Unit 11 - Home Buying

Which of the following is a main cost associated with home ownership?

• Utility Bills

• Groceries

• Size of a Garage

• Health Insurance

This type of mortgage changes periodically - fixed at a lower rate initially and then adjusts annually.

• Adjustable-rate mortgage

• Fixed-rate mortgage

• Depreciating mortgage

• FHA-rate mortgage

Depreciation on a home means:

• When the value increases over time

• When the cost of the home is greater than a person’s income

• When the value decreases over time

• When the cost of the home is lower than a person’s income

What term describes a house’s value increase over time?

• Depreciation

• Appreciation

• Inflation

• Expansion

A person gains equity in a home when she rents it. It’s the same as owning the home.

• True

• False

Casey bought a home in a fairly good area. Six months later, the construction of a massive manufacturing facility was announced. The new plant is expected to employ over 10,000 new workers. Which of the following describes what will likely happen to Casey’s home value?

• Home values will depreciate as more people move away from the area.

• A shortage in homes in the area will cause the value of her home to depreciate.

• New subdivision will be built, so the value of her home won’t change.

• An increased demand in housing will cause her home value to appreciate.

What does getting “pre-qualified” for a loan mean?

• The bank will determine if they are eligible for a loan based on their current residence

• The bank will determine if each person qualifies for a loan or if only one of them qualifies

• The bank will determine the amount it is willing to loan them based on their income and credit scores

• The bank will compare the house they want to buy with the house they live in and determine the loan amount based on relative values

Banks look at two ratios to determine the amount of money a person is qualified to borrow for a home. Typically, to qualify for a loan, a person’s total debt payments can be ________ percent of his monthly gross income.

• 20

• 25

• 30

• 35

When determining the loan to value (LTV) a bank will lend for a property, which of the following is considered?

• The appraised value and purchase price of the property

• The purchase price of the property

• The asking price and appraised value of the property

• The asking price

Earnest money acts as a holding deposit, so a seller will take the home off the market while it is under contract. Typically, what amount of earnest money is required?

• Whichever is greater — either $2,000 or 1 percent of asking price

• The same amount as the required down payment

• 3.5 percent of the asking price

• It depends on the bank’s approved LTV