Personal Finance- Chapter 9- Obtaining Affordable Housing

Mortgage loan Loan to purchase real estate in which the property itself serves as collateral
Rent Cost charged for using an apartment or other housing space
Lease In this context, a contract specifying both tenant and landlord legal responsibilities
Subleasing An arrangement in which the original tenant leases the property to another tenant
Single-family dwelling Housing unit that is detached from other units
Condominium (condo) Form of ownership with the owners holding legal title to their own housing unit among many, with common grounds and facilities owned by the developer or homeowners association
Cooperative (co-op) Form of ownership in which the owner holds a share of the corporation that owns and manages a group of housing units as well as common grounds and facilities
Foreclosure Process in which the lender sues the borrower to prove default and asks the court to order the sale of the property to pay the debt
Closing costs Include fees and charges other than the down payment and typically vary from 2 to 7 percent of the mortgage loan amount
Down payment An initial payment made in the context of buying expensive items on credit, such as a vehicle or home
Point/interest point Fee equal to 1 percent of the total mortgage loan amount
Title Legal right of ownership interest to real property
Deed Written document use to convey real estate ownership
Title insurance Protects the lender’s interest if the title search is later found faculty
Home inspection Conducted to ensure that the home is physically sound and that all operating systems are in proper order
Appraisal fee Fee charged for a professionally prepared estimate of the fair market value of the property by an objective party
PITI Elements of a monthly real estate payment consisting of principal, interest, real estate taxes, and homeowner’s insurance
Loan-to-value (LTV) ratio Original or current outstanding loan balance divided by the home value
Mortgage insurance Insures the difference between the amount of down payment required by an 80 percent LTV ratio and the actual, lower down payment
Private mortgage insurance (PMI) Mortgage insurance obtained from a private company
Federal Housing Administration (FHA) Part of the U.S. Department of Housing and Urban Development (HUD) that insures loans that meet its standards to encourage home ownership
Escrow account Special reserve account at a financial institution in which funds are held until they are paid to a third party- in this case, for home insurance and for property taxes
Mortgage broker Individual or company that acts as an intermediary between borrowers and lenders
Front-end ratio Compares the total annual PITI expenditures for housing with the loan applicant’s gross annual income to assess the borrower’s ability to pay the mortgage
Back-end ratio Compares the total of all monthly PITI expenditures plus auto loans and other debts with gross monthly income
Purchase offer/offer to purchase Written offer to purchase real estate
Earnest money Funds given to the seller as a deposit to hold the property until a purchase contract can be negotiated
Purchase contract/sales contract Formal legal document that outlines the actual agreement that results from the real estate negotiations
Real estate broker (agent) Person licensed by a state to provide advice and assistance, for a fee, to buyers or sellers of real estate
Contingency clauses Specify that certain conditions must be satisfied before a contract is binding
Good-faith estimate Lender’s list of all the costs associated with the loan, including the annual percentage rate (APR), application and processing fees, closing costs, and any other charges that must be paid when the deal is legally consummated
Loan commitment Lender’s promise to grant a loan
Uniform settlement statement Lists all of the costs and fees to be paid at the closing
Amortization schedule List that shows all the monthly payments, the portions that will go toward interest and principal, and the debt remaining after each payment is made throughout the life of the loan
Homeowner’s equity Dollar value of the home in excess of the amount owned on it
Conventional mortgage A fixed-rate, fixed-term, fixed-payment mortgage loan
Adjustable-rate mortgage (ARM)/ variable-rate mortgage Mortgage in which the borrower’s interest rate fluctuates according to some index of interest rates based on the rising or falling cost of credit in the economy- thus transferring interest rate risk to the borrower
Teaser rate Low interest rate that lenders sometimes use to lure buyers; these rates will be low for the first year or so and then will rise to more realistic rates
Biweekly mortgage A form of growing-equity mortgage (GEM) that calls for payments of half of the normal payment to be made every two weeks; the borrower thus makes 26 payments a year and reduces the principal amount by one full payment each year; this reduces the mortgage term to about 20 years on a 30-year mortgage
Reverse mortgage/home-equity conversion loan Allows a homeowner older than age 61 to continue living in the home and to borrow against the equity in a home that is fully paid for and to receive the proceeds in a series of monthly payments, often for life
Defect disclosure form A state required form that discloses problems that could affect the property’s value or desirability, such as a basement that floods in heavy rains
FSBO For sale by owner; commonly pronounced “fizbo”; home sold directly by the homeowner to save on sales comission paid to a real estate broker
Listing agreement Agreement that brokers require homeowners to sign that permits the broker to list the property exclusively or with a multiple-listing service
Broker’s commission Largest selling cost in selling a home; these commissions often amount to 6 percent of the slling price of the home
A renter may have to pay__ when moving into an apartment. All of these (the security deposit, the first month’s rent, the last month’s rent)
The primary disadvantage of a 15-year mortgage as compared to a longer mortgage is the amount of the monthly payment
Which of the following is not a characteristic of a growing-equity mortgage? payment increases are determined annually on the basis of inflation
Intentionally failing to pay mortgage payments in order to be foreclosed and out of the mortgage payment is called strategic default
The person assigned to manage your loan application through the process is the loan officer
VA-guaranteed mortgages are very much like FHA-insured mortgages EXCEPT they can only be granted to military veterans
The escrow account is used to accumulate funds for both homeowner’s insurance premiums and real estate property taxes
Jamie and Danny are financing their new $275,000 home with a 7.5 percent, 30-year mortgage. They will be making a $55,000 down payment and paying 1 point. How much will the point cost in dollars? $2,200
John and Sarah bought a home last year and paid the following housing expenses during the year:Mortgage interest- $14,500Mortgage principal- $1,235Property taxes- $4,250Homeowner’s insurance- $2,740Maintenance- $2,150Utilities- $3,900Assuming they are the 28 percent marginal tax bracket, their standard deduction for the year is $11,600 and they have no additional expenses that they can itemize, how much more did they save in taxes from home ownership? $2,002
Lenders in the sub-prime market offer loans to higher-risk applicants
If the lender requires an 85 percent loan-to-value ratio, the borrower will have to make a___ percent down payment 15
__rarely appreciate(s) in value mobile homes
An advantage of variable-rate loans is (are) lower initial APR
Sellers of homes generally set a sales asking price___ percent higher than what they expect to get for it 5 to 15
Which of the following characteristics would cause a person to prefer renting over buying housing? Unknown job stability in the geographical area
The type of mortgage where the interest rate can fluctuate up and down according to an index of interest rates is the__ mortgage adjustable-rate
Which of the following is a measure of the relative price of owned housing that shows the average home price divided by annual rent in a community? price-to-rent ratio
Andrew and Muareen paid the following housing expenses during the year:Mortgage interest- $7,000Mortgage principal- $600Property taxes- $2,000Homeowner’s insurance- $600Maintenance- $850Utilities- $1,900What is the total dollar amount of the housing expenses that can be deducted on their taxes? $9,000
In communities with a multiple-listing service, a listed home can be showed by all realtors in the community
When a tenant who wants to move before his or her lease is up and leases to another tenant, this is called subleasing
Property taxes are based on the__ of the house assessed value
Which of the following is (are) typical when a mortgage is assumed? all of these (the buyer obtains the loan at a rate of interest below current market rates, the buyer takes responsibility for the mortgage payments, the mortgage is not assumable if there is a due-on-sale clause)
The typical required loan-to-value ratio today is no more than 80 percent
Which of the following documents outlining all of the costs associated with closing on the sale of a home must the purchaser receive at least 1 business day prior to the closing? uniform settlement statement
Home sellers must be upfront with potential buyers about the condition of the home by providing a defect disclosure form

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