Deck 10: Purchasing and Financing a Home

Question 1

Condominiums have the advantages of sharing expenses among owners and giving the owners more privacy than single-family homes.

Answer 1

False

Question 2

If a person chooses to purchase a more expensive home,he or she may have to cut expenses in other areas such as entertainment.

Answer 2

True

Question 3

The selection of a home's school system is only applicable if you have or are likely to have school-aged children.

Answer 3

False

Question 4

Is purchasing a home an expense,an investment,or both?

Question 5

Online realtor services are more convenient,but usually charge higher commissions than traditional full-service real estate companies.

Question 6

Since most of the problems have already been fixed,older homes usually have lower maintenance expense than newer homes.

Question 7

The purchase of a home represents a potential liability if you need to move quickly and the home does not appreciate rapidly in value.

Question 8

Most individuals pay for a home with a down payment of 5% or less and then obtain a mortgage to finance the rest.

Question 9

Which of the following should not be considered when selecting a condominium?

A)Availability of companies that perform maintenance and repair services in the area
B)Taxes
C)Resale value
D)Association dues

Question 10

Which of the following is false about condominiums?

A)Association dues are required.
B)An individual owner may mow the grass or make any repairs to the common areas when needed.
C)They share common areas such as a pool,tennis court,and club house.
D)They combine funds for maintenance.

Question 11

Purchasing a condominium is an alternative to purchasing a home but also requires good decision-making skills.

Question 12

Real estate brokers usually offer good advice,but since they have a vested interest in you buying from them,you should also factor in your own judgment.

Question 13

Since real estate brokers are licensed and bonded,they are required to give you unbiased information about real estate purchases.

Question 14

Buying a home may be the single biggest investment you will ever make,so the decision should be taken very seriously.

Question 15

When choosing a home,a convenient location can save you considerable travel time and expenses.

Question 16

Which of the following is true about condominiums?

A)Each person owns a portion of the land on which a condominium is located
B)Maintenance fees of common areas are shared
C)They have more privacy than single family homes
D)All of the above

Question 17

In determining the amount of down payment and monthly mortgage payments you can afford,you should maintain some extra funds for liquidity purposes to cover unanticipated bills.

Question 18

The first step in the home-buying process should be to

A)identify the specific home you want to purchase.
B)determine a realistic price range of homes you can afford.
C)compare the cost of buying to renting.
D)find a good realtor.

Question 19

An advantage of using online realtor services is that

A)you have easier access to qualified realtors.
B)the commissions and fees are often less than those charged by traditional full-service realtors.
C)your chances of selling a house are about 50% greater.
D)you will get a higher price for houses sold or pay lower prices for houses bought.

Question 20

Your monthly payments for a house are likely to be as high as rent when you factor in mortgage payments,property taxes,homeowner's insurance,and home repairs.

Question 21

It is a good idea not to disclose defects of the home you are trying to sell,since these will adversely affect your selling price or your ability to quickly sell your home.

Question 22

Which of the following is most important when selecting a home?

A)Taxes
B)Insurance
C)Resale value
D)Location

Question 23

Which of the following costs associated with home ownership is hardest to budget?

A)Insurance
B)Taxes
C)Repairs
D)Mortgage payments

Question 24

The type of home which probably would require the lowest maintenance is a (an)

A)large home.
B)older home.
C)home built by a well-known construction company.
D)home with a large yard.

Question 25

When purchasing a home,which of the following costs will you not incur?

A)Origination fee
B)Realtor's commission
C)Application fee
D)Appraisal fee

Question 26

Disclosing defects when selling a home is not

A)the legal thing to do in most states.
B)the moral thing to do.
C)optional if the defect is only a minor one.
D)the smart thing to do to avoid lawsuits.

Question 27

Homes near areas that have just been zoned for industrial use become more valuable.

Question 28

Annual property taxes for homes are usually

A)less than 0.5% of the home value.
B)0)5% to 1% of the home value.
C)1% to 2% of the home value.
D)greater than 2% of the home value.

Question 29

Homeowner's association fees are not

A)often used for security guards.
B)optional to homeowners in an area.
C)used to maintain common grounds.
D)often quite high and should be considered when buying a home.

Question 30

For a conventional mortgage you will typically need a(n)________ of from 10% to 20% of the selling price of the home you are purchasing.

Question 31

When obtaining a mortgage you should

A)apply for the maximum amount you can afford,since the house will be an appreciating asset.
B)let a realtor or some other expert choose the type and length of mortgage you will need.
C)maintain some funds for liquidity purposes to cover unanticipated bills.
D)be very conservative and apply only for a mortgage amount you can pay off within 10 years.

Question 32

Most realtors agree that location more than anything influences a home's future resale value.

Question 33

The specific location of your home can influence the amount of property taxes and insurance you will pay.

Question 34

A good way to estimate the market value of a home is to multiply the number of square feet by the average price per square foot of similar homes in the area.

Question 35

To determine how much home you can afford to purchase,you should not consider

A)finding a good Internet page that has a mortgage calculator.
B)looking at your budget,balance sheet,and income statement.
C)possible future raises you will receive.
D)consulting a loan officer.

Question 36

Most home purchases are made initially

A)with payments by personal check.
B)with a 10 to 20 percent down payment and a mortgage.
C)with a 5 percent down payment.
D)with no down payment.

Question 37

Of the following criteria for selecting a home,which would usually diminish the most in importance as the age of the buyers exceed 50?

A)Price
B)Convenient location
C)School system
D)Taxes

Question 38

When selling a home,which of the following costs will you incur?

A)Loan origination fee
B)Realtor's commission
C)Title search and insurance
D)Points

Question 39

Homeowner's Association monthly dues generally include water,sewer,garbage,and maintenance or other amenities such as a pool,clubhouse,and a tennis court.

Question 40

Owning a home entails all of the following expenses except

A)renter's insurance.
B)property taxes.
C)maintenance expenses.
D)lost interest on down payment and closing costs.

Question 41

A point is a flat fee of $500 for each multiple of $100,000 that you finance on a new home.

Question 42

Proximity to schools can increase home values,while increased distance from schools often lowers home values.

Question 43

Which of the following would not be included in closing costs?

A)Points
B)Earnest money
C)Title charges
D)Recording fees

Question 44

For a conventional mortgage,a lender typically requires a down payment of 10 to 20 percent of the home's selling price.

Question 45

A market analysis is not

A)an estimate of the price of a home.
B)a guarantee of the price you will receive when selling a home.
C)based on similar homes in the area.
D)determined by multiplying the number of square feet in the home by the average price per square foot of comparable homes.

Question 46

Which of the following is true?

A)Loan origination fees are around 10-20 percent
B)Loan application fees range from $100 to $500
C)Points are $100-$200 per $1,000 of the home's value
D)Appraisal costs range between 15-20 percent of the value of the house

Question 47

Which of the following is not true?

A)A conventional mortgage requires a 10-20 percent down payment
B)With government-backed loans,the government insures the loan in the event of default
C)Veterans Administration mortgages are extended to most first-time homebuyers
D)Government-backed mortgages may require lower down payments than conventional mortgages

Question 48

Before you buy a house,you should conduct a(n)________ to determine if the price is comparable to similar houses in the area.

Question 49

A sales contract stipulates not only the price offered for a home,but also the repairs to be completed and the move-in date requested by the buyer.

Question 50

To simplify and speed up the home buying process,you should first give a verbal offer to see if the seller is willing to take the price you are willing to offer.

Question 51

On the purchase of a home,one "point" is equal to

A)$100.
B)$1,000.
C)1 percent of the amount being financed.
D)1 percent of the purchase price.

Question 52

In addition to closing costs,realtor fees of about 10 percent are charged when you buy a home.

Question 53

In negotiating for the purchase of a home,which of the following may not be included?

A)Possession date
B)Repairs that are to be made
C)A pile of wood for the fireplace
D)Cost of street repairs

Question 54

When buying a home,the seller pays the realtor commission,so you pay no fee for realtor services except in the form of a higher purchase price.

Question 55

In negotiating a price for the purchase of a home,you should do all except which of the following?

A)Offer the highest price you can afford first to get it settled quickly
B)Write up a contract
C)Realize this is a process
D)Understand that realtors are brokers between the buyer and seller

Question 56

All the information,except ________,can be found on a variety of Web sites about mortgages.

A)projected rate increases
B)loan rates,length of loan,and principal
C)loan applications
D)background on different mortgage companies

Question 57

A ________ is responsible for determining the value of the home as part of the loan process.

A)banker
B)loan officer
C)real estate appraiser
D)real estate agent

Question 58

You are considering the purchase of a 2,300 square foot house that is being offered for $238,500.After researching recent home sales in the area,you find three that are comparable.The first was a 2,500 square foot home that sold for $225,000,the second was a 2,200 square foot home that sold for $200,000 and the third was a 2,000 square foot home that sold for $178,000.Based on your analysis,what would be a reasonable offer on the house? (Round all computations to the nearest dollar.)
(a)$210,000
(b)$207,000
(c)$205,000
(d)$201,000

Question 59

Government-backed mortgages may require lower down payments than conventional mortgages,but usually charge higher interest rates.

Question 60

Your home value is likely to be higher with all of the following except

A)being close to a school.
B)having a convenient location.
C)being in an area that has just been zoned for industrial use.
D)being in an area where a large retail business has just moved in.

Question 61

Of the following fees involved in the purchase of a house,which is usually not borne by the purchaser?

A)Title search and insurance
B)Appraisal fee
C)Realtor's commission
D)Loan application fee

Question 62

When homeowners expect that interest rates will rise,they prefer

A)fixed rate loans.
B)adjustable rate mortgages.
C)balloon payment mortgages.
D)decreasing term mortgages.

Question 63

In comparing a 30- and 50-year mortgage,over the life of the loan you will have smaller payments but pay more interest with the 30-year mortgage.

Question 64

The schedule that shows your monthly home payment and the amounts applied to principle and interest each month is called a depreciation table.

Question 65

For a long-term home loan,such as 30 years,the amount of principle you pay on your loan during the first few years is quite small.

Question 66

On a fixed rate mortgage,the monthly

A)payment remains constant and the interest rate fluctuates.
B)payment remains constant and interest rate stays the same.
C)rate varies and the interest rate varies.
D)payment remains constant until the balloon payment.

Question 67

A 15-year mortgage compared to a 30-year mortgage has all of the following except

A)a lower appraisal fee.
B)less interest over the life of the loan.
C)higher payments.
D)a faster build up of equity.

Question 68

List four key components of closing costs.

Question 69

There are a number of different mortgage types to choose from in financing a home or condominium,such as a fixed or variable loans for 15 or 30 years.

Question 70

If you obtain an FHA or VA loan you will make additional payments each month to cover your home insurance and property taxes that will be placed in an account called a(n)

A)insurance account.
B)appraisal account.
C)escrow account
D)default prevention account

Question 71

Over the life of a mortgage,the payment to principal ________ and the portion to interest expense ________.

A)increases; increases
B)decreases; increases
C)increases; decreases
D)decreases; decreases

Question 72

If you wish to keep your monthly payments as low and predictable as you can,you should use a

A)15-year ARM.
B)30-year ARM.
C)15-year fixed rate.
D)30-year fixed rate.

Question 73

One point on a $80,000 loan for the purchase of a $110,000 home would equal

A)$100.
B)$800.
C)$1,000.
D)$1,100.

Question 74

Points paid at closing are for payment of

A)finance charges or interest.
B)loan processing.
C)property taxes.
D)inspections.

Question 75

An amortization schedule shows all but the

A)principal portion of the payment.
B)interest portion of the payment.
C)increase in market value.
D)beginning and ending balances.

Question 76

Chuck obtained a mortgage of $90,000 to finance a $120,000 home.The title search will be $400,appraisal fee $500,application fee $900,and he will pay one percent origination fee.How much are his closing costs?
(a)$900
(b)$1,800
(c)$2,700
(d)$3,000

Question 77

Fixed rate mortgages usually have

A)the same interest rate.
B)an adjustable rate.
C)a balloon payment.
D)different monthly payments depending upon the interest rate.

Question 78

The monthly payment for a 15-year loan would be about ________ times as much as a comparable 30-year loan.

A)0)5
B)1)25
C)2)0
D)the same

Question 79

If a homebuyer shops around,she/he can probably avoid which of the following fees?

A)Title search
B)Title insurance
C)Appraisal fee
D)Loan origination fee

Question 80

The schedule that discloses the monthly payment that you will make,based on a specific mortgage amount,a fixed interest rate level,and maturity is called a(n)

A)depreciation schedule.
B)payment table.
C)amortization table.
D)obligation schedule.