Chapter 9 Quiz

Which of the following are advantages of renting?

-More mobility -More Liquidity -Limited maintenance expenses -Limited financial obligations

Which of the following are advantages of home ownership?

-Tax deductions on interest paid -Pride of ownership -More predictable housing expenses -Creates a store of value and possible equity growth

Which of the following are part of a standard home inspection checklist?

-electrical -structural elements -outdoor buildings -plumbing -exterior elements -roof and attic -systems

Usually, if a down payment is less than ____ of the price, the borrower will have to pay for private mortgage insurance.

20%

Based on a reasonable outlay, what percentage of your income should go toward housing costs?

33%

If you have other debts, your PITI plus other debt repayments should be what percentage of your gross income?

38%

The size of the down payment you make does not effect the cost of financing, but can effect the price of the house

False

After a purchase and sale agreement is signed, when must you meet the conditions in the paperwork?

NOT: a week before the closing date

If a security deposit is not used, it's returned to the tenant when they leave a rental.

True

Some mortgages have a penalty for early payment of the balance.

True

While a house may be used to store value, it may not generate a real increase in wealth.

True

You might get your mortgage through your local bank, and then find that they sell the loan to a larger financial institution.

True

Your ability to access financing or get a loan will determine the price range of the house you can buy.

True

How much will a real estate broker typically make when selling a house?

about 6% of the purchase price

Match the terms below with their definitions:

adjustable rate mortgage: a loan for which the amount of interest can change over time payment cap: the amount by which the payment can increase or decrease balloon mortgage: offers fixed monthly payments for a specified period, and then a final, large repayment of principal HELOC: allows the homeowner to secure a line of credit and pay interest only on the outstanding balance reverse mortgage: designed to provide buyers with high equity in their home a chance at liquidity

People tend to rent at what point in their lives?

early in their adulthood

Sales of _____ far outnumber sales of ___.

existing single family homes, new single family homes

Housing markets tend to be ____ in nature.

local

For a mortgage loan, the _____ the maturity, the ____ the interest rate.

longer, greater

Many economists attribute the severity of the recession in the early 2000s to...

the banking crisis that froze the credit markets

When buying a house, a realtor is helping you gather information and assess choices, but you should remember that they're working for _____, and will be compensated by them.

the sellers

Why do renters give their landlords a security deposit?

to cover the costs of repairs and cleaning, as necessary