Question 1

Narrative 14-2
For problems in this section, use Table 14-1 from your text to find monthly mortgage payments.
-Refer to Narrative in your text 14-2. The Andersons are purchasing a home with a mortgage of $120,000 at $7 \frac { 3 } { 4 } \%$ . They can finance for 25 years or 30 years. 
A)How much more will their monthly payment be if they choose the 25-year mortgage?
B)How much less total interest will they pay if they choose the 25-year mortgage?

Accepted Answer

The answer of Narrative 14-2
For problems in this section, use...

Question 2

A mortgage loan in which the interest rate changes periodically, usually in relation to a predetermined economic index is called an Adjustable Rate Mortgage (ARM)​

Accepted Answer

An Adjustable Rate Mortgage (ARM) has an interest rate that can change over time, typically in relation to an index such as the prime rate, making monthly payments variable.

Question 3

For an adjustable rate mortgage (ARM), the amount of time between one rate change and the next, usually between one, two, or three years, is referred to as the adjustment period.​

Accepted Answer

The adjustment period in an ARM defines the interval at which the interest rate can change, typically set at one, two, or three years, depending on the specific terms of the mortgage.

Question 4

Narrative 14-2
For problems in this section, use Table 14-1 from your text to find monthly mortgage payments.
-Refer to Narrative in your text 14-2. Stevie Ray is looking for a 20-year mortgage of $90,000. The Alternative Savings Bank is offering a $10 \frac { 1 } { 2 } \%$ mortgage with 2 discount points, and the Green Bank is offering a 10% mortgage with $3 \frac { 1 } { 2 }$ closing points. 
A)How much more total interest will be paid on the mortgage from Alternative Savings?
B)Taking into account the discount points, which bank is offering a better deal, and by how much?

Accepted Answer

The answer of Narrative 14-2
For problems in this section, use...

Question 5

Narrative 14-2
For problems in this section, use Table 14-1 from your text to find monthly mortgage payments.
-Refer to Narrative in your text 14-2. Daniel earns a gross income of $3,590 per month and applies for a mortgage with a monthly PITI of $765.63. David has other financial obligations totaling $363.17 per month. If the lending ratio guidelines are as given in the table below, what type of mortgage, if any, would Daniel qualify for? $$\begin{array} { | l | l | l | } 
\hline \text { Mortgage Type } & \text { Housing Expense Ratio } & \text { Total Obligations Ratio } \
\hline \text { FHA } & 29 \% & 41 \% \
\hline \text { Conventional } & 28 \% & 36 \% \
\hline
\end{array}$$

Accepted Answer

The answer of Narrative 14-2
For problems in this section, use...

Question 6

​The official document representing the right of ownership of real property is known as a title.

Accepted Answer

A title is the legal document that represents the right of ownership over real property, indicating who legally owns the property.

Question 7

Narrative 14-2
For problems in this section, use Table 14-1 from your text to find monthly mortgage payments.
-Refer to Narrative in your text 14-2. Mike and Dianne Perez are financing a $120,000 mortgage at $10 \frac { 1 } { 4 } \%$ for 25 years. Their monthly payments for principal and interest are $1,112.40. After making 3 payments, what is the amount of their loan balance?

Accepted Answer

The answer of Narrative 14-2
For problems in this section, use...

Question 8

Expenses incurred in conjunction with the sale of real estate, including loan origination fees, credit reports, appraisal fees, title search, title insurance, inspections, attorney's fees, recording fees, and broker's commissions are called closing costs.​

Accepted Answer

Closing costs encompass all the various fees and expenses associated with completing a real estate transaction, including but not limited to loan origination fees, credit reports, appraisal fees, title search, title insurance, inspections, attorney's fees, recording fees, and broker's commissions.

Question 9

Long-term, low down-payment home loans made by private lenders to eligible veterans, the payment of which is guaranteed by the Veteran's Administration in the event of default are known as either VA mortgages or GI loans.​

Accepted Answer

VA mortgages, also known as GI loans, are indeed long-term, low down-payment home loans made by private lenders to eligible veterans, with the payment guaranteed by the Veteran's Administration in the event of default. This program was established to help veterans purchase homes without needing a large down payment.

Question 10

A chart that shows the month-by-month breakdown of each mortgage payment into principal and interest and the outstanding balance of the loan is referred to as the annual loan statement. ​

Accepted Answer

The chart described is known as an amortization schedule, not an annual loan statement. An amortization schedule breaks down each payment by principal and interest over the life of the loan, showing the remaining balance after each payment.

Question 11

A government agency within the U.S. Department of Housing and Urban Development (HUD) that sets construction standards and insures residential mortgage loans made by approved lenders is known as the Federal Housing Administration (FHA).​

Accepted Answer

The Federal Housing Administration (FHA) is indeed an agency within the U.S. Department of Housing and Urban Development (HUD) that sets construction standards for homes and insures residential mortgage loans made by private lenders to encourage home ownership.

Question 12

If a mortgage includes an optional escrow account, the payment is actually divided into four parts abbreviated PITI, which is Principal, Interest, Transaction Fees, and Incidentals.​

Accepted Answer

PITI stands for Principal, Interest, Taxes, and Insurance, not Transaction Fees and Incidentals.

Question 13

A discounted rate for the first adjustment period of an adjustable-rate mortgage that is below the current market rate of interest is called the prime rate.​

Accepted Answer

The discounted rate for the first adjustment period of an adjustable-rate mortgage that is below the current market rate of interest is called a teaser rate, not the prime rate. The prime rate is the interest rate that commercial banks charge their most creditworthy customers.

Question 14

Narrative 14-2
For problems in this section, use Table 14-1 from your text to find monthly mortgage payments.
-Refer to Narrative in your text 14-2. Elliott Properties purchased a 20-unit apartment building for $800,000. After a 20% down payment the balance was financed with a 15-year, $10 \frac { 3 } { 4 } \%$ fixed-rate mortgage. The property taxes are $22,430 per year and the hazard insurance premium is $8,629 per year. If each apartment rents for $775 per month, how much income will Elliott make per month after the PITI is paid on the building?

Accepted Answer

The answer of Narrative 14-2
For problems in this section, use...

Question 15

Extra charges frequently added to the cost of a mortgage, allowing lenders to increase their yield without showing an increase in the mortgage interest rate is called Private Mortgage Insurance (PMI).​

Accepted Answer

Private Mortgage Insurance (PMI) is an insurance policy that a borrower might be required to buy if they have less than 20% down payment for the home, protecting the lender against loss if the borrower defaults on the loan. Extra charges frequently added to the cost of a mortgage to increase the lender's yield without showing an increase in the mortgage interest rate are typically referred to as points or origination fees, not PMI.

Question 16

​Land, including any permanent improvements such as homes, apartment buildings, factories, hotels, shopping centers, or any other "real" structures is referred to as a mortgage.

Accepted Answer

Land and any permanent improvements on it, such as buildings, are referred to as real estate, not a mortgage. A mortgage is a loan secured by the property itself.

Question 17

A mortgage is a type of loan secured by personal items like a vehicle, boat, jewelry, or other items of value.​

Accepted Answer

A mortgage is specifically a loan secured by real property, typically a home or land, not personal items.

Question 18

A bank account used by mortgage lenders for the safekeeping of the funds accumulating to pay next year's property taxes and hazard insurance is called an escrow account.​

Accepted Answer

An escrow account is indeed used by mortgage lenders to hold funds that are designated for future payments of property taxes and hazard insurance, ensuring these bills are paid on time.

Question 19

The closing is the meeting in which the buyer and seller of real estate conclude all matters pertaining to the transaction.​

Accepted Answer

The closing, also known as settlement or escrow in different regions, is indeed the final meeting where the buyer and seller of real estate finalize all matters related to the transaction, including transferring property ownership, settling closing costs, and signing necessary legal documents.

Question 20

A special form of insurance primarily on mortgages for single-family loans, allowing the buyer to borrow more by putting down a smaller down-payment is called Private Mortgage Insurance (PMI).​

Accepted Answer

Private Mortgage Insurance (PMI) is indeed a type of insurance that allows homebuyers to purchase a home with a smaller down payment, typically less than 20% of the home's purchase price, by protecting the lender against default.

Quiz 14: Mortgages

A mortgage loan in which the interest rate changes periodically, usually in relation to a predetermined economic index is called an Adjustable Rate Mortgage (ARM)​

For an adjustable rate mortgage (ARM), the amount of time between one rate change and the next, usually between one, two, or three years, is referred to as the adjustment period.​

​The official document representing the right of ownership of real property is known as a title.

Expenses incurred in conjunction with the sale of real estate, including loan origination fees, credit reports, appraisal fees, title search, title insurance, inspections, attorney's fees, recording fees, and broker's commissions are called closing costs.​

Long-term, low down-payment home loans made by private lenders to eligible veterans, the payment of which is guaranteed by the Veteran's Administration in the event of default are known as either VA mortgages or GI loans.​

A chart that shows the month-by-month breakdown of each mortgage payment into principal and interest and the outstanding balance of the loan is referred to as the annual loan statement. ​

A government agency within the U.S. Department of Housing and Urban Development (HUD) that sets construction standards and insures residential mortgage loans made by approved lenders is known as the Federal Housing Administration (FHA).​

If a mortgage includes an optional escrow account, the payment is actually divided into four parts abbreviated PITI, which is Principal, Interest, Transaction Fees, and Incidentals.​

A discounted rate for the first adjustment period of an adjustable-rate mortgage that is below the current market rate of interest is called the prime rate.​

Extra charges frequently added to the cost of a mortgage, allowing lenders to increase their yield without showing an increase in the mortgage interest rate is called Private Mortgage Insurance (PMI).​

​Land, including any permanent improvements such as homes, apartment buildings, factories, hotels, shopping centers, or any other "real" structures is referred to as a mortgage.

A mortgage is a type of loan secured by personal items like a vehicle, boat, jewelry, or other items of value.​

A bank account used by mortgage lenders for the safekeeping of the funds accumulating to pay next year's property taxes and hazard insurance is called an escrow account.​

The closing is the meeting in which the buyer and seller of real estate conclude all matters pertaining to the transaction.​

A special form of insurance primarily on mortgages for single-family loans, allowing the buyer to borrow more by putting down a smaller down-payment is called Private Mortgage Insurance (PMI).​

A mortgage loan in which the interest rate changes periodically, usually in relation to a predetermined economic index is called an Adjustable Rate Mortgage (ARM)

For an adjustable rate mortgage (ARM), the amount of time between one rate change and the next, usually between one, two, or three years, is referred to as the adjustment period.

The official document representing the right of ownership of real property is known as a title.

Expenses incurred in conjunction with the sale of real estate, including loan origination fees, credit reports, appraisal fees, title search, title insurance, inspections, attorney's fees, recording fees, and broker's commissions are called closing costs.

Long-term, low down-payment home loans made by private lenders to eligible veterans, the payment of which is guaranteed by the Veteran's Administration in the event of default are known as either VA mortgages or GI loans.

A chart that shows the month-by-month breakdown of each mortgage payment into principal and interest and the outstanding balance of the loan is referred to as the annual loan statement.

A government agency within the U.S. Department of Housing and Urban Development (HUD) that sets construction standards and insures residential mortgage loans made by approved lenders is known as the Federal Housing Administration (FHA).

If a mortgage includes an optional escrow account, the payment is actually divided into four parts abbreviated PITI, which is Principal, Interest, Transaction Fees, and Incidentals.

A discounted rate for the first adjustment period of an adjustable-rate mortgage that is below the current market rate of interest is called the prime rate.

Extra charges frequently added to the cost of a mortgage, allowing lenders to increase their yield without showing an increase in the mortgage interest rate is called Private Mortgage Insurance (PMI).

Land, including any permanent improvements such as homes, apartment buildings, factories, hotels, shopping centers, or any other "real" structures is referred to as a mortgage.

A mortgage is a type of loan secured by personal items like a vehicle, boat, jewelry, or other items of value.

A bank account used by mortgage lenders for the safekeeping of the funds accumulating to pay next year's property taxes and hazard insurance is called an escrow account.

The closing is the meeting in which the buyer and seller of real estate conclude all matters pertaining to the transaction.

A special form of insurance primarily on mortgages for single-family loans, allowing the buyer to borrow more by putting down a smaller down-payment is called Private Mortgage Insurance (PMI).