Finance CH. 5 Quiz

Prequalification provides a home buyer with information regarding the specific mortgage amounts he or she is eligible for subject to the expected changes in interest rates.TrueFalse True
Jane and Smith are considering the purchase of a home in downtown Minneapolis. They approached Larson’s Mortgagers Inc. to arrange for the financing needed for their home. This process of arranging with a mortgage lender in advance of buying a home is called?a. contingency auctionb. prequalificationc. diversificationd. foreclosuree. real estate short sale b. prequalification
Fredrick purchased a property worth $150,000 on mortgage. He had paid $30,000 as a down payment on this property. However, because of a recent slump in the real estate prices, the property is worth only $110,000, forcing Fredrick to sell the property. Assuming that no mortgage payments have been made by Fredrick, this sale is termed a(an) _____.a. real estate declining equityb. shrinking principal salec. indexed equityd. real estate short salee. fixed mortgage sale d. real estate short sale
Assume that you have taken a car on a closed-end lease for a period of 5 years. At the end of the fifth year, you would need to pay additional money only a. when the mileage limits are exceeded b. when the residual value is lower than expected c. when the residual value is more than expected d. when the mileage limits are not exceeded a. when the mileage limits are exceeded
In a co-op, the buyer receives title to a unit and joint ownership of the common areas.TrueFalse False
Which of the following is a type of down payment that lowers the potential depreciation and therefore your monthly lease payments on a leased car?a. Money factorb. Property depreciation costc. Purchase optiond. Initial residual valuee. Capital cost reduction e. Capital cost reduction
The seller of the house typically pays thea. real estate agent’s commission.b. loan application fee c. appraisal fee. d. title search and insurance. a. real estate agent’s commission.
The price of the car you are leasing is called the:a. capitalized cost.b. residual value.c. money factor.d. purchase option.e. capital cost reduction. a. capitalized cost
Matt is considering the purchase of a condo on a mortgage. However, he is not sure of the amount of the mortgage he is eligible for. _______________ will help him identify and correct any problems such as credit report errors that may arise on his application. a. Prequalificationb. A contingency clause c. A Multiple Listing Service d. Due diligence a. Prequalification
The Real Estate Settlement Procedures Act governs __________ on owner-occupied houses, condominiums, and apartment buildings of four units or fewer.a. mortgage closings b. the terms of prequalified loans c. mortgage rates d. the contingency clause a. mortgage closings
Phil and Christina are recently married and are unsure of where they will be relocated after Christina finishes her residency in 9 months. Based on this information, which of the following housing recommendations would be most appropriate for them?a. Leasing a cooperative apartmentb. Purchasing a trailerc. Renting a homed. Sharing a single-family dwellinge. Buying a condominium c. Renting a home
If you made a down payment of $11,000 on a house worth $110,000, the lenders will require _____ because of the size of the down payment.a. application feesb. homeowner’s insurancec. closing pointsd. a bonde. private mortgage insurance e. private mortgage insurance
Fees charged by lenders as a condition of a mortgage loan that raises the effective rate of interest are called:a. add-on charges.b. mortgage points.c. loan discounts.d. down payments.e. commissions. b. mortgage points.
When shopping for a lease, you want:a. a low residual value.b. a low capitalized cost.c. a high money factor.d. high lease payments.e. a high insurance cost. b. a low capitalized cost.
Which of the following are tax deductible if one itemizes deductions?a. Interest and real estate taxesb. Principal and interestc. Principal, interest, and real estate taxesd. Principal, interest, real estate taxes, and insurancee. Interest, real estate taxes, and insurance a. Interest and real estate taxes
The first step in the auto-buying process should be:a. to begin negotiations on various automobiles.b. to test-drive several automobiles.c. to consider alternative buying strategies.d. to decide whether to trade in your used car or to sell it yourself.e. to analyze how much you can afford to spend on the car. e. to analyze how much you can afford to spend on the car.
The majority of each monthly payment at the beginning of the loan goes to pay the:a. real estate taxes.b. private mortgage insurance.c. homeowner’s insurance.d. principal.e. interest. e. interest
_____ is a situation where homeowners owe more to the lenders than what their properties are worth.a. Inflationb. A negative equityc. A restructured. A foreclosuree. An expanded mortgage b. A negative equity
If the maximum loan-to-value ratio that a lender will accept on a house costing $100,000 is 90 percent, then the borrower must make:a. a maximum down payment of $10,000.b. a maximum down payment of $10,000 including closing costs and mortgage points.c. a minimum down payment of $90,000 including closing costs.d. a minimum down payment of $10,000 including closing costs .e. a minimum down payment of $10,000 plus closing costs. e. a minimum down payment of $10,000 plus closing costs
A financing made available by a builder or seller to a potential new-home buyer at interest rates well below market interest rates, often only for a short period is termed as a a. two-step ARM b. conventional mortgage c. convertible ARM d. buydown d. buydown
As the maturity of term of loan goes down, A. Monthly payment goes upB. Monthly payment goes downc. Total interest paid over the life of the loan goes downd. Both A and C d. Both A and CMonthly payment goes upTotal interest paid over the life of the loan goes down
Assume you are renting now and monthly:Cash inflows- $4,900. Cash outflow- $3, 650 (of which rent is $650) Want to put 10% of inflow into savings and have another $200 per month as “cushion” for emergenciesHow much of a mortgage (loan) plus property taxes plus insurance can you manage?a. $1,050b. $1,210c. $1,470d. $1,390 b. $1,2104900-490-200= 4,2104,210 – 3,650= 560560+650= 1,210
Leasing a car generally will result in ____________ equity than purchasing a cara. Higherb. Lowerc. Trick Question c. Trick Question
Depreciation of ones car is an operating expenseTrueFalse True
Fredrick purchased a property worth $150,000 on mortgage. He had paid $30,000 as a down payment on this property. However, because of a recent slump in the real estate prices, the property is worth only $110,000, forcing Fredrick to sell the property. Assuming that no mortgage payments have been made by Fredrick, this sale is termed a(an) _____.a. shrinking principal saleb. indexed equityc. real estate declining equityd. fixed mortgage salee. real estate short sale e. real estate short sale
At the end of your car lease period, you intend to turn in the car, and you will not pay extra at that time based on the residual value of the car. You have _____ lease.a. a money factorb. a purchase optionc. a residuald. a closed-ende. an open-end d. a closed-end
Which of the following is true of buying a used car as compared with a new car?a. A used car will have a higher residual value than a new car.b. Purchasing a used car will be less expensive as compared with purchasing a new car.c. The accessories in a new car will be better updated compared with those fitted in a new car.d. The fuel efficiency in a used car is always higher compared with that of a new car.e. A used car will be in a better mechanical condition compared with a new car. b. Purchasing a used car will be less expensive as compared with purchasing a new car.
The _____ governs closings on owner-occupied houses, condominiums, and apartment buildings of four units or fewer.a. Mortgage Lenders Actb. Real Estate Settlement Procedures Actc. Real Estate Agents Actd. Equal Credit Opportunity Acte. Truth-in-Lending Act b. Real Estate Settlement Procedures Act
A lender will usually require a loan-to-value ratio of _____ or less for a borrower to avoid having to pay private mortgage insurance (PMI).a. 85%b. 75%c. 80%d. 95%e. 90% c. 80%
Which of the following will help a buyer know ahead of time the specific mortgage amount that he or she will be eligible for subject to changes in rates and term?a. Prequalificationb. The interest ratec. Anchoringd. The rent ratioe. Leasing a. Prequalification
You made a $900 mortgage payment. The interest of $925 on the mortgage for this month leads to an increase in the principal balance. You have __________a. signed up for a conventional mortgage b. experienced a negative amortization c. taken a fixed-rate mortgage d. refinanced your loan b. experienced a negative amortization
You made a $900 mortgage payment. The interest of $925 on the mortgage for this month leads to an increase in the principal balance. You havea. signed up for a conventional mortgage b. experienced a negative amortization c. taken a fixed-rate mortgage d. refinanced your loan b. experienced a negative amortization
An escrow account is used to collect _____ from one’s monthly mortgage payment.a. operating expensesb. interestc. real estate taxesd. closing costse. principal c. real estate taxes
As home prices have fallen in recent years, the rent ratio:a. and rent attractiveness have decreased.b. and rent attractiveness have increased.c. has increased and rent attractiveness has stabilized.d. has decreased and rent attractiveness has increased.e. has increased and rent attractiveness has decreased. a. and rent attractiveness have decreased.
When you lease your apartment from a nonprofit corporation that owns the building and you own a share of the nonprofit corporation, you own:a. a cooperative apartment.b. a condominium.c. a row house.d. a mobile home.e. a single family home. a. a cooperative apartment.
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. true false True
Most homeowners get financial benefit from owning a home as it results in:a. adding to the hidden costs of mortgage payments.b. saving tax liability by tax evasion.c. tax savings due to tax shelter.d. reducing non-depreciating assets.e. the creation of a recession proof liability. c. tax savings due to tax shelter.

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