6.6 Buying a Home

Rimi currently earns $2,500 per month. She has the following monthly debt payment expenses: $75 for credit cards, $125 for student loans, and a $235 car payment. She is looking to buy a house. The monthly mortgage, including principal, insurance, and taxes, is $900. Does Rimi meet the FHA housing payments to income ratio guideline?

• yes, because her ratio is less than 31%

• no, because her ratio is greater than 31%

• no, because her ratio is less than 43%

• no, because her ratio is greater than 43%

Answer explanation

(Monthly housing payments) / (Monthly gross income) x 100

Rimi currently earns $2,500 per month. She has the following monthly debt payment expenses: $75 for credit cards, $125 for student loans, and a $235 car payment. She is looking to buy a house. The monthly mortgage, including principal, insurance, and taxes, is $900. Does Rimi pass the FHA total fixed payments-to-income ratio requirements?

• yes, because her ratio is less than 31%

• no, because her ratio is less than 31%

• yes, because her ratio is less than 43%

• no, because her ratio is greater than 43%

Answer explanation

$900 + $75 + $125 + $235 =

?? / $2,500 =

What is NOT found in a good faith estimate?

• loan type

• title insurance premium

• yard maintenance fees

• loan amount

Which of the following loans requires a lower down payment?

• conventional 30-year mortgage

• FHA 30-year mortgage

• conventional 15-year mortgage

• none of the answer choices are correct

Ann is thinking about paying points to a lender to obtain a lower interest rate on her mortgage. The loan is in the amount of $350,000. If she pays 2 points, she can reduce her interest rate from 5.25% to 4.50%. How much in the loan points must Ann pay to get this deal?

• $1,000

• $1,750

• $3,500

• $7,000

Answer explanation

Step 1: Take 2 points / 100 = ?

Step 2: Take ? * 350,000 = ??

Insurance that protects the lender in the event that the borrower does not repay the mortgage is called:

• mortgage insurance

• homeowner's insurance

• settlement insurance

• good faith insurance

What options are available for someone who is underwater with her or his home and can no longer make the monthly mortgage payment?

• foreclosure

• short sale

• home equity loan

• both foreclosure and short sale

Unlike renters, homeowners are required to pay for what common expenses?

• replacing appliances

• fixing broken windows

• painting every few years

• all of the answer choices are correct

What word means the part of the price paid at the time of purchase?

• down payment

• financed

• interest

• mortgage

• principal

What word means the same thing as borrowed?

• down payment

• financed

• interest

• mortgage

• principal