Virtual Business: Personal Finance Lesson 17 Review

When planning to buy a home, your monthly housing related costs should not exceed what percentage of your monthly gross income?

• 24%

• 28%

• 36%

• 34%

A simple formula for finding your equity in your home is:

• Purchase price of your home minus outstanding loan balance

• Down payment plus sum of mortgage payments due

• Market value of your home minus outstanding loan balance

• None of these

All of the following would be considered closing costs except for:

• A title search

• Cost of repainting the kitchen before moving in

• Fee for obtaining credit report

• Title insurance

Which of the following statements are true:

• You will always pay less interest with a 15-year mortgage than with a 30-year mortgage, provided that the interest rate is the same for both loans

• With an adjustable rate mortgage, the interest rate always increases after the first five years

• If you refinance your home, the interest rate will remain the same

• If you refinance your home, the interest rate will increase

The location of a home is important because:

• A good location will make a home easier to sell later

• Homes in good locations will usually appreciate in value

• Not all locations have good school systems or the same amenities

• All of these

A real estate agent is able to:

• Get you a lower price on a home

• Arrange for you to tour homes that you are interested in purchasing

• Lower the bank's interest rate

• All of these

Your total debt from all loans should not exceed what percentage of your gross monthly income?

• 16%

• 26%

• 36%

• 46%

A "point" on a loan equals:

• 0.1% of the loan amount

• 1% of the loan amount

• 10% of the loan amount

• 2% of the loan amount

When figuring out the total amount of debt you are responsible for, you should include:

• Car loans and home loans

• Car loans, home loans, and school loans

• Car loans, home loans, school loans, and any credit card debt

• Any debt that must be paid within 3 years

Which statement is true of an adjustable rate mortgage?

• Payments will adjust each year based on the amount of equity you have in your home

• The interest rate will stay fixed for a period of time, then adjust either up or down based on the index

• The interest rate can only change twice during the course of the loan

• An adjustable rate mortgage always includes a balloon payment at the end of the 7th year