Deck 5: Making Automobile and Housing Decisions

Question 1

Capitalized cost on an auto lease is the same as the price of the car.

Answer 1

True

Question 2

Most new car warranties cover a minimum of the first 72,000 miles or 6 years of ownership.

Answer 2

False

Question 3

Fixed automobile costs increase as the number of miles driven increase.

Answer 3

False

Question 4

Low-balling is a sales technique where the salesperson quotes a low price for a car to get you to make an offer,and negotiates the price upward prior to signing the sales agreement.

Question 5

An automobile is a personal use asset for most buyers.

Question 6

Low-balling is a sales technique where the salesperson quotes a low price for a car then tries to get you to purchase a different,more expensive vehicle.

Question 7

The money factor on an auto lease is similar to the interest rate on a loan.

Question 8

The greatest fixed cost involved with owning an automobile is usually the monthly loan payments.

Question 9

The largest single investment you will undertake in your lifetime will probably be the purchase of an automobile.

Question 10

Capitalized cost on an auto lease is similar to the interest rate on a loan.

Question 11

Gasoline is a variable cost of automobile ownership.

Question 12

Terminating a car lease before expiration is often difficult and costly.

Question 13

Early termination clauses on an auto lease typically apply to cars that are stolen or totaled in an accident as well as when you just want to return the vehicle before the end of the lease.

Question 14

Most new car warranties cover a minimum of the first 36,000 miles or 3 years of ownership.

Question 15

Less rapid depreciation is one advantage of buying a new car rather than a used car.

Question 16

The greatest fixed cost involved with owning an automobile is usually the auto insurance payments.

Question 17

You should secure the trade in value of your current automobile before you start negotiating the final price on the car you are purchasing.

Question 18

Automobiles tend to decrease in value over time.

Question 19

When buying a used car,it is very important to have it checked by a reputable mechanic.

Question 20

A closed-end automobile lease is the most popular type of lease.

Question 21

You can deduct mortgage interest and property taxes on your home to reduce your federal income taxes only if you itemize deductions.

Question 22

A significant legal difference between a cooperative and a condominium is that the condominium owner normally holds a title to the property.

Question 23

The term condominium refers to a style of architecture.

Question 24

To make a legally binding offer on a car,you must sign a sales contract that specifies the offering price and all the conditions of your offer.

Question 25

A loan-to-value ratio of 80 percent would require a buyer to make a 20% down payment.

Question 26

As a homeowner,the federal government may allow you to deduct interest expenses and taxes paid on the property.

Question 27

The largest single investment you will undertake in your lifetime will probably be the purchase of a house.

Question 28

Condominiums and townhomes are generally less costly than single-family,detached homes.

Question 29

The sales contract on an automobile purchase contractually binds you to purchase the car at the price you offered in the contract.

Question 30

The federal income tax advantage gained from home ownership will depend on the amount of deductible interest and property taxes and your total income.

Question 31

There are large regional differences in the price of housing.

Question 32

The difference between the market value of your home and the balance of the mortgage is your equity in the property.

Question 33

Townhome,condominium and co-op owners can deduct real estate taxes and mortgage interest on their federal income taxes.

Question 34

One who leases an automobile is typically responsible for early termination costs,even when early termination is due to theft or auto accidents.

Question 35

A lender will generally require mortgage insurance if the down payment is less than 20 percent.

Question 36

Condominium and Townhome owners can deduct real estate taxes and mortgage interest on their federal income taxes but co-op owners cannot take these deductions.

Question 37

In a condominium and townhome,the buyer receives title to an individual unit and joint ownership of the common areas.

Question 38

In a co-op,the buyer receives title to a unit and joint ownership of the common areas.

Question 39

A loan-to-value ratio of 90 percent would require a buyer to make a 90% down payment.

Question 40

A condominium or townhome buyer will make monthly mortgage payments as well as pay a fee for services and maintenance of common areas.

Question 41

The job of a mortgage banker is to locate conventional loans for clients.

Question 42

If a buyer withdraws from a transaction without a valid reason after signing a sales contract,he typically loses his earnest money.

Question 43

Earnest money deposits and contingency clauses are usually specified in the sale contract.

Question 44

The cost of a title search and title insurance are typically part of the closing costs on a housing transaction.

Question 45

A PITI payment is composed of principal,interest,real estate taxes,and insurance.

Question 46

Points paid to secure a mortgage to purchase a primary residence will generally be tax deductible as interest in the year they are paid.

Question 47

A 5 percent down payment will result in larger monthly mortgage payments than a 10 percent down payment on the same house for the same maturity mortgage.

Question 48

Private Mortgage Insurance (PMI)protects the lender from loss on a loan.

Question 49

The market price of a house is $125,000 and the homebuyer will borrow $100,000.Two points will equal $2,000.

Question 50

Security deposits are controlled by the tenant.

Question 51

The market price of a house is $125,000 and the homebuyer will borrow $100,000.Two points will equal $2,500.

Question 52

You will need to purchase homeowners insurance equal to the purchase price of the house you are buying.

Question 53

If you are buying a house that is for sale by the owners,the earnest money goes directly to the seller.

Question 54

The monthly mortgage payment divided by your monthly gross income equals an affordability ratio.

Question 55

Points paid when a home is refinanced can all be deducted as interest in the year they are paid.

Question 56

The down payment is typically the only substantial housing cost that must be paid at the time of the purchase.

Question 57

First-time homebuyers can withdraw up to $10,000 from an IRA without penalty regardless of their age.

Question 58

A real estate sales contract contains the terms and provisions which establish the sale's transaction.

Question 59

First-time homebuyers can withdraw up to $25,000 from an IRA without penalty if they are 30 years of age or less.

Question 60

An inflation hedge is an asset that increases in value at a rate equal to or greater than the rate of inflation.

Question 61

Commercial banks are an important source of both mortgage loans and interim construction loans.

Question 62

Balloon payment mortgages generally must be refinanced.

Question 63

One can increase the tax benefits of homeownership by selecting a shorter term mortgage,for example 15 years rather than 30 years.

Question 64

The interest rate is lower on a 6-year auto loan than on a 3-year auto loan

Question 65

The interest rate charged on adjustable-rate mortgages will change from time to time based on a specified index.

Question 66

Other factors being equal,fixed-rate mortgages will have higher interest rates initially than adjustable-rate mortgages.

Question 67

To be legally binding,real estate buy-sell agreements must be in writing,but leases may be oral.

Question 68

An adjustable rate mortgage with a baseline rate of 4%,a margin of 1%,and an annual cap of 1% would have an initial mortgage rate no higher than 6%.

Question 69

According to federal law,private mortgage insurance on most loans currently made ends automatically once the mortgage is paid down to 78% of the original value of the house.

Question 70

A FHA loan is insured by the federal government.

Question 71

Graduated payment mortgages and growing equity mortgages are both examples of adjustable-rate mortgages.

Question 72

The Veterans Administration guarantees mortgage loans given to qualified veterans.

Question 73

To refinance a mortgage,the lender typically requires at least 20% equity in the home.

Question 74

An adjustable rate mortgage with a baseline rate of 5%,a margin of 2%,and an annual cap of 1% would have an initial mortgage rate of 7%.

Question 75

Negative amortization is possible with an adjustable-rate mortgage.

Question 76

The affordability ratios used to qualify applicants for FHA and VA loans are more stringent than those used for conventional loans.

Question 77

Adjustable-rate mortgages with interest rate caps can lead to negative amortization.

Question 78

Negative amortization is possible with a fixed-rate mortgage.

Question 79

Adjustable-rate mortgages with monthly payment caps can lead to negative amortization.

Question 80

According to federal law,private mortgage insurance on most loans currently made ends automatically once the mortgage is paid down to 80% of the original value of the house.