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Exam 9: The Housing Decision: Factors and Finances

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Question 1

Multiple Choice

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Which of the following is not an advantage of renting?

A) Ease of mobility
B) More long-term financial benefits than home ownership
C) Fewer responsibilities for maintenance and repairs
D) Lower initial costs
E) No expenses related to property taxes

F) B) and D)
G) C) and E)

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Question 2

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Paula has completed a mortgage application and provided evidence of employment,income,assets owned,and existing debt to the potential lending institution.Although Paula has not even begun the process of looking at possible homes to buy,she is eagerly awaiting news from the lender as to whether she has been approved for a mortgage.In what stage of the application process is she?

A) Appraisal
B) Prequalification
C) Assessment
D) Amortization
E) Home inspection

F) A) and E)
G) C) and E)

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Question 3

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Explain what amortization is and how a down payment and loan duration impact it.

Jason Smith pays monthly rent of $1,250 and an annual premium for renter's insurance of $210.He realizes that he has lost interest of $36 from paying the security deposit.What is Jason's total annual cost of renting?

The purpose of a rate cap in an adjustable-rate mortgage is to limit the amount by which the interest rate can increase or decrease during the ARM term.

Michelle Duncan wants to know what price home she can afford.Her annual gross income is $45,000.She owes $550 per month on other debts and expects her property taxes and homeowners insurance to cost $225 per month.She knows she can get an 8%,30-year mortgage so her mortgage payment factor is 7.34.She expects to make a 20% down payment.What is Michelle's affordable home purchase price? Round your answer to the nearest $100.

What should you consider to determine the price you offer for a home?

Property taxes are based on the assessed value.Who determines this value and what can you do if you disagree with this assessment?

What does it mean to sublet an apartment?

A conventional mortgage usually has:

A home worth $160,000 with $80,000 still owed on the mortgage would have equity of $80,000,which is ________ percent of the home's value.

Which of the following would increase the amount that a person could afford to spend on a home?

What is the most popular form of housing?

A renter is required to pay a security deposit of $800,on which 3 percent interest will be paid.What amount would the person earn each year?

Negotiating a purchase price for a home can involve an offer and a counteroffer.

Private Mortgage Insurance is usually required if the down payment is less than ________ percent of the purchase price of the home.

An FHA fixed-rate mortgage has low down payment requirements and is fully assumable with no prepayment penalties.

Money that is usually deposited with the lending institution for the payment of property taxes and homeowner's insurance is called:

Duane Miller wants to know what price home he can afford.His annual gross income is $60,000.He has no other debt expenses and expects property taxes and insurance to cost $500 per month.He knows he can get a 6%,15 year mortgage so his mortgage payment factor is 8.43.He expects to make a 10% down payment.What is Duane's affordable home purchase price? Round your answer to the nearest $100.

An appraisal refers to the price for which a home has been sold.