Personal finance chapter 7

A. The legal document used to allow a lender to use real property as collateral

. What is a mortgage? A. The legal document used to allow a lender to use real property as collateral B. The difference between what is owned vs. what is owed C. The transfer of a lease agreement to a new tenant D. All of the choices are incorrect

True

A fixed-rate or fixed-term equity loan is popular when financing an auto or home

A. Can be used to consolidate many high interest rate credit card debts into a single low interest loan

A home equity loan: A. Can be used to consolidate many high interest rate credit card debts into a single low interest rate loan B. Is a great option for people with a lot of debt who cannot control their spending C. Usually has a high interest rate, so it should be used only in emergencies D. None of the answers are correct

C. 35%;40%

A new car depreciates ____________ to ____________ in the first three years of ownership. A. 50%; 60% B. 25%; 40% C. 35%; 40% D. 40%; 50%

C. buyer or seller, but it must be known by all parties

A real estate agent works for the _________, and if they work for the buyer, he/she can help the buyer determine his/her borrowing capacity and identify financing options A. Buyer B. Seller C. Buyer or seller, but it must be known by all parties D. Buyer and seller

B. To pay your utility bills

All of the following are acceptable reasons to borrow on the equity from your home except: A. To pay for college B. To pay your utility bills C. To buy a car D. To remodel your house

C. A home loan where the interest rate varies base on a benchmark plus a spread

An adjustable-rate mortgage (ARM) is defined as: A. Insurance for the lender if it needs to foreclose on your home and the sale of the home does not cover the mortgage and the cost of the foreclosure B. A loan that has a specified payment amount and a specified repayment schedule C. A home loan where the interest rate varies based on a benchmark plus a spread D. A ratio expressing the amount of a first mortgage lien as a percentage total value

A. Lowe than loan payments

Car lease payments are usually: A. Lower than loan payments B. Higher than loan payments C. Never a good investment D. About the same as loan payments

A. Sublease

College students usually _________ their apartments over the summer when they go home. A. Sublease B. Put equity in C. Ignore D. Mortgage

C. Rent a home that meets her needs in her current city

Connie just graduated from college and got her first job. The job pays well but promotions may require her to relocate. What is the best option for Connie if she wants to find a home? A. Buy a small home in her current city B. Buy a large home in the city with potential promotions C. Rent a home that meets her needs in her current city D. Rent a small home in the city in which she may get promoted

True

Equity is the difference between what you own and what you owe

C. The value of your assets minus your liabilities

Equity is: A. How much cash you have in the bank minus what you owe B. How many assets you have C. The value of your assets minus your liabilities D. How many liabilities you have outstanding

True

Home equity loans are typically used to make major purchases for your home

C. 20%

How much of a down payment do lenders recommend when purchasing a car? A. 10% B. 15% C. 20% D. 40%

C. Maintenance

Identify which item is not an advantage of buying a house vs. renting. A. Increase equity each month you make a mortgage payment B. Tax advantages C. Maintenance D. All of the choices are correct

B. Liability, comprehensive, and collision coverage

If you have a car loan, the lender will require what kind of insurance? A. Liability B. Liability, comprehensive, and collision coverage C. Extended warranty D. Rider

False

If you have a loan on a vehicle you only have to have liability insurance

False

Insurance doesn't impact your budget

False

Leasing a vehicle is always better than buying a vehicle because you build equity faster

C. 20%

Most lenders require how much of a down payment on a house to avoid paying PMI? A. 30% B. 40% C. 20% D. No down payment

C. not use them unless he can pay the balances in full each month

Nick took out a home equity loan to consolidate his credit card debt. What should he do with his credit cards? A. Continue to use them and run up the balances to the credit card limit B. Charge everything and never use cash C. Not use them unless he can pay the balances in full each month D. All of the choices are incorrect

D. You do not gain any equity in the rented property

One disadvantage to renting is _________________. A. You are able to move easily B. Its low initial cost C. You gain equity as you pay the rent each month D. You do not gain any equity in the rented property

True

PMI is required when buying a home with a down payment <20% of the selling price.

True

Second mortgages can be extremely risky.

B. Sublease

The transfer of a lease agreement from a tenant to another tenant is known as a(n): A. Mortgage B. Sublease C. Equity distribution D. All of the choices are incorrect

D. Shop for financing and close the deal

What are the last two steps in the auto purchase process? A. Analyze needs vs. wants and do your homework B. Comparison shop and negotiate a deal C. Do your homework and comparison shop D. Shop for financing and close the deal

C. The value of your house may decrease

What is a disadvantage to buying a home? A. The value of your house may increase B. Eventually you will be able to live payment-free C. The value of your house may decrease D. You will gain equity by paying down your mortgage

A. Because it will create and additional claim against the value of your home

What is a reason that you should not take out a second mortgage? A. Because it will create an additional claim against the value of your home B. Because it will require balloon payments C. Because it is a fixed-rate/fixed-term loan D. Because of overhead costs

A. a home loan in which the interest rate varies based o na benchmark plus an additional spread, called a margin

What is an adjustable-rate mortgage (ARM)? A. A home loan in which the interest rate varies based on a benchmark plus an additional spread, called a margin B. A loan that has a specified payment amount and a specified repayment schedule C. A ratio expressing the amount of a first mortgage lien as a percentage of total value D. A mortgage with a strict rate

A. Analyzing needs vs. wants

What is the first step in the auto purchasing process? A. Analyzing needs vs. wants B. Do your homework C. Determining what you can afford D. Comparison shopping

C. The HELOC acts like a revolving charge account

What is the major advantage to having a home equity line of credit (HELOC)? A. It can be used by an entire family B. Banks give guidance on when to use a HELOC C. The HELOC acts like a revolving charge account D. Ease of access to student loans

C. Determine what you can afford

What is the second step of the auto purchase process? A. Shop for financing B. Comparison shop C. Determine what you can afford D. Analyze needs vs. wants

A. Fixed rate

When interest rates are low, what kind of mortgage should you get? A. Fixed rate B. ARM C. Balloon payment mortgage D. Do not get a mortgage

D. All the choices are correct

When looking into buying or leasing a car, what criteria are compared when "doing the homework"? A. New vs. used B. Price and insurance cost C. Reliability and service records D. All choices are correct

D. All choices are correct

When picking out a car and determining needs vs. wants, a person should ask him or herself all of the following questions except: A. How much cargo do you carry? B. Do you want a manual or automatic transmission? C. Do you need two-wheel drive, all-wheel drive, or four-wheel drive? D. All choices are correct

C. help you move in

When purchasing a home, a real estate broker can help you do all of the following, except: A. Find companies to conduct inspections B. Identify financing options C. Help you move in D. Help you find a lender

D. all of the above are important

Which is an important selection criteria when searching for a home? A. Taxes B. Schools C. Location D. All of the above are important

A. If you like the car, buy it

Which is not a way to comparison shop for a car? A. If you like the car, buy it B. Check private sales C. Check dealerships D. Test drive the car

B. Capital gains exclusion if you live in the house for less than two years before selling

Which is not an advantage of buying a home? A. It can provide tax advantages B. Capital gains exclusion if you live in the house for less than two years before selling C. You can get a second mortgage home equity loan D. All of the choices are correct

D. The landlord can make inspections

Which is not an advantage of renting? A. Someone else is responsible for repairs B. There are no unexpected home repair bills C. There is no risk of losing money on your investment D. The landlord can make inspections

D. All answers are correct

Which of the following are true in regard to leasing a vehicle? A. You are in a long-term rental agreement with a limit on the number of miles you can drive without penalty B. A security deposit is required at the signing of the lease and then monthly payments are required C. At the end of the lease you return the car; at that time you have the option of purchasing the vehicle D. All answers are correct

D. There are no unexpected home repair bills

Which of the following is an advantage of renting? A. You can personalize your living space B. It can provide tax advantages C. You can gain equity D. There are no unexpected home repair bills

C. Your local car dealership

Which of the following is more likely to charge you more money when you buy a car? A. An ad in the paper B. An ad on Craigslist C. Your local car dealership D. A sign in a car window

B. Homeowner's insurance

Which of the following is not a closing cost charged by a title company or a bank? A. Title search B. Homeowner's insurance C. Appraisal fee D. Points

C. Pay the sticker price

Which of the following is not a step that you should take before you buy an automobile? A. Negotiate the deal B. Do your homework C. Pay the sticker price D. Shop for financing

D. Take the first offer

Which of the following is not a step toward purchasing an automobile? A. Close the deal B. Shop for financing C. Analyze needs vs. wants D. Take the first offer

D. you will have a fixed payment for a specific time frame with a fixed interest rate

Which of the following is not true in regard to a home equity line of credit (HELOC)? A. With a HELOC, you apply once for the loan and can use it for any expenses B. As you pay off your HELOC you have more credit available to use C. There are tax incentives on your HELOC D. You will have a fixed payment for a specific time frame with a fixed interest rate

B. you put down less than 20% on your home

Why might you have to pay private mortgage insurance (PMI)? A. You had more than three traffic violations in the past year B. You put down less than 20% on your home C. You live in a high-risk neighborhood D. You have a history of defaults

A. private mortgage insurance

_____________ may be required by the lender if it needs to foreclose on a home, and the sale does not cover the mortgage and the cost of the foreclosure: A. Private mortgage insurance B. Premium mortgage insurance C. Primary minimum insurance D. Primary mortgage insurance

B. Loan to Value

_________________ is the ratio expressing the amount of a first mortgage lien as a percentage of the total appraised value of real property. A. Fixed term B. Loan to value (LTV) C. Equity D. Good faith estimate