Question 1

Which of the following is tax deductible if one itemizes deductions?
A) Principal, interest, real estate taxes, and insurance
B) Principal, interest, and real estate taxes
C) Principal and interest
D) Interest, real estate taxes, and insurance
E) Interest, PMI, and real estate taxes

Accepted Answer

The answer of Which of the following is tax deductible...

Question 2

The ____ would be included in a rental contract or lease agreement.
A) amount of the monthly payment
B) payment date
C) length of lease agreement
D) deposit required
E) all of these would be included

Accepted Answer

All of these would be included in a rental contract or lease agreement as they are all important terms and conditions that both the landlord and tenant need to agree upon before signing the contract.

Question 3

The interest rates and monthly mortgage payments will not change over the life of your mortgage;you have a(n)
A) reverse-annuity mortgage.
B) fixed-rate mortgage.
C) adjustable rate mortgage.
D) rollover mortgage.
E) graduated-payment mortgage.

Accepted Answer

A fixed-rate mortgage ensures that your interest rates and monthly mortgage payments will not change over the life of your mortgage.

Question 4

Generally,renting would be preferred to buying when
A) you have no money to make a down payment.
B) you know your job will be temporary.
C) you have just gone through a divorce.
D) all of these.
E) none of these.

Accepted Answer

The answer of Generally,renting would be preferred to buying when
A)...

Question 5

Earnest money is the sum of money the home buyer deposits with the
A) realtor to view homes.
B) realtor for finding the desired home.
C) lender to originate the loan.
D) seller to indicate intent of purchase.
E) lender to guarantee the purchase.

Accepted Answer

Earnest money is the sum of money that a homebuyer deposits with the seller to indicate their intent to purchase the property. It shows that the buyer is serious about the transaction and can help secure the sale.

Question 6

When refinancing your mortgage,you should consider
A) the interest rates of the old and new mortgages.
B) the years you expect to remain in the home.
C) any prepayment penalties on the old mortgage.
D) closing costs of the new mortgage.
E) all of these.

Accepted Answer

All of the options mentioned are important factors to consider when refinancing your mortgage. The interest rates of the old and new mortgage will determine your monthly payment and the overall cost of the loan. The years you plan to stay in the home will determine if refinancing is worth the cost. Any prepayment penalties on the old mortgage may determine if it is financially beneficial to refinance. Finally, the closing costs of the new mortgage will determine the total cost of refinancing.

Question 7

The act requiring mortgage lenders to give borrowers HUD booklets and good faith estimates of the closing costs is called the
A) Equal Credit Opportunity Act.
B) Truth-in-Lending Act.
C) Real Estate Settlement Procedures Act.
D) Mortgage Lenders Act of 1980.
E) None of the above.

Accepted Answer

The act requiring mortgage lenders to give borrowers HUD booklets and good faith estimates of the closing costs is called the Real Estate Settlement Procedures Act (RESPA). The Equal Credit Opportunity Act (ECOA) prohibits discrimination in lending based on certain factors, such as race or gender. The Truth-in-Lending Act (TILA) requires lenders to disclose details about the cost of credit to consumers. The Mortgage Lenders Act of 1980 is not a real act.

Question 8

Terms of renting a housing unit may be contained in a contract called a
A) deposit requirement.
B) renewal option.
C) lease.
D) housing code.
E) housing standard.

Accepted Answer

Terms of renting a housing unit are usually contained in a contract called a lease. The lease typically outlines the length of the rental period, the amount of rent due and when it is due, the security deposit required, and any restrictions or rules imposed by the landlord.

Question 9

An escrow account is used to collect ____ from one's monthly mortgage payment.
A) interest
B) principal
C) real estate taxes
D) homeowner's insurance
E) c and d only

Accepted Answer

An escrow account is used to collect real estate taxes and homeowner's insurance from one's monthly mortgage payment. While interest and principal are also included in the monthly mortgage payment, they are not collected in the escrow account.

Question 10

Sean and Lisa (age 25 and 28,respectively)are purchasing their first home for $200,000 with a 5% down payment.They will withdraw the down payment from Lisa's IRA.They will have to pay ____ on the IRA withdrawal.
A) federal income taxes
B) an early withdrawal penalty
C) Social Security taxes
D) a and b
E) a, b, and c

Accepted Answer

The answer of Sean and Lisa (age 25 and 28,respectively)are...

Question 11

Homeowner's insurance will cost about ____ percent of the market value of the home.
A) 1/4
B) 1/4 to 1/2
C) 1/2
D) 1/2 to 3/4
E) 3/4

Accepted Answer

The answer of Homeowner's insurance will cost about ____ percent...

Question 12

Mike (age 40)is purchasing his second home for $200,000 with a 25% down payment.He will withdraw some of the down payment from his IRA.He will have to pay ____ on the IRA withdrawal.
A) federal income taxes
B) an early withdrawal penalty
C) Social Security taxes
D) a and b
E) a, b, and c

Accepted Answer

Mike will have to pay federal income taxes on the IRA withdrawal as well as an early withdrawal penalty since he is under the age of 59 1/2. Therefore, choices (a) and (b) are correct. He will not have to pay Social Security taxes on the IRA withdrawal.

Question 13

____ and ____ are often paid as part of one's house payment and held in an escrow account.
A) Closing costs; interest
B) Insurance; real estate taxes
C) Principal; interest
D) Insurance; utilities
E) Utilities; real estate taxes

Accepted Answer

Insurance and real estate taxes are often paid as part of one's house payment and held in an escrow account.

Question 14

A real estate sales contract will include
A) the amount you are willing to pay for the property.
B) the terms of the mortgage loan.
C) deed restrictions.
D) market value of the property.
E) none of the above.

Accepted Answer

The answer of A real estate sales contract will include
A)...

Question 15

A financial advantage of renting compared to purchasing housing is
A) income tax treatment.
B) no need for a down payment.
C) required security deposit.
D) the legal obligation.
E) stable monthly payments.

Accepted Answer

Renting does not require a down payment, unlike purchasing a home which typically requires a substantial down payment. This can be an advantage for individuals who cannot afford a large out-of-pocket expense.

Question 16

____ is a reason for preferring to rent rather than to buy.
A) Mobility
B) No maintenance worries
C) Lower monthly cash flows
D) Down payment money better used elsewhere
E) All of these are reasons

Accepted Answer

All of these are valid reasons for preferring to rent rather than to buy. Renting allows for increased mobility in home and job changes, eliminates maintenance worries and provides lower monthly cash flows, while also allowing for down payment money to be used elsewhere.

Question 17

Barb and Bob want to purchase a new home but don't know how much mortgage they can qualify for.The lender requires total installment loan payments not exceed 35% of gross monthly income.Based on Barb and Bob's financial data below,what is the maximum monthly mortgage payment for which they can qualify? 
A) $1,400
B) $1,208
C) $1,050
D) $ 850
E) $ 500

Accepted Answer

The answer of Barb and Bob want to purchase a...

Question 18

The monthly interest on your mortgage was $690;you paid $650.The result is
A) growing equity.
B) negative amortization.
C) fixed interest expense.
D) shrinking principal.
E) indexed equity.

Accepted Answer

If the monthly interest on the mortgage is $690, and the payment made was $650, it means that the payment was not enough to cover the interest owed. This leads to negative amortization, where the unpaid interest gets added to the principal balance, causing it to increase instead of decreasing.

Question 19

The most popular mortgage loan for financing a home purchase is a(n)
A) conventional fixed-rate loan.
B) FHA loan.
C) VA loan.
D) adjustable-rate loan.
E) Fannie Mae loan.

Accepted Answer

According to the National Association of Realtors, conventional fixed-rate loans make up the majority of home purchase loans in the United States. FHA and VA loans are more specialized and have specific eligibility requirements, while adjustable-rate loans may not be as attractive to borrowers in a low interest rate environment. Fannie Mae loans are not a type of mortgage loan, but rather a government-sponsored enterprise that buys and securitizes mortgages.

Question 20

The FHA ____ high loan-to-value ratio mortgages.
A) guarantees
B) insures
C) subsidizes
D) grants
E) allows

Accepted Answer

The FHA (Federal Housing Administration) insures high loan-to-value ratio mortgages, which means that if a borrower defaults on their loan, the lender is protected by the FHA. This makes it less risky for lenders to offer high LTV loans to borrowers who might not otherwise qualify.

Quiz 5: Making Automobile and Housing Decisions

Which of the following is tax deductible if one itemizes deductions?

The ____ would be included in a rental contract or lease agreement.

The interest rates and monthly mortgage payments will not change over the life of your mortgage;you have a(n)

Generally,renting would be preferred to buying when

Earnest money is the sum of money the home buyer deposits with the

When refinancing your mortgage,you should consider

The act requiring mortgage lenders to give borrowers HUD booklets and good faith estimates of the closing costs is called the

Terms of renting a housing unit may be contained in a contract called a

An escrow account is used to collect ____ from one's monthly mortgage payment.

Sean and Lisa (age 25 and 28,respectively) are purchasing their first home for $200,000 with a 5% down payment.They will withdraw the down payment from Lisa's IRA.They will have to pay ____ on the IRA withdrawal.

Homeowner's insurance will cost about ____ percent of the market value of the home.

Mike (age 40) is purchasing his second home for $200,000 with a 25% down payment.He will withdraw some of the down payment from his IRA.He will have to pay ____ on the IRA withdrawal.

and are often paid as part of one's house payment and held in an escrow account.

A real estate sales contract will include

A financial advantage of renting compared to purchasing housing is

____ is a reason for preferring to rent rather than to buy.

The monthly interest on your mortgage was $690;you paid $650.The result is

The most popular mortgage loan for financing a home purchase is a(n)

The FHA ____ high loan-to-value ratio mortgages.