ECON1200 CH 7&8
The Homeowner Protection Act requires that a PMI policy be terminated when the equity reaches ______ of the property value at the time the mortgage was executed.
22%
modular home
completed pieces transported and set on a concrete foundation
prefabricated home
components built in a factory and then assembled at the housing site, which keeps building costs lower
In the context of the home inspection as part of the home-buying process, identify elements of exterior facilities.
condition of patio or porch; appropriate drainage system
purchase agreement
contract; legal offer to purchase the home
A ___ is anything that increases the likelihood of loss through some peril.
hazard
Defective house wiring is an example of a:
hazard
The one drawback of a conventional 15-year or 20-year mortgage when compared to a 30-year mortgage is:
higher monthly payments
You can sell your home on your own but you must be prepared to:
invest time and effort
factory-built houses
living units that are fully or partially assembled in a factory and then moved to the living site
The most important factor when buying a home is said to be the home's ____
location
FHA/VA fixed-rate mortgage typically have ___(low/high) down payment requirements.
low
zoning laws
restrictions on how the property in an area can be used
Which of the following can affect mortgage affordability?
- income - down payment - mortgage rates - length of loan
The benefits of a FHA/VA fixed-rate mortgage include:
- low down payment - may be assumable with no prepayment penalties
services of real estate agents
1. showing you homes based on needs and pre-approved mortgage amount 2. presenting your offer to the seller based on a market analysis 3. negotiating a purchase price 4. assisting you in obtaining financing 5. representing you at the closing they can recommend lawyers, insurance agents, home inspector and mortgage companies
Which of the following are the common terms (years) of home mortgages?
10-30 years
home inspection
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.
____ is protection against possible financial loss that allows you to be prepared for the worst.
Insurance
How could the tax benefit and risk of a home equity loan best be described?
Interest is tax deductible, but default could mean foreclosure.
Which of the following is true of your personal insurance program?
It should change along with your needs and goals.
Which of the following is NOT true?
The initial rate offered by ARMS is usually higher than conventional mortgages.
Which of the following is an example of a detached structure that is covered under homeowner's insurance?
a garage
What coverage pays for you to stay somewhere else in the event of fire or other damage to your home?
additional living expenses coverage
The two main categories of automobile coverage are:
bodily injury property damage
duplex
a building with two separate housing units
In a ______ system, drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.
no fault
earnest money
a portion of the purchase price deposited as evidence of good faith
Which of the following are covered by a homeowner's policy?
personal property, a house, other structures
In the context of the home inspection as part of the home-buying process, identify elements of interior design.
adequate laundry area, accessibility to basement and attic, ventilation for cooking
An estimate of the current value of the property is known as:
an appraisal
Choosing never to drive to work, so you are not in an accident is an example of risk _____.
avoidance
Homeowners can request that PMI be removed once equity has grown to 22 percent of the _____ of a home.
current market value
Which of the following are risk assumption actions?
deciding not to purchase insurance, self-insuring
multiunit dwellings
dwellings with more than one living unit
Quality of landscaping, trees, and shrubs are part of the:
exterior facilities in a house
Conventional 30-year mortgages provide certainty regarding principal and _____ payments
interest
Factors such as the size and arrangement of rooms, layout of kitchen, and the location of bedrooms, closets, and storage space should be considered when inspecting the ______ of a home.
interior design
Risk management is a(n) ________.
long range planning process
One of the most important services that real estate agents provide is that they:
market your house on various websites.
disadvantages of renting
no tax benefits, limitations regarding remodeling, restrictions regarding pets or other activities
Which of the following are covered by renter's insurance?
personal property personal liability additional living expenses
single-family dwellings
previously owned houses, new houses, and custom built houses
advantages of buying
pride of ownership, financial benefits, lifestyle flexibility
___ mortgage insurance is usually required if the down payment is less than 20 percent.
private
Not eating a high fat diet and exercising lower the chances of illnesses. This is an example of:
risk reduction
Despite its fixed payments, some borrowers will select an adjustable rate mortgage over a conventional mortgage because:
the adjustable rate mortgage has lower initial payments
Your insurance protection for your home should be based on the amount needed to ___ or repair your house and not the amount you originally ___ for the home
rebuild, paid
True or false: People who have very little money in savings will probably rent housing rather than purchase it. True false question.
true
True or false: Points are prepaid interest charged by the lender and one point is equal to 1 percent of the loan amount.
true
True or false: Risk management is a long-range financial planning process that helps reduce financial losses caused by destructive events.
true
True or false: The best risk management plans are flexible enough to handle life's changing situations.
true
True or false: Two external (market) factors that affect the price of a home are the current demand for housing and the financing options (i.e., interest rates) available.
true
True or false: When we set up a special fund to cover the cost of a loss, we are self-insuring.
true
True or false: You can be held legally responsible for another person's injury or damage even if it was not your fault.
true
True or false: You should consider refinancing costs in relation to the savings gained with a lower monthly payment before moving forward with refinancing.
true
Examples of risk reduction include:
wearing a seatbelt, installing smoke alarms
dual agent
works for the buyer and the seller
All of the losses would be covered by homeowner's insurance except:
you accidentally injure yourself with a sharp blade at home.
A drawback of 30-year conventional mortgages is:
you will pay higher initial rates than with adjustable mortgages.
Towing and emergency road service coverage pays for the cost of getting your vehicle to a:
service station but not for the cost of repairs.
townhouse
single family home, sharing one or more walls with other units
True or false: A household inventory is a list or other documentation of personal belongings with purchase dates and cost information.
true
True or false: Your driver classification is one of the main factors that affects the premium for your vehicle insurance.
true
The main bodily injury coverages are:
uninsured motorist's protection bodily injury liability medical payments coverage
The benefits of a conventional 15-year or 20-year mortgage usually include:
- quicker pay-off on the loan than a 30 year amortization - a faster equity build up than a 30 year mortgage - a lower rate than a 30 year mortgage
Private mortgage insurance (PMI) is required when the down payment is less than Blank______ of the purchase price of the home.
20%
Which of the following captures the main factor to consider when refinancing a loan at a lower rate?
The cost of refinancing versus the benefits (savings) of lower monthly payments
lease
a legal document that defines the conditions of a rental agreement
appraisal
assessment of the property's current market value
benefits of renting
easy to move, fewer responsibilities for maintenance, minimal financial commitment
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
Factors such as the appearance of the neighborhood, the quality of landscaping, the condition of the driveway, and the outdoor lighting are part of the:
exterior facilities
Risk management needs are the same throughout one's life.
false
True or false: Home equity loan interest is only tax deductible as long as the proceeds are spent on education with the risk being that a default on the equity loan could mean foreclosure.
false
disadvantages of buying
financial commitment, higher living expenses than renting, limited mobility
Insurance is a protection against possible _______ loss, and provides protection against many ________.
financial, risks
A deductible is a set amount that a policyholder must pay (choose all that may apply):
for risk shifting, assuming risk, and per loss on an insurance company
cooperative housing
form of housing in which the units are owned by a nonprofit
An adjustable-rate mortgage usually has a rate cap and a ____ cap
payment
building a home is for
people who want certain specifications
contingency clause
stating the agreement is binding only if a certain event occurs
During which step of the mortgage loan application process does the lender obtain a credit report and verify your application and financial status?
step 2
True or false: Even if you do not use a real estate agent to sell your home, you should use an attorney or title company to close the transaction.
true
True or false: Factors that impact the asking price for a home include recent selling prices of comparable homes in your area.
true
True or false: Not buying flood insurance on a house is an example of risk assumption.
true
True or false: Some of the factors to consider when determining a price for a home include the owner's need to sell, the time the home has been on the market, and the features and condition of the home.
true
mobile/manufactured home
trailer; offers features of a conventional house
Making needed repairs, painting the interior and exterior of the home, and cleaning all rooms are strategies that can lead to a fast and financially favorable sale.
true
True or false: Buying a house is the most expensive decision that most people will ever make.
true
True or false: Monthly payments are typically the same across 15-, 20-, and 30-year loans.
false
When purchasing a home, the buyer (not the seller) can expect to pay closing costs such as:
title search fee, appraisal fee and termite inspection
The services that a real estate agent can provide include suggesting a selling price, making potential buyers and other agents aware of your home, and conducting showings of your home.
true
Conventional 15- or 20-year mortgages have faster ___ buildup, which is a key advantage over a 30-year mortgage.
equity
True or false: Purchasing insurance is the only way to manage risk.
false
The most common sources for a down payment include all of the following except:
checking account funds
The main benefit of a conventional 30-year mortgage is:
fixed payments
lifestyle
how one spends their time and money
condominiums
individually owned housing units in a building
The legal responsibility for the financial cost of another person's losses or injuries is known as:
liability
Your ______, needs, desires, and attitudes are reflected in your choice of a home.
lifestyle
Generally speaking, the Blank______ the credit score the Blank______ the mortgage rate.
lower, higher ; higher, lower
Common sources of down payment funds to purchase a home include:
personal savings, sale of investments and assistance from relatives
The most common method of dealing with risk is to ____ it, which means to transfer it to an insurance company.
shift
determine the home price
the amount you offer will be affected by recent selling prices in the area, current housing demand, the length of time the home has been on the market, and the mortgage amount for which you qualify
The higher the deductible:
the more risk the insured is assuming
counteroffer
the owner indicates a willingness to negotiate a price
According to the text, the amount of property damage liability coverage that is suggested is:
50,000-100,000
The two standard renter's insurance policies are broad form and ___ form
comprehensive
Additional living expenses that result from a home fire or other home damage are:
costs for you to stay in a motel or a rented apartment while your home is being fixed.
Which of the following is NOT included among closing or settlement costs? One of these is incurred at the beginning of the process and not at the closing.
credit report
Homeowner's insurance does not cover injuries to people on property.
false
True or false: Comprehensive physical damage insurance for your car covers damage to your vehicle if you are at fault in an accident with another vehicle.
false
Most homeowner's policies cover many perils, but not:
flood
A home located in an area where there is a history of high claims will have ___ premiums
high
A household ___ is a list or other documentation of personal belongings, with purchase dates and cost information.
inventory
Comprehensive insurance for your car covers ___ damage to your car from such risks as fire, theft, falling objects, and hitting an animal.
physical
Homeowner's coverage includes (select all that may apply):
plants trees toolshed garage
The main influences on the premium paid for home and property insurance include:
policy type type of structure location of home
Choosing not to participate at all in any kind of heavy physical activity is one way to protect yourself from injury. This is an example of:
risk avoidance
Which of the following are general risk management techniques?
risk avoidance, risk assumption and risk reduction
The coverage of HO-3 policies includes which of the following perils?
theft, smoke, fire and lightning, windstorms
True or false: According to the text, your homeowner's insurance covers damage to your home and any other structures on your property.
true
Automobile insurance covers ___ damage and personal damage (bodily injury) caused by the policyholder's car.
vehicle
The main factors that influence premiums for automobile insurance are:
vehicle type, rating territory, and driver classification
Beyond the standard bodily injury and property damage coverage, other possible automobile coverage includes:
wage loss car rentals towing services
