Bus 121 Ch. 7 Selecting and Financing Housing
Brett bought a house five years ago for $150,000. At that time he borrowed $140,000 from his bank. The house is now worth $162,000. The current value of his mortgage must be no higher than ________ for him to request termination of his PMI policy.
$126,360. Once his equity has increased to 22% of the current market value, he can request that PMI be cancelled. He may request termination of PMI when his mortgage balance reaches $126,360 {$162,000 × (1 − 0.22)}.
Jordan earns an annual salary of $46,680. If a lender uses 33% of monthly gross income as a guideline for the maximum PITI (principal, interest, taxes, and insurance), what is the maximum amount that Jordan can pay for PITI each month?
$1283.70 monthly gross income = annual salary / 12 months. If 33% of the monthly gross income is allowed for PITI, then his maximum PITI = monthly gross income × 33%.
Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30-year, 5% mortgage (where the mortgage factor is 5.37), how much of a mortgage loan can he afford?
$167,597.77 Affordable mortgage amount = (affordable monthly mortgage payment/mortgage factor) × 1,000; thus, = ($900/5.37) × 1,000 = $167,597.77
Lonette and Al want to purchase a home and avoid paying private mortgage insurance (PMI). What minimum amount of down payment is required for them to purchase a $40,500 home to avoid PMI?
$8100 To avoid PMI, a 20% down payment is required. Down payment = 20% × cost of home
What should a home buyer consider when evaluating a house?
All of these should be evaluated. (Zoning laws.) (Location of businesses and future construction projects.) (Property values of the community.) (School system.)
Which of the following is a form of housing in which the units are owned by a nonprofit organization?
Cooperative housing.
Pauline just submitted an offer on her dream home. As evidence of good faith, she also included
Earnest money.
Which of the following is an account used to pay property taxes and homeowner's insurance?
Escrow.
Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called
Points.
Which of the following is NOT correct?
Traditional financial guidelines suggest that your home should cost about five times your annual income.