Finance test

the owner/landlord is known as the

lessor

commercial banks

offer full range of financial services including checking,savings,lending and most other services

Mutual savings banks

owned by depositors, also specialize in savings accounts and mortgages.

Joe Smith earns $72,000 per year. His bank uses a rule that PITI must be equal or less than one third of gross monthly income. If his home owner's insurance is $100 per month, roughly how much of a monthly payment can Joe afford including taxes over and above $100 for insurance?

$72,000/ 12 months = $6,000 $6,000/ 3 = 2,000 - 1000 = $1900

What s true about a secruity deposit that is required when you sign a lease?

- usually one month's rent - held to covered the cost of the damages -some state and local laws require landlords to pay interest

When purchasing a home the buyer can expect to pay closing costs such as:

-title search fee -title insurance -attorney fee -appraisal fee -recording fees -settlement fee -lenders origination fee

If you have a $150,000 30- year 5% mortgage, how much of your first monthly payment of $805.50 would go toward principal?

$180.50 $150,000 x 5% x 1 month/12= 625 $805.50-$625.00= 180.50

Common sources of downpayment funds to purchase a home include:

- the sale of investment - personal savings - assistance from relatives

Trenton wants to buy a house but can provide only a 10% down payment. he probably will be required to have

PMI

Who is most likely to benefit from a reverse mortgage?

elderly home owners who can take the funds in the form of tax- free loan to live on and pay back the loan when the home is sold.

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

What are the advantages of owning a condominium?

fewer maintenance responsibilities when compared to a house

A drawback of a 30 year conventional mortgage is:

higher initial rates than adjustable

How could the tax benefit and risk of a home equity loan best be described

interest is tax deductible could mean foreclosure.

When sam applied for a loan, he was assured that his rate would not change if he closed within a specific time period. Sam had a _____.

lock

regular saving accounts

usually involve low or no minimum balance and allow you to withdraw more as needed. s

The act that requires that PMI be removed automatically once equity in the home reached 22% is known as :

Homeowners Protection Act

an account used to pay property taxes and homeowners insurance

escrow

Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except:

Expected maintance cost

saving and loan associations

a financial institution that traditionally specialized in savings accounts and mortgage loans

compounding

a process that calculates interest based on previously earned interest.

Ricky has a conventional mortgage. he can monitor the reduction of his loan balance through his payments by using

amortization

overdraft protection

automatic loan made to checking account customers for checks written in excess of their balance.

What are some disadvantages of home ownership?

significant financial commitment limited mobility higher living expenses than renting

Carrie bought a house five years ago for $150,000. At the time she borrowed $140,000 from her bank. The house is now worth $162,000. Her PMI will automatically be dropped when her mortgage balance drops to

$117,000 $150,000 x (1-.22)

Although the interest only mortgage has lower interest payments, it does not allow the borrower to :

- decrease the amount that is owed -build equity unless the home increases in value

The amount of money offered for a home depends on

- features of the home -recent selling prices in the area - the time the home has been on the market

What can affect mortgage affordability ?

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

Exterior construction factors include:

-condition of roof and gutters -material quality

what is a payment cap?

it keeps the payments on an ARM at a given level or limits the amount to which those payments can rise

annual percentage yield

the percentage rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for 365 day period.

The annual rental payments for an apartment are $16,000 plus renter's insurance of $300 and the lost interest on the security deposit of $100. A comparable home mortgage would cost about $22,000 per year. how much will rental option cost?

$16,400

Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30 year 5% mortgage (where the mortgage factor is 5.36), how much of a mortgage loan can he afford?

$167,597.77 ($900/5.37) x 1000

When thinking of buying your first home it is important to :

-determine hoe much you can afford - realize you might not get everything you want in the first house - consider a handy-man's special

Which home improvements are the three most desirable

-energy efficient features -remodeled kitchen -additional or remodeled bathroom -added rooms & storage space -converted basement -fireplace -outdoor deck or patio

the benefits of a FHA/VA fixed rate mortgage include:

-low down payment requirement -may be assumable with no prepayment pentalties