Deck 5: Making Automobile and Housing Decisions

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

The greatest fixed cost involved with purchasing an automobile financed with a loan is usually the monthly loan payments.

Question 6

Automobiles tend to decrease in value over time.

Question 7

An automobile is a personal use asset for most buyers.

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

Lowballing 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 13

Lowballing 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 14

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

Question 15

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 16

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 17

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

Question 18

Gasoline is a variable cost of automobile ownership.

Question 19

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

Question 20

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

Question 21

A significant legal difference between a cooperative building and a condominium is that in a condominium,an owner normally holds a title to an individual living unit and joint ownership of the common areas,while in a cooperative building,each tenant owns a share of the nonprofit corporation that owns the building.

Question 22

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 23

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 24

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

Question 25

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

Question 26

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

Question 27

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 28

There are large regional differences in the prices of housing.

Question 29

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

Question 30

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 31

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

Question 32

The term condominium refers to a style of architecture.

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

You will need to purchase a homeowner's insurance equal to the purchase price of the house you are buying.

Question 43

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

Question 44

Negative amortization is possible with a fixed-rate mortgage.

Question 45

A Federal Housing Administration (FHA)loan is insured by the federal government.

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

Negative amortization is possible with an adjustable-rate mortgage.

Question 59

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

Question 60

If after signing a sales contract,you withdraw from a transaction without a valid reason,you might have to forfeit the earnest money deposit.

Question 61

The monthly payment is lower in a 6-year auto loan than on a 3-year auto loan.

Question 62

The "rent ratio" has fallen as home prices have fallen.

Question 63

A short sale does not affect a distressed homeowner's credit score as much as a foreclosure.

Question 64

The first step in the auto-buying process should be:

A) test drive several cars.
B) beginning negotiations.
C) to consider alternative buying strategies.
D) to decide whether to trade in your used car or to sell if yourself.
E) analyzing how much you can afford to spend on the car.

Question 65

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

Question 66

According to federal law,private mortgage insurance on most loans made on or after July 29,1999,ends automatically once the mortgage is paid down to 80% of the original value of the house.

Question 67

The affordability ratios used to qualify applicants for Federal Housing Administration and Veteran Allowance loans are more stringent than those used for conventional loans.

Question 68

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

Question 69

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

Question 70

According to federal law,private mortgage insurance on most loans made on or after July 29,1999,ends automatically once the mortgage is paid down to 78% of the original value of the house.

Question 71

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

Question 72

Variable auto ownership costs are most dependent on:

A) driver behavior.
B) miles driven.
C) city lived in.
D) down payment.
E) periodic renewal of vehicle registration.

Question 73

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

Question 74

Renting affords more flexibility than home ownership.

Question 75

The loss of value in a car over time is called:

A) maintenance.
B) loan payment.
C) sales payment.
D) commission.
E) depreciation.

Question 76

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

Question 77

An increase in the "rent ratio" indicates that renting is more affordable relative to housing prices.

Question 78

The Veterans Administration guarantees mortgage loans given to qualified veterans.

Question 79

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

Question 80

_____ is a fixed auto ownership cost.

A) Gasoline
B) Installment loan payment
C) Auto insurance
D) Maintenance
E) b and c