Deck 7: Selecting and Financing Housing

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

As interest rates increase, more people are able to afford the cost of an average-priced home.

Answer 3

False

Question 4

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

Question 5

A landlord has the right to sublet an apartment.

Question 6

A handyman's special is a home that needs work and that you are able to get at a lower price .

Question 7

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.

Question 8

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

Question 9

Lease-to-purchase and rent-with-option allow homeowners to become renters.

Question 10

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.

Question 11

Lenny the landlord has the right to take legal action against Tina the tenant for nonpayment of rent or destruction of property.

Question 12

An advantage of renting is pride of ownership.

Question 13

With a downpayment of at least 5%, lenders use 33% of monthly gross income as a guideline for PITI (principal, interest, taxes, and insurance).

Question 14

Your lifestyle affects your housing decision.

Question 15

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

Question 16

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

Question 17

Renter's insurance protects the tenant by covering damage or theft to clothing, furniture, and stereo equipment.

Question 18

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

Question 19

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

Question 20

The Real Estate Settlement Procedures Act (RESPA) requires that loan applicants be given an estimate of the closing costs after the actual closing.

Question 21

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

Question 22

Mortgage points are paid to the lender at the end of the mortgage.

Question 23

Each year about 50% of home sales are made by the home's owners.

Question 24

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

Question 25

Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30-year, 5% mortgage (where the mortgage factor is 5.37), how much of a mortgage loan can he afford?

A) $150,000
B) $167,597.77
C) $200,100.75
D) $324,000.00
E) $510,015.00

Question 26

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.

Question 27

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

A) Lease.
B) Lessee.
C) Lessor.
D) Rental agreement.
E) Subletting.

Question 28

The most common conventional mortgage is the 20-year ARM.

Question 29

Which of the following is an advantage of renting?

A) Noise from parties may be monitored closely.
B) Renters have fewer responsibilities for maintenance than home owners.
C) Tenants cannot take tax deductions for mortgage interest and property taxes.
D) Tenants may be subject to restrictions regarding remodeling .
E) Tenants may have restrictions regarding pets.

Question 30

Merrill bought a house and applied for a loan through the VA (Veterans Administration). The VA will provide the mortgage money .

Question 31

Most low- and middle-income people can qualify for a VA-guaranteed loan.

Question 32

A real estate agent can help screen potential buyers to determine whether they will qualify for a mortgage..

Question 33

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.

Question 34

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

Question 35

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

Question 36

Home improvements will definitely increase the selling price of a house.

Question 37

Which of the following is a disadvantage of renting?

A) Renters have fewer responsibilities than home owners.
B) Tenants cannot take tax deductions for mortgage interest and property taxes.
C) Renters usually do not have to be concerned with maintenance and repairs.
D) Taking possession of a rental unit is less expensive than buying a home.
E) Renting can be more convenient for those who move frequently.

Question 38

Which of the following is NOT correct?

A) Renting is usually less costly in the short run.
B) Home ownership usually has long-term financial advantages.
C) Lifestyle and financial factors should be analyzed to determine if you should rent or buy.
D) Traditional financial guidelines suggest that your home should cost about five times your annual income.
E) Renting offers mobility.

Question 39

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

A) The amount of the down payment.
B) The conditions under which the landlord may enter the apartment.
C) The interest rate for a lease loan.
D) The name and address of the buyer.
E) The sale date.

Question 40

Most new mortgages are assumable.

Question 41

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

A) Prefabricated home.
B) Duplex.
C) Manufactured home.
D) Single-family dwelling.
E) Townhouse.

Question 42

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?

A) Condominium
B) Cooperative housing
C) Manufactured home
D) Single-family dwelling
E) Townhouse

Question 43

Which of the following is a form of housing in which the owners pay a monthly fee for maintenance of the common areas?

A) Condominium
B) Cooperative housing
C) Manufactured home
D) Single-family dwelling
E) Apartment

Question 44

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

A) Condominium
B) Cooperative housing
C) Manufactured home
D) Single-family dwelling
E) Townhouse

Question 45

What should a home buyer consider when evaluating a house?

A) Zoning laws.
B) Location of businesses and future construction projects.
C) School system.
D) Property values of the community.
E) All of these should be evaluated.

Question 46

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

A) Stability of residence
B) Personalized living location
C) Deductibility of mortgage interest
D) Deductibility of real estate taxes
E) Maintenance and costs of repairs and home improvements

Question 47

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

A) Lease
B) Lessee
C) Lessor
D) Rental statement
E) Sublease

Question 48

Paul and Lora built their home. When they researched contractors, they considered all of the following except

A) Contractor's reputation and experience.
B) Contractor's relationship with suppliers and carpenters.
C) Payment arrangements during construction.
D) Time and payment schedules.
E) Contractor's property tax payments during construction.

Question 49

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

A) Move into the house.
B) Set up a home inspection.
C) Contact the seller to purchase his lawn tools.
D) Close the purchase transaction.
E) Sign his mortgage papers.

Question 50

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

A) Lease.
B) Lessee.
C) Lessor.
D) Rental statement.
E) Sublease.

Question 51

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

A) An advantage is that Donald can deduct mortgage interest and real estate taxes.
B) A disadvantage is that Donald is responsible for maintenance and costs of repairs and home improvements.
C) An advantage is that the down payment required is less than the security deposit for a rental.
D) A disadvantage is that real estate taxes are a major expense for homeowners.
E) An advantage is that Donald can paint his house bright purple with green trim to match his college's colors.

Question 52

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

A) Condominium.
B) Cooperative housing.
C) Manufactured home.
D) Single-family dwelling.
E) Townhouse.

Question 53

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

A) Providing advice on features to highlight.
B) Screening potential buyers to determine whether they will qualify for a mortgage.
C) Suggesting a selling price .
D) Showing Ingrid's home to potential buyers.
E) Home appraisal.

Question 54

The tenant is the

A) Lease.
B) Lessee.
C) Lessor.
D) Owner.
E) Sublease.

Question 55

This provides the tenant protection from rent increases.

A) Lease
B) Lessee
C) Lessor
D) Rental statement
E) Sublease

Question 56

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

A) Down payment.
B) Renter's insurance.
C) Mortgage interest.
D) Mortgage principal.
E) Handyman

Question 57

Which of the following expenses is NOT usually incurred by a tenant?

A) Security deposit.
B) Utilities (other than water).
C) Renter's insurance.
D) Property taxes.
E) None of these are incurred.

Question 58

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

A) A "handyman's special" will be set at a higher price than one that is in good condition.
B) They should assess the school system in the area they want to live.
C) The amount they can afford for housing will be primarily determined by the down payment.
D) Their first home should contain all the features desired.
E) They should complete all repair work themselves to increase costs..

Question 59

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

A) The seller must accept her offer.
B) Her offer must have been for the asking price.
C) The seller's price is affected by Kelly's need to buy.
D) The seller may reject the offer and choose to provide a counteroffer.
E) Kelly will receive earnest money when she presents the offer.

Question 60

The owner/landlord is known as the

A) Lease.
B) Lessee.
C) Lessor.
D) Renter.
E) Sublease.

Question 61

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

A) Appraisal.
B) Contingency clause.
C) Dual agent.
D) Earnest money.
E) Purchase agreement.

Question 62

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

A) Expected maintenance costs.
B) The home purchase price he can afford.
C) The monthly mortgage payment he can afford.
D) The mortgage amount he can afford.
E) None of the above are correct.

Question 63

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

A) Amortization.
B) Escrow.
C) Lock.
D) PMI.
E) Points.

Question 64

When Sam applied for a loan, he was assured that his rate would not change if he closed within 30 to 90 days. Sam had a(n) ______ on the interest rate.

A) amortization
B) escrow account
C) lock
D) PMI
E) points

Question 65

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

A) ARM.
B) FHA loan.
C) Negative amortization.
D) Buy-down.
E) VA loan.

Question 66

Ricky has a conventional mortgage. He can monitor the reduction of his loan balance through his payments by using _____ information.

A) amortization
B) escrow
C) lock
D) PMI
E) points

Question 67

Pauline just submitted an offer on her dream home. As evidence of good faith , she also included a(n)

A) Appraisal.
B) Contingency clause.
C) Dual agent.
D) Earnest money.
E) Counteroffer

Question 68

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

A) appraisal
B) contingency clause
C) dual agent
D) counteroffer
E) purchase agreement

Question 69

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

A) ARM.
B) FHA loan.
C) Negative amortization.
D) Second mortgage
E) VA loan.

Question 70

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

A) Payment cap.
B) Buy-down.
C) ARM.
D) Rate cap.
E) Interest-only mortgage.

Question 71

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)

A) Appraisal.
B) Contingency clause.
C) Dual agent.
D) Earnest money.
E) Purchase agreement.

Question 72

Private mortgage insurance

A) Cannot be avoided.
B) Is part of all mortgages.
C) Is usually required if the down payment is less than 25%.
D) Must be terminated automatically when the homeowner's equity reaches 22% of the property value at the time the mortgage was executed.
E) Protects the buyer from financial loss if the value of the home increases.

Question 73

Yvette has a flexible-rate mortgage that limits the amount to which her monthly payments can rise. This feature is called a(n)

A) Rate cap
B) FHA loan.
C) Negative amortization.
D) Payment cap.
E) VA loan.

Question 74

As a result of being an armed services veteran, Dan should be eligible for a(n)

A) ARM.
B) FHA loan.
C) Negative amortization.
D) Payment cap.
E) VA loan.

Question 75

Paul is looking for a low-interest, low-downpayment loan for his first home, but he is not a veteran.. He might be eligible for a(n)

A) ARM.
B) FHA loan.
C) Negative amortization.
D) Payment cap.
E) VA loan.

Question 76

The primary benefit of a home equity loan is

A) Its limited availability.
B) The deductibility of the loan interest on federal taxes.
C) The required monthly payments.
D) Tax-free income in the form of a loan.
E) All of the above are primary benefits.

Question 77

A reverse mortgage

A) Is the same thing as a second mortgage.
B) Allows a homeowner access to a line of credit program
C) Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the home owner dies.
D) All of these are correct.
E) None of these are correct.

Question 78

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

A) The amount available for a down payment.
B) Current mortgage rates.
C) Income.
D) Length of the loan.
E) Size of the home.

Question 79

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

A) Amortization.
B) Escrow account.
C) Lock.
D) PMI.
E) Points.

Question 80

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

A) FHA loan.
B) Buy-down.
C) ARM.
D) Home equity mortgage.
E) Interest-only mortgage.