Unit 11 Quiz Review

If you pay extra on a mortgage it can pay the debt off quicker because all of the extra payment goes toward principal.

• True

• False

Which of these does not determine the type of home loan a person qualifies for?

• Family size

• Military status

• Income-to-debt ratio

• Credit score

What is the minimum down payment required for most conventional loans?

• It depends on the home's value.

• It depends on the person’s credit score.

• 7%

• 5%

• 3.5%

Vincent bought a home with a loan that does not require him to pay private mortgage insurance. Which of the following loan types does he most likely have?

• Conventional loan

• ARM loan

• FHA loan

• VA loan

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

• It depends on the bank’s approved LTV

• 3.5 percent of the asking price

• The same amount as the required down payment

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

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

• The asking price

• The asking price and appraised value of the property

• The purchase price of the property

• The appraised value and purchase price of the property

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

Getting “pre-qualified” for a loan means _______________.

• 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.

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

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

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

Julie bought a home in a pretty good area. Six months later, the construction of a large manufacturing facility was announced. The new facility is expected to employ over 10,000 new workers. Which of the following describes what will likely happen to Julie'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.

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

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

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

• True

• False