Personal Finance CH 7

Which of the following are the common terms (years) of home mortgages? -50 -20 -5 -30 -10 -15

-20 -30 -10 -15

The benefits of a conventional 15-year or 20-year mortgage usually include: -A lower rate than a 30-year mortgage -A faster equity build-up than a 30-year mortgage -A lower closing costs than a 30-year mortgage -A quicker pay-off of the loan than a 30-year amortization

-A lower rate than a 30-year mortgage -A faster equity build-up than a 30-year mortgage -A quicker pay-off of the loan than a 30-year amortization

In the context of the home inspection as part of the home-buying process, identify elements of interior design. -Accessibility to basement and attic -Outdoor lighting -Adequate laundry area -Ventilation for cooking -Type and condition of chimney

-Accessibility to basement and attic -Adequate laundry area -Ventilation for cooking

Common sources of down payment funds to purchase a home include: -a loan from a bank -the sale of investments -personal savings -assistance from relatives

-the sale of investments -personal savings -assistance from relatives

When purchasing a home, the buyer (not the seller) can expect to pay closing costs such as: -real estate commission -title search fee -termite inspection -appraisal fee

-title search fee -termite inspection -appraisal fee

Early in a persons' career renting is advantageous because renting offers: A. Mobility B. Choice of different types of apartments. C. The ability to host large parties. D. The ability to have pets.

A. Mobility

The main benefit of a conventional 30-year mortgage is: A. fixed payments B. lower initial payments C. flexible payments D. variable payments

A. fixed payments

The benefits of an adjustable rate mortgage include all of the following except: A. Rate caps that protect borrowers. B. Possibility of future rate decreases. C. Lower initial rate. D. Fixed rates on loans.

D. Fixed rates on loans.

Despite its fixed payments, some borrowers will select an adjustable rate mortgage over a conventional mortgage because: A. The interest deductions are higher on the adjustable rate mortgage B. The points are less on the adjustable rate mortgage C. The closing costs (other than interest) are less on the adjustable rate mortgage D. The adjustable rate mortgage has lower initial payments

D. The adjustable rate mortgage has lower initial payments

T/F 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

An adjustable-rate mortgage usually has a rate cap and a (fill in the blank) cap.

Payment

T/F Location is considered the most important factor when buying a house.

True

Which of the following statements is NOT true? A. The points charged affects the interest rate on the loan. B. A point equals 5% of the loan amount. C. A point equals 1% of the loan amount D. Points are the prepaid interest charge charged by the lender in return for a lower mortgage rate.

B. A point equals 5% of the loan amount.

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 (fill in the blank) of a home. A. Interior construction B. Resale value of the home C. Interior design D. Age of the home

C. Interior design

During which step of the mortgage loan application process does the lender obtain a credit report and verify your application and financial status? A. Step 3 B. Step 1 C. Step 2

C. Step 2

The most common sources for a down payment include all of the following except: A. Personal savings B. Checking account funds C. Assistance from relatives D. sale of investments

B. Checking account funds

One way that an interest-only mortgage benefits the borrower is by: A. lower initial rates. B. Making the loan more easily affordable. C. Not building equity unless home value increases. D. Not decreasing the amount owed.

B. Making the loan more easily affordable.

One way that an interest-only mortgage benefits the borrower is by: A. Keeping interest rates lower beyond 10 or more years. B. Offering lower payments. C. Increasing the value of the home. D. Building equity at a faster rate.

B. Offering lower payments.

Which of the following is NOT true? A. A rate cap restricts how much a rate can increase or decrease. B. The initial rate offered by ARMS is usually higher than conventional mortgages. C. A payment cap could cause negative amortization. D. The initial rate offered on ARMS is usually lower than those on conventional mortgages.

B. The initial rate offered by ARMS is usually higher than conventional mortgages.