. down payments. add-on charges.

mortgage points.

_ is a situation where homeowners owe more to the lenders than what their properties are worth.

negative equity

Matt is considering the purchase of a condo on a mortgage. However, he is not sure of the amount of the mortgage he is eligible for. will help him identify and correct any problems such as credit report errors that may arise on his application.

prequalification

Which of the following will help a buyer know ahead of time the specific mortgage amount that he or she will be eligible for subject to changes in rates and term? Leasing The rent ratio The interest rate Anchoring Prequalification

prequalification

If you made a down payment of $11,000 on a house worth $110,000, the lenders will require _____ because of the size of the down payment. application fees homeowner's insurance closing points a bond private mortgage insurance

private mortgage insurance

Jackie is in the 28 percent marginal tax bracket and has no other itemized deductions except those related to her home. If she is eligible for a standard deduction worth $6,100 and she incurs the following costs related to housing, how much tax savings will she receive as a result of her home purchase? $5,040 $3,332 $13,250 $2,800 $0

$3,332

A lender will usually require a loan-to-value ratio of _____ or less for a borrower to avoid having to pay private mortgage insurance (PMI). 90% 95% 80% 75% 85%

80%

Which of the following is not essential when a lender analyzes the creditworthiness of a borrower? Employment Housing Lifestyle Income Personal or family matters

Lifestyle

Which of the following is true of buying a used car as compared with a new car? Purchasing a used car will be less expensive as compared with purchasing a new car. The accessories in a new car will be better updated compared with those fitted in a new car. A used car will be in a better mechanical condition compared with a new car. A used car will have a higher residual value than a new car. The fuel efficiency in a used car is always higher compared with that of a new car.

Purchasing a used car will be less expensive as compared with purchasing a new car.

The _____ governs closings on owner-occupied houses, condominiums, and apartment buildings of four units or fewer. Equal Credit Opportunity Act Truth-in-Lending Act Real Estate Settlement Procedures Act Real Estate Agents Act Mortgage Lenders Act

Real Estate Settlement Procedures Act

A veteran might be able to buy a home with no down payment with

a VA loan guarantee

When you lease your apartment from a nonprofit corporation that owns the building and you own a share of the nonprofit corporation, you own: a row house. a condominium. a mobile home. a single family home. a cooperative apartment.

a cooperative apartment.

A payment made using _____ is equivalent to paying by cash. a debit card a retail credit card a reward card a student credit card an affinity card

a debit card

If the interest rates and monthly mortgage payments do not change over the life of your mortgage, you have _____. a reverse-annuity mortgage a fixed-rate mortgage a rollover mortgage a graduated-payment mortgage an adjustable-rate mortgage

a fixed- rate mortgage

If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 90 percent, then the borrower must make: a maximum down payment of $10,000. a minimum down payment of $10,000 plus closing costs. a minimum down payment of $90,000 including closing costs. a maximum down payment of $10,000 including closing costs and mortgage points. a minimum down payment of $10,000 including closing costs .

a minimum down payment of $10,000 plus closing costs.

The monthly interest on your adjustable-rate mortgage was $690. You paid $650 as your monthly payment on the loan leading to an increase in the principal balance. This is an example of: a shrinking principal. a fixed interest expense. an indexed equity. a growing equity. a negative amortization.

a negative amortization

As home prices have fallen in recent years, the rent ratio: has decreased and rent attractiveness has increased. and rent attractiveness have decreased. has increased and rent attractiveness has decreased. has increased and rent attractiveness has stabilized. and rent attractiveness have increased.

and rent attractiveness have decreased.

A financing made available by a builder or seller to a potential new-home buyer at interest rates well below market interest rates, often only for a short period is termed as a

buydown

the data in a multiple listing service (MLS): eliminates the need for a real estate agent. includes the entire ownership history of the listed properties. consists of a comprehensive listing of properties for sale in a given community area. deals only with undervalued properties that are authorized by the government within a geographic location. is accessible to the buyers and sellers directly.

consists of a comprehensive listing of properties for sale in a given geographic area.

________ are ongoing costs of home ownership.

property taxes and insurance

Earnest money is the sum of money the home buyer pledges with the

seller to indicated intent of purchase

With prequalification, a buyer can

set right in advance any problems on his credit report

A real estate sales contract will include: the amount you have paid as an earnest money deposit. the movement in the value of the property over the last 20 years. the future value of similar properties in foreign countries. the terms of a mortgage loan taken from a third party. the current value of the properties in the neighboring locations.

the amount you have paid as an earnest money deposit.

Variable auto ownership costs are dependent on: the periodic renewals of vehicle registration. the driver's behavior. the instalment payments on car loan. the down payment. the miles covered by the automobile.

the miles covered by the automobile.

The real estate agent's commission is generally paid by

the seller

A credit report is routinely used to predict creditworthiness. true false

true

An individual can be overusing credit even if he or she can afford to make the minimum monthly payments on time. true false

true

If you initiated the telephone call, it is okay to give your credit card account number when ordering or purchasing from major catalog houses, airlines, hotels, and so on. true false

true

Prequalification provides a home buyer with information regarding the specific mortgage amounts he or she is eligible for subject to the expected changes in interest rates. true false

true

The market price of a house is $125,000, and the home buyer borrows $100,000. Two points are equal to $2,000. true false

true

The most common forms of open account credit are bank credit cards and retail charge cards. true false

true

The most common method of computing finance charges on a credit card is the average daily balance method including new purchases. true false

true

The property listing in a local multiple listing service (MLS) cannot be accessed by all buyers and sellers. true false

true

Chapter 7 of the bankruptcy code: restores all the losses incurred by the borrower. sells only the home of the borrower. requires the debtor to pay back the debt in the future. results in the loss of all of one's assets. eliminates most of the financial obligations of the borrower.

​e. eliminate most of the financial obligations of the borrower.