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Finance Final- Chapter 7
Terms in this set (70)
Most people select a place of residence based on available financial resources, needs, and lifestyle.
Budget guidelines are available to assist people in deciding how much to spend on housing.
Opportunity costs of housing can refer to time and effort involved in finding and repairing a place to live along with lost interest earnings on security deposits and down payments
Ease of mobility is an advantage of renting
A lease protects the rights of both the tenant and the landlord
A security deposit is a fee charged to help you find an apartment or house to rent
Condominiums involve the purchase of an individual living unit rather than an entire building.
Cooperative housing involves the renting of a living unit by the people involved in ownership of the building on a nonprofit basis.
Ease of mobility is a common advantage associated with home ownership
Many people believe that location is the most important factor to consider when selecting a home.
Current interest rates can affect the price of a home
Negotiating a purchase price for a home usually involves an offer and counteroffers
The amount of the down payment will affect the amount of mortgage a person can afford.
Qualifying for a mortgage is similar to obtaining other forms of credit
Prepaid interest may be a part of a mortgage agreement
Amortization refers to changes in the monthly payment for a variable rate mortgage
An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.
Adjustable rate mortgages with a payment cap can result in a situation of negative amortization.
A buy down results in reduced mortgage payments during the first few years of the loan as a result of an interest rate subsidy from a builder or real estate developer.
A balloon mortgage can help a homebuyer when interest rates are high but are expected to come down in the near future.
An escrow account is designed to reduce the cost of a mortgage.
An appraisal refers to the price for which a home has been sold
Home improvements may contribute more to the value of the home than the cost of the renovations.
Renting is more advantageous than buying a home for
lower short-term living costs.
A common opportunity cost associated with renting is
interest lost on the security deposit
A cost associated with home buying would be
Renting would be most appropriate for people who
have limited funds currently available
Brenda Williams plans to rent instead of buy her housing. What advantage of renting will Brenda encounter?
lower initial costs
The main financial benefit of renting is
lower initial costs.
The legal document involved in renting an apartment is called a(n)
What is the purpose of subletting an apartment?
to obtain another tenant to complete a lease period
The purpose of a security deposit is to
pay for potential damages
A condominium involves
ownership of an individual living unit
Ownership of an individual housing unit in a building is commonly called
A cooperative housing arrangement involves
a nonprofit organization.
Otto Putman rents a living unit as a result of his membership in a nonprofit housing organization. What name is commonly used for this type of housing?
Prefabricated housing refers to
partially assembled housing in factories
A common financial benefit of home ownership is
increased property value.
Lonette and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction would reduce their taxable income by
A common financial risk of home ownership is that
property values may decrease.
Which of the following would increase the amount that a person could afford to spend on a home?
increased family income
The most commonly considered factor when selecting a home is the
location of the home.
As Wally Quinten conducts an investigation of property value factors, most real estate experts tell him that ____________ most influences the housing values in an area.
quality of schools
The purpose of zoning laws is to
restrict property use.
Restrictions on how property in an area can be used are
A real estate agent can best assist a homebuyer by
assisting in getting a mortgage.
The purpose of a counteroffer is to
negotiate the purchase price.
Earnest money has the purpose of
serving as good faith by a homebuyer.
The amount of mortgage a person is eligible for would be increased by
lower interest rates
Which of the following would increase the speed of equity growth for a homebuyer?
obtaining a 15-year mortgage instead of a 30-year mortgage
What is prepaid interest charged by a mortgage company?
Todd Foley is applying for a $100,000 mortgage. He can get a $600 monthly payment for principal and interest and no points, or a $520 monthly payment with 2 points? How many months will it take Todd to cover the cost of the discount points if he takes the lower monthly payment?
A conventional mortgage usually involves
Which of the following is an example of a conventional mortgage?
a fixed rate mortgage
A VA-guaranteed loan program provides assistance to
A possible disadvantage of FHA and VA mortgages can be
a longer processing time.
The purpose of a rate cap with an adjustable rate mortgage is to
restrict the amount by which the interest rate can increase.
Negative amortization is the result of
a higher amount owed on the mortgage.
Fran Laurel expects her income to rise every few years as she gains experience in her career. Which mortgage has payments that rise to different levels every 5 or 10 years?
A newly married couple is having trouble affording a home. What type of mortgage arrangement would reduce the monthly payment as a result of an interest rate subsidy from a builder or real estate developer?
A short-term mortgage with a very large final payment is called a ____________ mortgage.
A home equity loan is also referred to as a ____________ mortgage.
Refinancing of a mortgage is recommended when
interest rates fall.
Which of the following is an example of a closing cost?
The purpose of title insurance is to
guarantee the boundaries of the property.
Which document is used to transfer ownership of property from one party to another?
Which of the following expenses is paid from an escrow account?
The purpose of an appraisal is to
estimate the current value of a home.
If you sell your home without the use of a real estate agent, you should still make use of a
The most common service provided by a real estate agent when selling your home is
screening potential buyers.