Finance final STUDY

LARGE CHART STARTING WITH BUY AND SELLER INFORMATION. What are the amounts due from the borrower at closing?

$50,627.61

You are considering an option to purchase or rent a single residential property. You can rent it for $2,000 per month and the owner would be responsible for maintenance, property insurance, and property taxes. Alternatively, you can purchase this property for $200,000 and finance it with an 80% mortgage at 6% interest, 30 year - fixed. The loan can be prepaid at any time with no penalty. You have done research in the market and found that properties have historically appreciated at an annual rate of 3% per year. Rents on similar properties have also increased at the same rate. Maintenance and insurance are currently $1,500 each per year and they have been increasing at a rate of 3% per year. 26 marginal tax rate.... occupy the property as your principal residence for at least 4 years. Capital gains exclusion would apply when you sell the property. Selling costs would be 7% in the year of sale. and Property taxes have generally been about 2% of the property value each year. What is the net cash flow from owning before sale (After-tax basis) at year 1?

$9,010

You have an opportunity to acquire a property from First Capital Bank. the bank recently obtained the property from a borrower who defaulted on his loan. First Capital is offering the property for $300,000. If you buy the property, you believe that you will have to spend (1) $15,500 on various acquisition-related expenses and (2) an average of $4,000 per month during the next 12 months for repair costs, and so on, in order to prepare it for sale. Because First Capital Bank would like to sell the property as soon as possible, it is willing to provide $270,000 in financing at 8% interest for 12 months payable monthly (interest only). Your market research indicates that after you repair the property, Furthermore, you will probably have to pay about $5,000 in fees and selling expenses in order to sell the property at that time. If you wanted to earn a 20% return compounded monthly, what is the price to sell after the repairing the property?

.$406,830.29??????

The subject property of an appraisal has only two bedrooms, but one of the comparables used in the appraisal has three. If the adjustment for a third bedroom is $5,000, the adjustment would be:

A $5,000 decrease to the comparable's selling price.

Which of the following is typically included in housing costs used to calculate a borrower's payment-to-income ratio?

All of the above are included in the housing costs

Which of the following is NOT a factor in causing a property to become distressed:

Borrower's personal debts

When calculating taxes, the difference between the acquisition cost and selling price of a house is called

Capital gain

Federal income tax policy has generally been thought to:

Encourage homeownership

An escrow account:

Ensures that a default insurance policy does not lapse if a borrower is in danger of default

Which of the following organizations provides lenders with complete protection against default losses:

FHA

If mortgage interest rates increase, demand for purchased housing tends to increase.

False

Residential appraisers use only the sales comparison approach to determine value of the homes they appraise.

False

Which of the following would NOT result in an increase in housing demand?

Higher interest rates

When considering the federal income tax treatment for housing, which of the following is tax deductible?

Mortgage interest paid

In some cases, lenders require that borrowers obtain default insurance. The purpose of such insurance is to:

Protect the lender from losses associated with borrower default on the loan

How to find terminal cap rate.

Return minus growth rate.

What document usually summarizes the sources, disbursements, charges and credits associated with a real estate closing?

The settlement statement

If the cost of rental housing increases relative to house prices, demand for purchased housing tends to increase.

True

In order to avoid the requirement to purchase private mortgage insurance when the loan-to-value is greater than 80%, a buyer may be able to take out a first mortgage for 80% or less and couple it with a second mortgage to account for the remainder of the necessary funds.

True

When using the cost approach to valuation, current market data for land values must be obtained.

True

A comparable property has a feature that is superior to the subject property. What adjustment would be made in the sales comparison approach to value?

Value of the feature would be subtracted from the sales price of the comparable property

How to find the going-in cap rate

first year NOI divided by NPV (Purchase price)