Family Finance Exam 2 Chapter 9

Front 1

smaller-than-normal payments are required in the early years, but gradually increase to larger-than-normal payments in later years

Back 1

Graduated-payment mortgage

Front 2

a base interest rate is set for the loan that is perhaps 0.5 percentage point higher than the interest rate for a conventional mortgage

Back 2

Lender buy-down mortgage

Front 3

series of short-term loans for two-to five-year periods, but with total amortization spread over the usual 25 to 30 years

Back 3

Rollover Mortgage

Front 4

lender offers an interest rate about one-third less than the market rate

Back 4

shared-appreciation mortgage

Front 5

People who design their loan in advance to reduce interest costs by paying off the mortgage loan early

Back 5

Growing-equity mortgage

Front 6

the buyer pays the seller a downpayment generally equal to the seller's equity in the home and takes responsibility for the mortgage loan payments for the remaining term of the seller's existing mortgage loan

Back 6

assumable mortgage

Front 7

this reuqires that the mortgage loan be fully paid off if the home is sold

Back 7

due-on-sale clause

Front 8

dividing the maximum amount the lender will loan on a piece of property by the property's purchase price

Back 8

loan-to-value ratio

Front 9

compares the total annual expenditures for housing with the loan applicant's gross annual income

Back 9

front-end ratio

Front 10

compares the total of all monthly debt payments with gross monthly income

Back 10

back-end ratio

Front 11

A lease is the cost of using an apartment or other housing space.

Back 11

False

Front 12

Owners of a condominium pay a homeowner's fee covering expenses related to the management of common grounds and facilities.

Back 12

True

Front 13

As a rule of thumb for determining the affordability of housing, the front-end ratio compares total monthly debt repayments (for the mortgage, auto loans, and other debts) with gross monthly income.

Back 13

False

Front 14

A mortgage loan is a loan to purchase real estate, in which the real estate itself serves as collateral.

Back 14

True

Front 15

Dividing the maximum amount a lender will loan on a piece of property by its value results in its loan-to-value ratio.

Back 15

True

Front 16

When a home has a second mortgage, it is the original mortgage that gets paid first in the event of default.

Back 16

True

Front 17

A land contract (or contract for deed) is an example of seller financing.

Back 17

True

Front 18

Negative amortization is the process of reducing the amount owed on a mortgage loan.

Back 18

False

Front 19

a special reserve account at a financial institution where funds are held until they are paid to a third party

Back 19

escrow account

Front 20

monthly payments are smaller than necessary to pay the interest

Back 20

negative amortization

Front 21

Reverse mortgages are also referred to as home-equity conversion loans.

Back 21

True

Front 22

Both home-equity installment loans and home-equity lines of credit are available to those who want to borrow the home equity as collateral.

Back 22

True

Front 23

In calculations of real estate property taxes, a home's fair market value and its assessed value are the same.

Back 23

False

Front 24

Prospective home buyers can qualify for a lower down payment if they make use of private or governmental mortgage insurance.

Back 24

True

Front 25

The factor(s) that make(s) home ownership financially advantageous over renting is (are)

Back 25

Taxes and appreciation

Front 26

The concept of gradually paying off a mortgage loan through a series of periodic payments is called

Back 26

amortization

Front 27

The formal legal document that outlines the actual agreement that results from real estate negotiations is called a(n)

Back 27

Purchase Contract

Front 28

The traditional fixed-rate, fixed-term, fixed-payment mortgage loan is called a

Back 28

Conventional Mortgage

Front 29

real estate taxes and homeowners' insurance premiums are often included in a monthly mortgage payment?

Back 29

True

Front 30

You can pay off your mortgage loan early and thereby save on total interest costs by using a(n)

Back 30

Growing-Equity Mortgage

Front 31

The two types of loans available when using the equity in your home as collateral are referred to as home-equity lines of credit and

Back 31

Home-equity installment loans

Front 32

Which of the following increase the return for a mortgage lender?

Back 32

Interest Points

Front 33

When you make an offer on a house, you should give a deposit called __________ _______ to the seller to ensure that the seller will not sell the house to someone else while you are negotiating.

Back 33

Earnest Money

Front 34

A(n) __________ is the written history of the ownership of real estate.

Back 34

Abstract

Front 35

Which of the following is used to convey real estate ownership to another?

Back 35

Deed

Front 36

The typical commission rate charged by brokers to list the home for sale and other services is

Back 36

6 percent paid by the seller.

Front 37

People who buy cooperative housing actually own a share in the ownership of the cooperative that is equivalent to the value of their particular housing unit and a proportionate share of all common areas.

Back 37

True

Front 38

A sales contract for the offer to purchase a home is usually backed by earnest money.

Back 38

True

Front 39

From the home buyer's perspective there is no meaningful difference between a listing agent and a selling agent.

Back 39

True

Front 40

The loan-to-value ratio for determining a down payment on a mortgage loan is calculated by dividing the maximum amount the lender will loan on a piece of property by its value.

Back 40

True

Front 41

The traditional fixed-interest rate, fixed-term, fixed-payment mortgage is referred to as a conventional mortgage.

Back 41

True

Front 42

The down payment required to assume a mortgage is roughly equivalent to the seller's equity in the home.

Back 42

True

Front 43

Interest-rate caps on an adjustable-rate mortgage place limits on both annual and life-of-loan increases in the mortgage interest rate.

Back 43

True

Front 44

Home-equity lines of credit are a form of second mortgage.

Back 44

True

Front 45

An escrow account is often used to hold real estate property tax payments and homeowners' insurance payments until the bills are received and paid by the lender.

Back 45

True

Front 46

A point is equal to 1 percent of the purchase price of a home.

Back 46

False

Front 47

The document outlining the legal right of ownership interest in real estate is called a title.

Back 47

True

Front 48

Homes are covered by implied warranties, but buyers may still want to purchase warranty insurance

Back 48

True

Front 49

Which of the following types of leases allows for either party to terminate the agreement at any time if they give proper notice (e.g. one week or one month)?

Back 49

Periodic Tenancy

Front 50

Which of the following types of owned housing is fully- or partially factory-assembled and designed to be transported in portions to the home site?

Back 50

Manufactured Housing

Front 51

A purchase offer on a home is usually accompanied by

Back 51

Earnest Money

Front 52

In order to protect themselves from the possibility of being turned down for a mortgage, home buyers should make sure that which of the following is included in the purchase contract?

Back 52

contingency clause

Front 53

The dollar value of a home in excess of what is owed on it is the

Back 53

Equity

Front 54

Which of the following occurs when the monthly payment on a mortgage loan is not sufficient to pay the interest owed?

Back 54

Negative amortization

Front 55

Which of the following types of mortgages allows the owner of a paid for home to live in the home and yet receive periodic payments from borrowing on the equity in the home?

Back 55

Reverse Mortgage

Front 56

Real estate property taxes are based on which of the following dollar amounts?

Back 56

assessed value of the property

Front 57

Which of the following is a legal opinion (not a guarantee) written by an attorney of the status of ownership of real estate?

Back 57

Certificate of title

Front 58

Of the four types of deeds, which is the safest?

Back 58

Warrenty deed

Front 59

Which of the following lists all of the fees to be paid at a real estate closing?

Back 59

Uniform Settlement Statement