Deck 7: Auto and Home Loans

Question 1

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

Answer 1

Your local car dealership

Question 2

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

A)Analyze needs versus wants and do your homework
B)Comparison shop and negotiate a deal
C)Do your homework and comparison shop
D)Close the deal and complete after-sale activities

Answer 2

Close the deal and complete after-sale activities

Question 3

Calculate the affordable monthly car payment for a person who has a gross monthly income of $3,250.00 and has $200 of monthly student loan payments,rent of $500,and $150 of child support?

A)$470.00
B)$420.00
C)$320.00
D)$270.00

Answer 3

$320.00

Question 4

What is the first step in the auto-purchasing process?

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

Question 5

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

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

Question 6

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

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

Question 7

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.

Question 8

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 9

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 10

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

A)Determine affordability
B)Shop for financing
C)Analyze needs versus wants
D)Make a preliminary offer

Question 11

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

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

Question 12

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 13

If your goal is to maximize your return on investment,identify the least acceptable reason to borrow on the equity from your home

A)to pay for college.
B)to assist with the purchase of a second home.
C)to buy a car.
D)to remodel your house.

Question 14

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

A)sublease
B)put equity in
C)ignore
D)mortgage

Question 15

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 16

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 17

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 18

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 versus wants

Question 19

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

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

Question 20

When picking out a car and determining needs versus 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 21

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)review your legal documents relating to title.
D)help you find a lender.

Question 22

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 23

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 24

________ 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 25

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 26

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 27

Real estate commissions are

A)at least 7% of the mortgage.
B)fixed by the banking commission.
C)based upon the equity in your home.
D)usually between 5 and 7 percent of the mortgage.

Question 28

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 29

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

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

Question 30

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 an apartment that meets her needs in her current city
D)Rent a small home in the city in which she may get promoted

Question 31

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 32

Which of the following is not a closing cost?

A)Title search
B)Landscaping
C)Appraisal fee
D)Points

Question 33

Which is not an advantage of buying a home?

A)It can provide tax advantages.
B)Full 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 34

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

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

Question 35

A real estate agent works for the ________.

A)buyer
B)seller
C)buyer or seller
D)buyer and seller

Question 36

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 37

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 38

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 39

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 40

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 41

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 42

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 43

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 44

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

Question 45

When interest rates are low,and you are just starting off with your first home,what kind of mortgage should you get?

A)30-year fixed rate mortgage
B)ARM
C)Balloon payment mortgage
D)Do not get a mortgage

Question 46

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 47

Second mortgages can be extremely risky.

Question 48

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

Question 49

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

Question 50

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 51

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 52

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

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

Question 53

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 54

Insurance doesn't impact your budget.

Question 55

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

Question 56

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 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

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 59

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 60

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

Question 61

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

Question 62

PMI is required when purchasing a home with a down payment greater than 20 percent of the purchase price.