Question 1

With private mortgage insurance,many lenders will allow you to borrow more than 80% of the appraised value of the home.What is the purpose of this action?

Accepted Answer

Private mortgage insurance (PMI) is designed to protect the lender by providing reimbursement for a portion of the loan if the borrower defaults. By allowing borrowers with PMI to borrow more than 80% of the home value, lenders can still offer loans to high-risk borrowers while mitigating some of the financial risk involved. PMI is not required by law, and it does not provide protection for the homeowner or the property.

Question 2

Select the one cost that is not involved in home ownership.

Accepted Answer

Rental deposit is a cost associated with renting a property, not owning one. The other options listed are all costs associated with home ownership.

Question 3

Jackie is considering obtaining a mortgage of $333,000.A lower APR is available,but she must pay 1.75 points to buy the rate down.How much must Jackie pay in dollars?

Accepted Answer

To find out how much Jackie must pay in dollars to buy the rate down, we need to calculate the points. 
1.75% of $333,000 = $5,828. Therefore, Jackie must pay $5,828 to obtain the lower APR. Option C is the correct answer. Option A, B, and D are not correct as they do not match the calculated result.

Question 4

Which of the following housing alternatives puts the responsibility for maintenance and repairs on the occupant?

Accepted Answer

Home ownership puts the responsibility for maintenance and repairs on the occupant.

Question 5

You are considering obtaining a mortgage of $220,000.A lower APR is available,but you must pay 2 points to buy the rate down.How much must you pay in dollars?

Accepted Answer

Points are calculated as a percentage of the total loan amount. 2 points on a $220,000 mortgage means 2% of $220,000, which is $4,400.

Question 6

When you decide to buy a home,which of these questions should be answered?

Accepted Answer

All these questions should be answered before buying a home. Knowing the maximum amount a bank will lend can help you determine the price range of homes you can consider. Deciding whether or not to borrow up to this maximum may depend on your individual financial situation and goals. Understanding the size of the down payment you can afford will also factor into your home-buying decision.

Question 7

Give the major financial advantages of home ownership.

Accepted Answer

The answer of Give the major financial advantages of home...

Question 8

What are the common options for housing?

Accepted Answer

The answer of What are the common options for housing?...

Question 9

PITI stands for the total of your monthly

Accepted Answer

PITI stands for Principal, Interest, Taxes, and Insurance, which are the four components that make up a typical monthly mortgage payment. Principal refers to the amount of money you borrowed to buy the property, while interest is the fee you pay to the lender for borrowing that money. Taxes and insurance are separate fees that may be included in your mortgage payment to cover property taxes and homeowners insurance.

Question 10

Name the steps in the housing decision.

Accepted Answer

The answer of Name the steps in the housing decision....

Question 11

You have just obtained a mortgage to purchase your home.The ________ that you paid to obtain the loan are charges that must be paid at the time of the sale and serve to raise the effective cost of the loan.

Accepted Answer

Points are charges that must be paid at the time of the sale and are calculated as a percentage of the loan amount. They serve to raise the effective cost of the loan. Closing fees and escrow fees are also charges associated with obtaining a mortgage, but they may not necessarily be paid at the time of sale. Security fees are not typically associated with obtaining a mortgage. Therefore, the best choice that fits the given description is A) points.

Question 12

When following smart buying to purchase a home you should

Accepted Answer

To follow smart buying when purchasing a home, it is important to consider all of the above options. Creating a budget and determining what PITI you can afford, checking your FICO score and credit report, looking at your overall financial plan to determine a loan amount, and determining how much of a down payment you can afford are all essential steps in smart home buying. Therefore, option E (all of the above) is the best choice.

Question 13

How much would the monthly payment be on a mortgage of $250,000 for 30 years at a rate of 6.0%?

Accepted Answer

We can use the formula for calculating mortgage payments:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
where M is the monthly payment, P is the principal ($250,000 in this case), i is the monthly interest rate (6.0% divided by 12), and n is the number of payments (30 years times 12 months per year, or 360 payments).

i = 6.0% / 12 = 0.005
n = 30 x 12 = 360

M = 250,000 [ 0.005(1 + 0.005)^360 ] / [ (1 + 0.005)^360 - 1 ]
M = $1,498.87

Therefore, the monthly payment on a mortgage of $250,000 for 30 years at a rate of 6.0% would be $1,498.87 per month. The correct answer is A.

Question 14

Private mortgage insurance typically is not needed with a down payment of 20% or larger.Why?

Accepted Answer

Buyers who can afford a down payment of 20% or more are considered less risky by lenders, as the substantial down payment reduces the loan-to-value ratio, indicating the buyer has more at stake and is thus more likely to make their mortgage payments.

Question 15

You are a newlywed,and you and your spouse have just found your dream home.Problem is,you do not have 20% for a down payment on the house.You will probably need to obtain

Accepted Answer

Since the couple does not have 20% down payment, they may need to obtain PMI or private mortgage insurance. This insurance is generally required by lenders when the down payment is less than 20%. It protects the lender in case the borrower defaults on the loan.

Question 16

Which of the following is not a recurring housing cost?

Accepted Answer

Mortgage payments, PITI (Principal, Interest, Taxes, and Insurance), maintenance and operating costs, and homeowner's insurance are all recurring housing costs. However, points are a one-time expense paid at the time of the mortgage closing and not a recurring cost.

Question 17

You are considering the purchase of an acre of land out in the country to build your future house on.You pay for an investigation of the public record to determine the current legal owner of the property.This is called a(n)

Accepted Answer

A title search is the process of researching the legal ownership of a property by examining public records. It is important to conduct a title search before purchasing any property to ensure that the seller has the legal right to sell it and that there are no liens or encumbrances on the property that may affect the buyer's ownership rights. A legal entity search, appraisal search, and escrow search are not relevant in determining the legal ownership of a property.

Question 18

Bob and Marilyn Hartin know the bank will carefully evaluate their situation before lending them the money for the mortgage for their new home.Which is not a consideration?

Accepted Answer

The number of children they have is not typically a consideration for a mortgage loan, as it does not directly impact the Hartin's ability to pay back the loan. The other options listed (financial history, level of debt, ability to pay, and appraised home value) are all important factors that the bank would likely consider when evaluating the Hartin's loan application.

Question 19

You are in the process of purchasing a new home.Expenses that the buyer and seller incur when finalizing the transfer of the ownership of the house are called

Accepted Answer

Closing costs are the expenses that both the buyer and seller have to bear to complete the transfer of ownership of the house. These may include fees for the title search, appraisal, home inspection, legal documentation, and other related services.

Question 20

Name the items that are deposited in an escrow account.

Accepted Answer

Property taxes and property insurance are typically deposited into an escrow account.

Quiz 8: The Home and Automobile Decision