Chapter 7: Selecting and Financing Housing

Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)

ARM

Which of the following expenses is NOT usually recommended or necessary for a tenant?

All of the above are expected (Security deposit, Utilities, and Insurance)

When Nancy buys her house, the mortgage company will probably conduct a(n)

Appraisal

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

Expected maintenance costs

Paul is 23 years old and has a small amount to use as a down payment for his first house. He might be eligible for a(n)

FHA loan

Andrew wants a loan that will allow him to pay back his 30-year mortgage in 15 to 18 years. His best choice is

Growing-equity mortgage

Since Dan served in the Army, he should be eligible for a(n)

VA loan

When Ingrid was selling her house, she contacted Gabe, her real estate agent, to help her with the sale. Gabe's services include all except

Working for the buyer

What should a home buyer consider when evaluating a house?

Zoning laws, Location of businesses and future construction projects, School system, Property values of the community

A condominium is a form of housing in which the units in a building are owned by a nonprofit organization.

false

A disadvantage of home ownership is the deductibility of mortgage interest and real estate tax payments.

false

A duplex is a house with two or more separate dwellings.

false

A landlord has the right to sublet an apartment.

false

About 50 percent of home sales are By Owner.

false

An advantage of renting is pride of ownership.

false

The most common conventional mortgage is the 20 year ARM.

false

The purpose of an escrow account is to pay the points at closing.

false

When Brett's apartment lease ends, he should receive his entire security deposit back even though the carpet has been damaged while he was living there.

false

When interest rates are high and the demand for homes is low, prices of homes will likely be at a premium.

false

Your decision to rent or to buy your residence should be based solely on lifestyle factors.

false

Jim wants to make an offer to buy an older house. At this point, he should

set up a home inspection

A balloon mortgage has fixed monthly payments for a period of time. At the end of that time, the entire principal balance must be paid in full.

true

A handyman's special is a home that needs work and is priced lower than homes in better condition.

true

A real estate agent can provide service to save you time and effort with selling your home.

true

Lenny the landlord has the right to take legal action against Tina the tenant if she does not pay her rent on a timely basis.

true

Most low and middle income people will NOT qualify for a VA-guaranteed loan.

true

Your lifestyle affects your housing buying decisions.

true

If you have an interest rate subsidy from a home builder or real estate developer, you have a(n)

Buy-down

Which of the following is a legal form of ownership where the owners pay a monthly fee for maintenance of the common areas?

Condominium

Madeline wants to purchase a larger house. However, she had not yet sold her current home. She may want to include a(n) _____ in her offer.

Contingency clause

If you do not pay back any of the loan amount for a portion of the loan period, you have a(n)

Interest-only mortgage

A legal document that includes information about the due date of monthly rent is called a

Lease

This gives the landlord the right to take legal action against a tenant for nonpayment of rent or destruction of property.

Lease

This provides the tenant protection from rent increases

Lease

Which of the following is an advantage of renting?

Renters have fewer responsibilities than homeowners

Major factors that affect the affordability of your mortgage include all except

Size of home

The opportunity to have another person take over rent payments and live in the rental unit is called a

Sublease

Walt decided to sell the home he lived in for 50 years. The house has 2 bedrooms on the first floor, a finished basement, and a finished attic with a low ceiling. To prepare his home for sale, he should

Take steps to make the house appear bright and large

Which of the following is a disadvantage of renting?

Tenants cannot take tax deductions for mortgage interest and property taxes

Most tenants sign a lease. Which of the following is part of a lease agreement?

The conditions under which the landlord may enter the apartment

The primary benefit of a home equity loan is

The deductibility of the loan interest o federal taxes

Kelly selected a home and submitted an offer to the seller.

The seller may choose to provide a counteroffer

Which of the following is NOT correct regarding real estate agents?

They require that you conduct your own showings

If you are selling your house by owner, you should still enlist the assistance of

A lawyer or title company to assist with the contract, closing, and other legal matters

Donald wanted to buy a house in the country, so he sought the advice from his cousin Evan. Evan explained the advantages and disadvantages of home ownership; however, he did have some information incorrect. Which of the following is incorrect?

An advantage is that the down payment required is less than the security deposit for a rental.

Paul and Lora built their home. When they researched contractors they paid attention to all of the following exept

Contractor's property tax payments during construction

If you have the option to change your adjustable-rate mortgage to a fixed-rate mortgage during a certain period, you have a(n)

Convertible ARM

Zelda is looking for a mortgage that will give her the option to change it to a fixed-rate mortgage. Which of the following will meet her criterion?

Convertible ARM

Which of the following is a form of housing in which shareholders purchase stock to obtain the right to live in a unit of the building?

Cooperative housing

Which of the following is a form of housing in which the units are owned by a nonprofit organization?

Cooperative housing

Which of the following is the document that transfers ownership of property from one party to another?

Deed

Frank and Diane wanted to buy a house. Which of the following do they need before they purchase a house?

Down payment

Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a(n)

Dual agent

Pauline just submitted an offer on her dream home. To show that she is serious, she also included

Earnest money

Which of the following is an account used to pay property taxes and home insurance?

Escrow

If you have a mortgage that provides for increases in payments that allow the amount owed to be paid off more quickly, you have a(n)

Growing-equity mortgage

Franklin wants to sell his house himself. Which of the following is NOT correct about his sale?

He should show the house only when he is home alone

Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except

His original cost

The tenant is the

Lesse

The owner/landlord is known as the

Lessor

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

Lock

Which of the following is NOT a benefit of home ownership?

Maintenance and costs of repairs and home improvements

Diane purchased her house and had it assembled before it was moved to her lot. She purchased a

Manufactured home

Private mortgage insurance

Must be terminated automatically when the homeowner's equity reaches 22 percent of the property value when the loan was initiated

Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly payments have not covered her interest owed. As a result, her home equity is decreasing because of

Negative amortization

Trenton wants to buy a house, but can only provide a 10 percent down payment. He probably will be required to have

PMI

During a home purchase closing, you should

Pay all closing costs, settle last-minute items, and sign documents

Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called

Points

A reverse mortgage

Provides older homeowners a loan that pays tax-free income and is repaid when the home is sold

Which of the following is NOT correct?

Traditional financial guidelines suggest that your home should cost about 5 times your annual income; Caryn's suggestion to open drapes but keep lights turned off to conserve energy will give her property a positive image

An advantage of a buy-down is the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.

true

Angela wanted to rent an apartment, so her landlord required her to sign a lease. The lease is a legal document that defines the conditions of her rental agreement.

true

At the closing of a home purchase, the buyer conducts a walk-through of the property.

false

Home improvements will definitely increase the selling price.

false

Yvette has a flexible-rate mortgage that has a maximum monthly increase. This feature is called a(n)

Payment cap

An advantage of a second mortgage is that the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.

false

An approved mortgage application usually locks in an interest rate for 60-120 days.

false

As interest rates increase, more people have the ability to afford an average-priced home.

false

Ricky has a conventional mortgage. He can monitor his interest and principal payments using

Amortization

If you have a mortgage that has a large final payment, you have a(n)

Balloon mortgage

Georgina and Henry are looking at houses. Which of the following is correct?

They should asses the school system in the area they want to live

Elaine purchased her living unit in a building with 5 other separate units. She purchased a

Townhouse

If you pay an extra $100 per month on your mortgage, your total loan principal will decrease and your total interest will remain the same.

false

If your home is assessed for $200,000, the market value of the home should be less than $200,000.

false

Merrill bought a house and applied for a loan through the VA (Veterans Administration). The VA will provide the down payment when he closes on the house.

false

Mortgage points are paid at the end of the mortgage.

false

Most new mortgages are assumable.

false

Private mortgage insurance is usually required if the down payment for a home is less than 30 percent.

false

Rental insurance isn't important since the landlord's insurance on the building includes coverage on all tenant's belongings.

false