True/False
Indicate whether the
statement is true or false.
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Ch 13. Buying a Home pp.
297-313
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1.
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The recent selling price of a
similar home in your area is a good estimate of the current value of your home.
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2.
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The value of most homes
appreciates over time.
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3.
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Home ownership generally offers
more privacy than renting property.
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4.
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The interest you pay on your
home loan is tax-deductible, but property taxes are not.
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5.
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You do not pay tax on your
home’s equity until you sell the home.
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6.
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Discount points used to lower a
mortgage interest rate are tax deductible and thus provide a form of tax
shelter.
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7.
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Property insurance is usually a
requirement of the loan agreement to protect the interests of the mortgage lender as well as the
homeowner.
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8.
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Homeowners are exempt from all
local zoning laws.
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9.
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Because the mortgage lender
owns an interest in most people’s homes, the cost of maintenance and repairs is usually split
between the homeowner and the lender.
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10.
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One of the first things a real
estate agent will ask a prospective homebuyer to do is to go to a mortgage lender and prequalify for
a real estate loan.
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11.
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As the purchaser, you pay the
real estate agents’ commission when you buy a home.
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12.
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When you make an offer to buy a
house, it becomes a binding contract only upon the seller’s acceptance.
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13.
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An offer to purchase a home may
be contingent on the property passing an inspection.
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14.
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If a title is clear, that means
that no one currently owns the property and the purchaser may legally buy it.
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15.
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A title insurance policy
protects the buyer from any claims arising from a defective title.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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Ch 13. Buying a Home pp.
297-313
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16.
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For purposes of computing
property taxes owed against your home, the city or county in which you live sets a(n) _____ value on
the property.
a. | assessed | c. | estimated | b. | market | d. | appraised |
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17.
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Janice and Steve bought a home
five years ago for $130,000. Today, the home is worth $150,000. Which of the following statements is
correct?
a. | Janice and Steve have $20,000 equity
in their home. | b. | The market value of Janice and Steve’s home is
$20,000. | c. | Janice and Steve’s property has appreciated by
$20,000. | d. | The appraised value of Janice and Steve’s home is
$20,000. |
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18.
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Because certain tax deductions
lower the cost of home ownership, owning real estate is sometimes called a
a. | tax
penalty. | c. | tax
shelter. | b. | tax loophole. | d. | tax avoidance scheme. |
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19.
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A fund where money is held to
pay amounts that will come due during the year—such as property taxes and property
insurance—is called a(n)
a. | trust
deed. | c. | money market
account. | b. | escrow account. | d. | mortgage. |
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20.
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Mortgage lenders usually offer
lower interest rates in exchange for higher discount points. Whether or not this is a good deal
depends mostly on
a. | the sales price of the
house. | b. | the amount of your down payment. | c. | the amount of equity you have in the
house. | d. | how long you plan to keep your
house. |
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21.
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Real estate agents earn income
based on a percentage of the home sale price, usually between _____ percent.
a. | 1 to 3 | c. | 6 to 8 | b. | 3 to 5 | d. | 8 to 10 |
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22.
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A serious intent to be bound to
an agreement is a(n)
a. | acceptance. | c. | contingency. | b. | proposal. | d. | offer. |
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23.
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As a general rule, your
mortgage payments should not exceed _____ percent of your take-home pay.
a. | 10 to
20 | c. | 30 to
50 | b. | 25 to
35 | d. | 50 to 60 |
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24.
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Which of the following
statements about mortgages is incorrect?
a. | The rate for an adjustable-rate
mortgage usually starts higher than the current rates for a fixed-rate
mortgage. | b. | Many adjustable-rate mortgages specify maximum rate increases and
ceilings. | c. | If you obtain a fixed-rate mortgage at 6 percent today, the rate will still be
6 percent 20 years from now. | d. | The rate on an adjustable-rate mortgage may go up or down based on changes in
the economy. |
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25.
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Legally established ownership
of property is a
a. | title. | c. | deed. | b. | tenancy agreement. | d. | lien, |
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Numeric Response
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Ch 13. Buying a Home pp.
297-313
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26.
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If you buy a home for $175,000,
how much down payment will you need to make if the lender requires a down payment of 15
percent?
(State your numeric answer below, Hint:
numbers only, no commas, 5 digits)
Formula: Home Purchase Price x
.15 = Down Payment
$
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27.
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Colleen purchases a home for
$225,000. If she makes a down payment of 20 percent, what will the amount of Colleen’s mortgage
be?
(State your numeric answer below, Hint: numbers
only, no commas, 6 digits)
Formula: Home Purchase Price x .20 =
Down Payment then Home Purchase Price - Down Payment =
Mortgage
$
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28.
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You accept a mortgage for
$130,000. What finance charge will you have to pay at closing if the lender charges 2
points?
(State your numeric answer below, Hint:
numbers only, no commas, 4 digits)
Formula: Mortgage x .02 =
Finance Charge
$
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29.
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Suppose the county requires you
to pay property taxes at the rate of $14 per thousand. Your house is assessed at $200,000 by the
county. How much property tax will you owe each year?
(State your numeric answer below, Hint: numbers only, no commas, 4 digits)
Formula: Home Value / 1000 = Tax Rate then Tax Rate x $14 = Property Tax
$
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30.
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Sven purchases a house valued
at $80,000 and has a mortgage of $65,000. Several years later he decides to sell the house. The
market value of the house has increased to $110,000 and his loan debt is down to $50,000. What is
Sven’s equity in the house?
(State your
numeric answer below, Hint: numbers only, no commas, 5 digits)
Formula: Current Market Value x Loan Debt = Equity
$
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Matching
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Ch 13. Buying a Home - Match the terms with their definition. a. | fixed-rate | f. | equity | b. | deed | g. | title
search | c. | setback | h. | market | d. | origination | i. | earnest money | e. | seller's counteroffer | j. | closing |
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31.
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A(n) __________ requirement is
a law that forces buildings and improvements to be constructed a minimum number of feet from streets
and other properties
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32.
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In real estate, an offer to
buy property is accompanied by a deposit called __________.
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33.
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A(n) __________ is a rejection
of the original offer with a listing of what terms would be acceptable.
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34.
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A(n) __________ mortgage is a
mortgage on which the interest rate does not change during the term of the
loan.
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35.
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The legal document that
transfers title of real property from one party to another is a(n) __________.
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36.
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A(n) __________ is the process
of checking public records to determine ownership and claims to a piece of
property.
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37.
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The __________ value of a home
is the price that a ready and willing buyer and seller would agree upon.
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38.
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The difference between the
market value of property and the amount owed on it is called __________.
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39.
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A loan __________ fee is the
amount charged by a bank or other lender to process the loan papers.
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40.
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Settlement costs—also
known as __________ costs—are the expenses incurred in transferring ownership from buyer to
seller in a real estate transaction.
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