ECON1200 CH 7&8

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%

modular home

completed pieces transported and set on a concrete foundation

prefabricated home

components built in a factory and then assembled at the housing site, which keeps building costs lower

In the context of the home inspection as part of the home-buying process, identify elements of exterior facilities.

condition of patio or porch; appropriate drainage system

purchase agreement

contract; legal offer to purchase the home

A ___ is anything that increases the likelihood of loss through some peril.

hazard

Defective house wiring is an example of a:

hazard

The one drawback of a conventional 15-year or 20-year mortgage when compared to a 30-year mortgage is:

higher monthly payments

You can sell your home on your own but you must be prepared to:

invest time and effort

factory-built houses

living units that are fully or partially assembled in a factory and then moved to the living site

The most important factor when buying a home is said to be the home's ____

location

FHA/VA fixed-rate mortgage typically have ___(low/high) down payment requirements.

low

zoning laws

restrictions on how the property in an area can be used

Which of the following can affect mortgage affordability?

- income - down payment - mortgage rates - length of loan

The benefits of a FHA/VA fixed-rate mortgage include:

- low down payment - may be assumable with no prepayment penalties

services of real estate agents

1. showing you homes based on needs and pre-approved mortgage amount 2. presenting your offer to the seller based on a market analysis 3. negotiating a purchase price 4. assisting you in obtaining financing 5. representing you at the closing they can recommend lawyers, insurance agents, home inspector and mortgage companies

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

10-30 years

home inspection

A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

____ is protection against possible financial loss that allows you to be prepared for the worst.

Insurance

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 true of your personal insurance program?

It should change along with your needs and goals.

Which of the following is NOT true?

The initial rate offered by ARMS is usually higher than conventional mortgages.

Which of the following is an example of a detached structure that is covered under homeowner's insurance?

a garage

What coverage pays for you to stay somewhere else in the event of fire or other damage to your home?

additional living expenses coverage

The two main categories of automobile coverage are:

bodily injury property damage

duplex

a building with two separate housing units

In a ______ system, drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

no fault

earnest money

a portion of the purchase price deposited as evidence of good faith

Which of the following are covered by a homeowner's policy?

personal property, a house, other structures

In the context of the home inspection as part of the home-buying process, identify elements of interior design.

adequate laundry area, accessibility to basement and attic, ventilation for cooking

An estimate of the current value of the property is known as:

an appraisal

Choosing never to drive to work, so you are not in an accident is an example of risk _____.

avoidance

Homeowners can request that PMI be removed once equity has grown to 22 percent of the _____ of a home.

current market value

Which of the following are risk assumption actions?

deciding not to purchase insurance, self-insuring

multiunit dwellings

dwellings with more than one living unit

Quality of landscaping, trees, and shrubs are part of the:

exterior facilities in a house

Conventional 30-year mortgages provide certainty regarding principal and _____ payments

interest

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

Risk management is a(n) ________.

long range planning process

One of the most important services that real estate agents provide is that they:

market your house on various websites.

disadvantages of renting

no tax benefits, limitations regarding remodeling, restrictions regarding pets or other activities

Which of the following are covered by renter's insurance?

personal property personal liability additional living expenses

single-family dwellings

previously owned houses, new houses, and custom built houses

advantages of buying

pride of ownership, financial benefits, lifestyle flexibility

___ mortgage insurance is usually required if the down payment is less than 20 percent.

private

Not eating a high fat diet and exercising lower the chances of illnesses. This is an example of:

risk reduction

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

Your insurance protection for your home should be based on the amount needed to ___ or repair your house and not the amount you originally ___ for the home

rebuild, paid

True or false: People who have very little money in savings will probably rent housing rather than purchase it. True false question.

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

True or false: Risk management is a long-range financial planning process that helps reduce financial losses caused by destructive events.

true

True or false: The best risk management plans are flexible enough to handle life's changing situations.

true

True or false: Two external (market) factors that affect the price of a home are the current demand for housing and the financing options (i.e., interest rates) available.

true

True or false: When we set up a special fund to cover the cost of a loss, we are self-insuring.

true

True or false: You can be held legally responsible for another person's injury or damage even if it was not your fault.

true

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

Examples of risk reduction include:

wearing a seatbelt, installing smoke alarms

dual agent

works for the buyer and the seller

All of the losses would be covered by homeowner's insurance except:

you accidentally injure yourself with a sharp blade at home.

A drawback of 30-year conventional mortgages is:

you will pay higher initial rates than with adjustable mortgages.

Towing and emergency road service coverage pays for the cost of getting your vehicle to a:

service station but not for the cost of repairs.

townhouse

single family home, sharing one or more walls with other units

True or false: A household inventory is a list or other documentation of personal belongings with purchase dates and cost information.

true

True or false: Your driver classification is one of the main factors that affects the premium for your vehicle insurance.

true

The main bodily injury coverages are:

uninsured motorist's protection bodily injury liability medical payments coverage

The benefits of a conventional 15-year or 20-year mortgage usually include:

- quicker pay-off on the loan than a 30 year amortization - a faster equity build up than a 30 year mortgage - a lower rate than a 30 year mortgage

Private mortgage insurance (PMI) is required when the down payment is less than Blank______ of the purchase price of the home.

20%

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

lease

a legal document that defines the conditions of a rental agreement

appraisal

assessment of the property's current market value

benefits of renting

easy to move, fewer responsibilities for maintenance, minimal financial commitment

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

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

Risk management needs are the same throughout one's life.

false

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

disadvantages of buying

financial commitment, higher living expenses than renting, limited mobility

Insurance is a protection against possible _______ loss, and provides protection against many ________.

financial, risks

A deductible is a set amount that a policyholder must pay (choose all that may apply):

for risk shifting, assuming risk, and per loss on an insurance company

cooperative housing

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

An adjustable-rate mortgage usually has a rate cap and a ____ cap

payment

building a home is for

people who want certain specifications

contingency clause

stating the agreement is binding only if a certain event occurs

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

True or false: Even if you do not use a real estate agent to sell your home, you should use an attorney or title company to close the transaction.

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: Not buying flood insurance on a house is an example of risk assumption.

true

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

mobile/manufactured home

trailer; offers features of a conventional house

Making needed repairs, painting the interior and exterior of the home, and cleaning all rooms are strategies that can lead to a fast and financially favorable sale.

true

True or false: Buying a house is the most expensive decision that most people will ever make.

true

True or false: Monthly payments are typically the same across 15-, 20-, and 30-year loans.

false

When purchasing a home, the buyer (not the seller) can expect to pay closing costs such as:

title search fee, appraisal fee and termite inspection

The services that a real estate agent can provide include suggesting a selling price, making potential buyers and other agents aware of your home, and conducting showings of your home.

true

Conventional 15- or 20-year mortgages have faster ___ buildup, which is a key advantage over a 30-year mortgage.

equity

True or false: Purchasing insurance is the only way to manage risk.

false

The most common sources for a down payment include all of the following except:

checking account funds

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

fixed payments

lifestyle

how one spends their time and money

condominiums

individually owned housing units in a building

The legal responsibility for the financial cost of another person's losses or injuries is known as:

liability

Your ______, needs, desires, and attitudes are reflected in your choice of a home.

lifestyle

Generally speaking, the Blank______ the credit score the Blank______ the mortgage rate.

lower, higher ; higher, lower

Common sources of down payment funds to purchase a home include:

personal savings, sale of investments and assistance from relatives

The most common method of dealing with risk is to ____ it, which means to transfer it to an insurance company.

shift

determine the home price

the amount you offer will be affected by recent selling prices in the area, current housing demand, the length of time the home has been on the market, and the mortgage amount for which you qualify

The higher the deductible:

the more risk the insured is assuming

counteroffer

the owner indicates a willingness to negotiate a price

According to the text, the amount of property damage liability coverage that is suggested is:

50,000-100,000

The two standard renter's insurance policies are broad form and ___ form

comprehensive

Additional living expenses that result from a home fire or other home damage are:

costs for you to stay in a motel or a rented apartment while your home is being fixed.

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

Homeowner's insurance does not cover injuries to people on property.

false

True or false: Comprehensive physical damage insurance for your car covers damage to your vehicle if you are at fault in an accident with another vehicle.

false

Most homeowner's policies cover many perils, but not:

flood

A home located in an area where there is a history of high claims will have ___ premiums

high

A household ___ is a list or other documentation of personal belongings, with purchase dates and cost information.

inventory

Comprehensive insurance for your car covers ___ damage to your car from such risks as fire, theft, falling objects, and hitting an animal.

physical

Homeowner's coverage includes (select all that may apply):

plants trees toolshed garage

The main influences on the premium paid for home and property insurance include:

policy type type of structure location of home

Choosing not to participate at all in any kind of heavy physical activity is one way to protect yourself from injury. This is an example of:

risk avoidance

Which of the following are general risk management techniques?

risk avoidance, risk assumption and risk reduction

The coverage of HO-3 policies includes which of the following perils?

theft, smoke, fire and lightning, windstorms

True or false: According to the text, your homeowner's insurance covers damage to your home and any other structures on your property.

true

Automobile insurance covers ___ damage and personal damage (bodily injury) caused by the policyholder's car.

vehicle

The main factors that influence premiums for automobile insurance are:

vehicle type, rating territory, and driver classification

Beyond the standard bodily injury and property damage coverage, other possible automobile coverage includes:

wage loss car rentals towing services