Ch. 3 PF exam

Government-guaranteed financing programs

-Veterans Administration (VA) -Federal Housing Authority (FHA) -US Department of Agriculture (USDA finances housing and community facilities in rural areas

earnest money

a portion of the price of a home that the buyer deposits as evidence of good faith to indicate a serious purchase offer. usually 1-3%

A policy that supplements your basic personal liability coverage is called a(n):

umbrella policy

100/300/50 Auto Insurance

$100,000 in coverage for bodily injury liability per person, $300,000 total for all injured parties involved, and $50,000 for property damage liability.

zoning laws

restrictions on how the property in an area can be used

types of risk: (6)

risk peril hazard personal property liability

risk management methods (4)

risk avoidance risk deduction risk assumption risk shifting

personal preferences are the... of a housing decision, but ... will modify final choice

personal preferences, financial factors

Sally was driving her own car and collided with a pickup truck. Sally sustained $141,000 in injuries, and her passenger sustained $26,000 in injuries. If her coverage was 100/300/50, what are the total medical expenses the insurance company would pay for this accident?

$126,000

rental costs: annual rent= insurance= security deposit=

$7,380 $145 $650

Buying cost: annual mortgage= property taxes= insurance/maintenance= down payment/closing costs= growth in equity= est. annual appreciation= after tax saving int. rate= tax rate=

-$9,800($9575 is interest) -1780 -1050 -4500 -225 -1700 -6% -28%

cooperative housing

form of housing in which the units in a building are owned by a nonprofit organization

an evaluation by a ... can minimize future problems mortgage company will usually conduct an...

trainer home inspector appraisal

Motor vehicle insurance falls into two categories: protection for bodily injury and protection for property damage. true/false

true

amortization

the reduction of a loan balance through payments made over a period of time

security deposit if money is deducted from security deposit...

typically required when you sign a lease and is often one month's rent you have the right to an itemized list of repair costs

mobile homes characteristics (3)

typically, less than 1,000 sq. ft., offer features of a conventional home site for manufactured home may be either purchases or leased tendency to quickly depreciate may make it difficult to obtain financing

for many apartments ... is covered by rent, though this is not for al utilities you will likely pay for all utilities if you...

water rent a house

A drawback of 30-year conventional mortgages is:

you will pay higher initial rates than with adjustable mortgages.

Home-buying activities step 5: Includes (3)

cost the purchase transaction -arrange closing date -obtain funds and documents for closing -request clarification of unclear aspects of the transaction

homeowners insurance

coverage for a place of residence and its associated financial risks such as damage to personal property and injury to others

Home-buying activities step 4: Included (3)

obtain financing -determine amount of down payment -investigate rates and conditions of mortgages -apply for mortgage and evaluate types of mortgages

risk management risk avoidance risk deduction risk assumption risk shifting

organized plan for protecting self, family, and property involves eliminating risks altogether decreases likelihood risks will cause harm taking on responsibility for negative results of risk involves transferring risk to insurer

points are... and one point is equal to...

prepaid interest charged by the lender 1 percent of the loan amount.

Home-buying activities step 3: Includes (2)

price the property -determine appropriate market price -negotiate an agreement price

insurance

protection against possible financial loss

coverage

protection provided by terms of the insurance policy

title insurance title company conducts...

protects the owner or lender against financial loss resulting from future defects in title & from other unforeseen property claims not exclude by the policy survey to define boundaries of property and conducts search to determine whether property is free of claims

reverse mortgages

provide homeowners who are 62 or older w/ tax-free income in form of a loan that is paid back (w/ interest) when home is sold, or the homeowner dies

personal, property, and liability risks are types of... speculative risk carries a...

pure or insurable, risk change of either loss or gain

homeowners protection act

requires PMI be terminated automatically when equity reaches 22% of property value at time mortgage was executed

real estate settlement procedures act

requires buyers be given closing costs estimate before the closing

ability-to-repay (ATR) / qualified mortgage rule (QM) rule

requires lenders to carefully consider borrower's financial situation before granting a mortgage

planning an insurance program (4)

set insurance goals develop plan to reach goals put plan into action check results

services of real estate agents (5)

show homes based on needs and pre-approved mortgage amount present offer to seller based on market analysis negotiate a purchase price assist you in obtaining financing represent you at closing

important motives of many home buyers major financial benefit of home buying...

stability of residence and a personalized living location mortgage interest and real estate may be deducted on federal income taxes

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

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

refinancing results in...

a new mortgage on your current home at a lower interest rate

insurance company (insurer) how does one join policy holder is the... and does what? people protected by the policy are called

risk-sharing firm that assumes financial responsibility for losses from an insured risk by purchasing a contract, aka policy purchaser of policy, and they pay the insurance company a premium insureds

warranty deed

the seller guarantees the title is good

types of housing available (6)

-Single-family Dwelling -Multi-unit Dwelling -Condominium -Cooperative Housing -factory-built Homes -Custom Homes

deed

document that transfers ownership of property from one party to another

multiunit dwellings

have more than one living unit

Fixed Rate Mortgage

(conventional mortgage) a mortgage with a fixed interest rate and a fixed schedule of payments

Which of the following are the common terms (years) of home mortgages? (4)

30 yr. 20 yr. 15 yr. 10 yr.

Conventional 15- or 20-year mortgages key advantage over a 30-year mortgage

Conventional 15- or 20-year mortgages have faster equity buildup

Private Mortgage Insurance (PMI) is usually required if...

Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency. is usually required if own payment is less than 20%

payment cap

On an adjustable-rate mortgage, the limit on the monthly payment increase that may result from a rate adjustment.

Personal property insurance covers:

Personal property items up to 55-75percent of the insured value of the home.

Housing rental activities step 1: Includes: (3)

The search - select an area and rental amount - compare costs and facilities of comparable units -talking to current & past residents

lease

a legal document that defines the conditions of the rental agreement between the tenant and the landlord; includes important info

Insurance that covers valuable items, such as an expensive musical instrument, is called:

a personal property floater

second mortgage or home equity loan

allows a homeowner to borrow on the paid-up value of the property

Renting advantages and disadvantages (3 each)

advantages: - easy to move - fewer maintenance responsibilities - minimal financial commitment Disadvantages: - no tax benefits - limitations regarding remodeling - restrictions regarding pets, and other activities

Buying advantages and disadvantages (3 each)

advantages: - pride of ownership - financial benefits - lifestyle flexibility Disadvantages: - financial commitment - higher living expenses than renting - limited mobility

interest only mortgage

allows a home buyer to have lower payments for the first few years of the loan, during which time none of the mortgage payment goes toward loan amount

mortgage payments are set to allow ... of the loan

amortization

Buy down mortgage

an interest rate subsidy that reduces mortgage payments during first few years of loan

appraisal

assessment of the property's current market value

Housing rental activities step 4: Includes: (3)

at the end of the lease -clean apartment; leave it in same condition as when moved in -tell landlord where to send security deposit -require than any deductions from security deposit be documented

Housing rental activities step 2: Includes: (4)

before signing a lease -verify lease starting date, costs, and facilities -talk to lawyer about unclear aspects of lease -note in writing, signed by the owner, the condition of the rental unit -remember, if 2 names are on lease, one person can be held responsible for the full rent

standard insurance policies (2)/def

broad form- covers personal property against perils specified in policy, such as fires and thefts comprehensive form- protects your personal property against all perils not specifically excluded in policy

homeowners insurance policy provides coverage for following (5)

building in which you live and any other structures on property additional living expenses personal property personal liability and related coverage specialized coverage

risk peril hazard personal risk property risk liability risk

chance of loss or injury anything that may possibly cause a loss anything that increases the likelihood of loss through some peril such as defective house wiring can increase chance of fire loss of income or life due to illness, disability, old age, or unemployment losses of property caused by perils, such as fire or theft, and hazards glossed caused by negligence that leads to injury or property damage

applying for a mortgage involves these steps: (3)

complete application and meet w/ lender to present evidence of employment, income, ownership of assets, and existing debt amount lender obtains a credit report and verifies your application and financial status mortgage is either approved or denied

Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car had been vandalized. This damage would be covered under his:

comprehensive physical damage coverage

to determine how much of a house you can afford

contact a mortgage company or other financial institution to prequalify you, free of charge

Home-buying activities step 1: Includes (3)

determine home ownership needs -evaluate owning your place of residence -assess types of housing units -calculate amount you can afford

Uninsured motorist protection automatically covers you and your family members, but in most states, it does NOT cover damage to the vehicle itself. true/false

false

closing costs

fees and charges paid when a real estate transaction is completed

Home-buying activities step 2: Includes: (3)

find and evaluate a property to purchase -select location -consider using real estate agent -conduct a home inspection

The main benefit of a conventional 30-year mortgage is:

fixed payments

building a home

for people who want certain specifications.

factory-built houses types of factory-built houses - definitions (3)

fully or partially assembled in a factory and then moved to the living site prefabricated home- with components built in a factory, is assembled at the housing site modular home- has completed pieces transported and set on a concrete foundation mobile homes- legally referred to as manufactured homes, are often moved from their original sites

adjustable rate, variable-payment mortgages (2)

has interest rate that increases/decreases during life on loan rate cap restricts amount by which interest rate can increase/decrease during the ARM term

implied warranties

home warranty programs, and service contracts should be considered

single-family dwelling

include previously owned houses, new houses, and custom-built homes

renter's insurance

includes coverage for personal property, additional living expenses, as well as personal liability and related coverage

condominiums

individually owned housing units in a building with several such units

when renting be sure to obtain...

insurance coverage on your personal property

when listing w/ a real estate agent: consider agents agent has a variety of ' agents have contacts with discount brokers are available to sellers who are willing to

knowledge of the community marketing materials real estate attorneys, repair companies, and other services that might be needed take on certain duties and want to reduce selling costs

when selling home use a

lawyer of title company to assist w/ the contract, closing, and other legal matters

purchase agreement, or contract

legal offer to purchase the home

liability

legal responsibilities for the financial cost of another person's losses/injuries

choice between renting/buying residence should be analyzed based on...

lifestyle and financial factors

Housing rental activities step 3: Includes: (4)

living in rental property -keep all facilities in good condition -contact owners regarding needed repairs -respect rights of others regarding noise -obtain renter's insurance for personal belongings and liability situations

most important factor when buying a home

location

mortgage terms usually range from

long-term loan on a specific piece of property, such as a home or other real estate 10-30 years

real estate taxes are a...

major expense for homeowners

closing is a

meeting of the buyer, seller, and lender of funds, or reps of each party, to complete the transaction

escrow amount

money, usually deposited with the lending financial institution, for the payment of property taxes and homeowner's insurance

traditional financial guidelines suggest you spend...

no more than 25-30% of take-home pay on housing