Deck 7: Auto and Home Loans

Question 1

Car lease payments are usually:

A) Lower than loan payments
B) Higher than loan payments
C) Never a good investment
D) About the same as loan payments

Answer 1

Lower than loan payments

Question 2

College students usually _________________ their apartments over the summer when they go home.

A) Sublease
B) Put equity in
C) Ignore
D) Mortgage

Answer 2

Sublease

Question 3

Identify which item is not an advantage of buying a house vs.renting.

A) Increase in equity
B) Tax advantages
C) Maintenance
D) All of the choices are correct

Answer 3

Maintenance

Question 4

At what life stage do most people buy their first home?

A) Retirement
B) Independent
C) Early family
D) Late family

Question 5

How much of a down payment do lenders recommend when purchasing a car?

A) 10%
B) 15%
C) 20%
D) 40%

Question 6

When picking out a car and determining needs vs.wants,a person should ask him or herself all of the following questions except:

A) How much cargo do you carry?
B) Do you want a manual or automatic transmission?
C) Do you need two-wheel drive,all-wheel drive,or four-wheel drive?
D) All choices are correct

Question 7

Which is not a way to comparison shop for a car?

A) If you like the car,buy it
B) Check private sales
C) Check dealerships
D) Test drive the car

Question 8

Which of the following is not a step that you should take before you purchase an automobile?

A) Negotiate the deal
B) Do your homework
C) Pay the sticker price
D) Shop for financing

Question 9

Which of the following are true in regard to leasing a vehicle?

A) You are in a long-term rental agreement with a limit on the number of miles you can drive without penalty
B) A security deposit is required at the signing of the lease and then monthly payments are required
C) At the end of the lease you return the car; at that time you have the option of purchasing the vehicle
D) All answers are correct

Question 10

Which of the following is not a step toward purchasing an automobile?

A) Close the deal
B) Shop for financing
C) Analyze needs vs.wants
D) Take the first offer

Question 11

A new car depreciates _________________ to _________________ in the first three years of ownership.

A) 50%; 60%
B) 25%; 40%
C) 35%; 40%
D) 40%; 50%

Question 12

If you have a car loan the lender will require what kind of insurance?

A) Liability
B) Liability,comprehensive,and collision coverage
C) Extended warranty
D) Rider

Question 13

When looking into buying or leasing a car,what criteria are compared when "doing the homework"?

A) New vs.used
B) Price and insurance cost
C) Reliability and service records
D) All choices are correct

Question 14

What is the first step in the auto purchasing process?

A) Analyzing needs vs.wants
B) Do your homework
C) Determining what you can afford
D) Comparison shopping

Question 15

Calculate the affordable monthly car payment for a person who has a monthly income of $2,185 and who already has $300 worth of debt.

A) $680.00
B) $686.60
C) $486.60
D) $480.00

Question 16

What is the disadvantage to buying a home?

A) The value of your house may increase
B) Eventually you will be able to live payment-free
C) The value of your house may decrease
D) You will gain equity by paying down your mortgage

Question 17

All of the following are acceptable reasons to borrow on the equity from your home except:

A) To pay for college
B) To pay your utility bills
C) To buy a car
D) To remodel your house

Question 18

What are the last two steps in the auto purchase process?

A) Analyze needs vs.wants and do your homework
B) Comparison shop and negotiate a deal
C) Do your homework and comparison shop
D) Shop for financing and close the deal

Question 19

Which of the following is more likely to charge you more money when you buy a car?

A) An ad in the paper
B) An ad on Craigslist
C) Your local car dealership
D) A sign in a car window

Question 20

What is the second step of the auto purchase process?

A) Shop for financing
B) Comparison shop
C) Determine what you can afford
D) Analyze needs vs.wants

Question 21

Insurance for the lender if it needs to foreclose on a home and the sale does not cover the mortgage and the cost of the foreclosure is called:

A) Private mortgage insurance
B) Premium mortgage insurance
C) Primary minimum insurance
D) Primary mortgage insurance

Question 22

The transfer of a lease agreement to a new tenant is known as a(n):

A) Mortgage
B) Sublease
C) Equity distribution
D) All of the choices are incorrect

Question 23

Which is not an advantage of renting?

A) Someone else is responsible for repairs
B) There are no unexpected home repair bills
C) There is no risk of losing money on your investment
D) The landlord can make inspections

Question 24

When purchasing a home,a real estate broker can help you do all of the following except:

A) Find companies to conduct inspections
B) Identify financing options
C) Help you move in
D) Help you find a lender

Question 25

What is a mortgage?

A) The legal document used to allow a lender to use real property as collateral
B) The difference between what is owned vs.what is owed
C) The transfer of a lease agreement to a new tenant
D) All of the choices are incorrect

Question 26

Which of the following is an advantage of renting?

A) You can personalize your living space
B) It can provide tax advantages
C) You can gain equity
D) There are no unexpected home repair bills

Question 27

One disadvantage to renting is _________________.

A) You are able to move easily
B) Its low initial cost
C) You gain equity as you pay
D) You do not gain any equity in the rented property

Question 28

Most lenders require how much of a down payment for a house?

A) 30%
B) 40%
C) 20%
D) No down payment

Question 29

Which is not a selection criterion when searching for a home?

A) Taxes
B) Schools
C) Interest rate
D) Location

Question 30

Why might you have to pay private mortgage insurance (PMI)?

A) You had more than three traffic violations in the past year
B) You put down less than 20% on your home
C) You live in a high-risk neighborhood
D) You have a history of defaults

Question 31

What mortgage type has an interest rate adjusted every year,so that monthly payments are subject to change every year for the entire 30-year loan term?

A) 5 year balloon mortgage
B) 1 year adjustable-rate mortgage
C) 7 year balloon mortgage
D) 1 in 30 adjustable-rate mortgage

Question 32

What does LTV stand for when buying a home?

A) Lease to value
B) Loan times vestment
C) Loan to value
D) Lowered time value

Question 33

A real estate agent works for the _________________.

A) Buyer
B) Seller
C) Buyer or seller
D) Buyer and seller

Question 34

Which is not an advantage of buying a home?

A) It can provide tax advantages
B) Capital gains exclusion if you live in the house for less than two years before selling
C) You can get a second mortgage home equity loan
D) All of the choices are correct

Question 35

Connie just graduated from college and got her first job.The job pays well but promotions may require her to relocate.What is the best option for Connie if she wants to find a home?

A) Buy a small home in her current city
B) Buy a large home in the city with potential promotions
C) Rent a home that meets her needs in her current city
D) Rent a small home in the city in which she may get promoted

Question 36

What is a sublease?

A) Having someone renting below you in the building
B) The transfer of a lease agreement to a new tenant
C) The extending of a lease
D) All of the choices are incorrect

Question 37

_________________ is the ratio expressing the amount of a first mortgage lien as a percentage of the total appraised value of real property.

A) Fixed term
B) Loan to value
C) Equity
D) Good faith estimate

Question 38

Equity is:

A) How much cash you have in the bank minus what you owe
B) How many assets you have
C) The value of your assets minus your liabilities
D) How many liabilities you have outstanding

Question 39

An adjustable-rate mortgage (ARM)is defined as:

A) Insurance for the lender if it needs to foreclose on your home and the sale of the home does not cover the mortgage and the cost of the foreclosure
B) A loan that has a specified payment amount and a specified repayment schedule
C) A home loan where the interest rate varies based on a benchmark plus an additional spread
D) A ratio expressing the amount of a first mortgage lien as a percentage of the total appraised value of real property

Question 40

Which of the following is not a closing cost?

A) Title search
B) Homeowner's insurance
C) Appraisal fee
D) Points

Question 41

Home equity loans are typically used to make major purchases for your home.

Question 42

Nick took out a home equity loan to consolidate his credit card debt.What should he do with his credit cards?

A) Continue to use them but not as much
B) Charge everything
C) Don't use them until the home equity loan is repaid
D) All of the choices are incorrect

Question 43

Equity is the difference between what you own and what you owe.

Question 44

What does HELOC stand for?

A) Health expense license of California
B) Home equity line of credit
C) Home equity liquidation of credit
D) None of the answers are correct

Question 45

A home equity loan:

A) Can be used to consolidate many high interest rate credit card debts into a single low interest rate loan
B) Is a great option for people with a lot of debt who cannot control their spending
C) Usually has a high interest rate,so it should be used only in emergencies
D) None of the answers are correct

Question 46

Which of the following is not true in regard to a home equity line of credit (HELOC)?

A) With a HELOC,you apply once for the loan and can use it for any expenses
B) As you pay off your HELOC you have more credit available to use
C) There are tax incentives on your HELOC
D) You will have a fixed payment for a specific time frame with a fixed interest rate

Question 47

What is an adjustable-rate mortgage (ARM)?

A) A home loan in which the interest rate varies based on a benchmark plus an additional spread,called an ARM margin; also known as a "variable-rate mortgage" or a "floating-rate mortgage"
B) A loan that has a specified payment amount and a specified repayment schedule
C) A ratio expressing the amount of a first mortgage lien as a percentage of the total appraised value of real property
D) A mortgage with a strict rate

Question 48

Leasing a vehicle is always a better idea than buying a vehicle because you build equity quicker.

Question 49

HELOC stands for:

A) Help equity line of counsel
B) Home equity line of credit
C) Home equity list of collateral
D) Help expenses loan occupational credit

Question 50

Who can help you determine your borrowing capacity and identify financing options?

A) Real estate broker
B) Ask.com
C) BankRate.com
D) Personal banker

Question 51

If you have a loan on a vehicle you only have to have liability insurance.

Question 52

When interest rates are low,what kind of mortgage should you get?

A) Fixed rate
B) ARM
C) Balloon payment mortgage
D) Do not get a mortgage

Question 53

What is the major advantage to having a home equity line of credit (HELOC)?

A) It can be used by an entire family
B) Banks give guidance on when to use a HELOC
C) The HELOC acts like a revolving charge account
D) Ease of access to student loans

Question 54

Why should you not take out a second mortgage?

A) Because it will create an additional claim against the value of your home
B) Because it will require balloon payments
C) Because it is a fixed-rate/fixed-term loan
D) Because of overhead costs

Question 55

Which of the following are not types home equity loans?

A) Home equity line of credit (HELOC):
B) Fixed-rate/fixed-term
C) Balloon payment loans
D) All of the choices are types of home equity loans

Question 56

Second mortgages can be extremely risky.

Question 57

A home equity loan for the purpose of debt consolidation is:

A) Never a good idea
B) Once in a while a good idea
C) Not always a good idea
D) Hands down,the best way to go

Question 58

What types of home equity loans are there?

A) Home equity line of credit (HELOC)
B) Fixed-rate/fixed-term
C) Balloon payment loans
D) All of the choices are correct

Question 59

What is the usual time frame for a fixed-rate/fixed-term equity loan?

A) 1-5 years
B) 2-7 years
C) 5-10 years
D) All of the choices are incorrect

Question 60

Insurance doesn't impact your budget.

Question 61

What upfront costs should you expect to pay at the time of closing?

Question 62

How do you comparatively shop for a home equity loan?

Question 63

When does it make sense to refinance your home?

Question 64

What precaution do you need to take if you choose to use a home equity loan for debt consolidation purposes?

Question 65

What kind of home equity loans exist?

Question 66

PMI is not required when purchasing a home with a down payment greater than 20% of the purchase price.

Question 67

How do people typically use a home equity loan?

Question 68

What types of mortgage loans are available and how do they differ?

Question 69

Explain the advantages and disadvantages of renting and choose whether you would rent or buy and why.

Question 70

What are the advantages to buying?

Question 71

A fixed-rate or fixed-term equity loan is popular when financing an automobile or home improvement.

Question 72

Why are 0% interest payments and $0 down not always the best deals?

Question 73

What role does a realtor have in brokering the sale of a home?

Question 74

How do you determine how much of an auto payment you can afford?

Question 75

What selection criteria should you use when selecting a home?

Question 76

Why might it not be a good idea to purchase homes in order to make a profit using adjustable-rate mortgages and base payments on introductory rates?

Question 77

What are the advantages of leasing over buying an automobile?

Question 78

If a homeowner is in foreclosure,the home equity loan is repaid first since that was the last loan to be negotiated.

Question 79

What are the advantages to renting?

Question 80

When does it make more financial sense to buy rather than rent?