What is the purpose of subletting an apartment?
A) to increase the rent
B) to lower maintenance costs
C) to convert the units to condominiums
D) to meet certain government housing regulations
E) to obtain another tenant to complete a lease period

E) to obtain another tenant to complete a lease period

The purpose of a security deposit is to
A) pay for potential damages.
B) cover the costs of utilities.
C) pay for the tenant's portion of real estate property taxes.
D) cover increases in monthly rent.
E) meet government housing regulations for a safe bui

A) pay for potential damages.

A condominium involves
A) renting a mobile home.
B) part ownership of a building by a nonprofit organization.
C) ownership of an individual living unit.
D) government-subsidized housing.
E) renting a house with the option to buy.

C) ownership of an individual living unit.

Ownership of an individual housing unit in a building is commonly called
A) a cooperative.
B) modular housing.
C) manufactured housing.
D) a condominium.
E) zoned housing.

D) a condominium.

35. A cooperative housing arrangement involves
A) government-supported rental units.
B) a nonprofit organization.
C) individual ownership of a living unit in a building.
D) factory built and on-site assembly.
E) housing units owned by a real estate develo

B) a nonprofit organization.

Otto Putman rents a living unit as a result of his membership in a nonprofit housing organization. What name is commonly used for this type of housing?
A) modular housing
B) government-supported housing
C) cooperative housing
D) a condominium
E) zoned hou

C) cooperative housing

Prefabricated housing refers to
A) nonprofit ownership.
B) government leasing of living units.
C) rental units available to government employees.
D) ownership available to low-income individuals.
E) partially assembled housing in factories.

E) partially assembled housing in factories.

A common financial benefit of home ownership is
A) a low security deposit.
B) tax deductibility of the down payment.
C) amortization of the growth of equity.
D) increased property value.

D) increased property value.

Lonette and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction would reduce their taxable income by
A) $1,000.
B) $2,240.
C) $3,000.
D) $4,000.
E) $8,0

E) $8,000.

A common financial risk of home ownership is that
A) interest rates may change with a conventional mortgage.
B) property values may decrease.
C) mortgage interest is not tax deductible.
D) only a portion of real estate taxes are tax deductible.

B) property values may decrease.

Which of the following would increase the amount that a person could afford to spend on a home?
A) increased family income
B) increased interest rates
C) decreased down payment
D) many other financial obligations
E) high monthly living expenses

A) increased family income

The most commonly considered factor when selecting a home is the
A) size of the home.
B) condition of the home.
C) location of the home.
D) local zoning laws.
E) current interest rates.

C) location of the home.

As Wally Quinten conducts an investigation of property value factors, most real estate experts tell him that ____________ most influences the housing values in an area.
A) community pride
B) style of homes
C) zoning laws
D) age of neighborhood
E) quality

E) quality of schools

The purpose of zoning laws is to
A) restrict property use.
B) encourage new housing development.
C) minimize people moving from an area.
D) reduce real estate property taxes.
E) assist real estate agents in finding homes for sale.

A) restrict property use.

Restrictions on how property in an area can be used are
A) cooperative agreements.
B) zoning laws.
C) common areas.
D) title insurance provisions.
E) refinancing clauses.

B) zoning laws.

A real estate agent can best assist a homebuyer by
A) obtaining funds for a down payment.
B) setting the purchase price.
C) offering new home warranties.
D) assisting in getting a mortgage.

D) assisting in getting a mortgage.

The purpose of a counteroffer is to
A) negotiate the purchase price.
B) reduce mortgage payments.
C) lower real estate property taxes.
D) avoid paying points at closing.
E) avoid paying the real estate agent's commission.

A) negotiate the purchase price.

Earnest money has the purpose of
A) paying real estate property taxes.
B) reducing the mortgage interest rate.
C) serving as good faith by a homebuyer.
D) paying the real estate agent's commission.
E) being a mortgage application fee.

C) serving as good faith by a homebuyer.

The amount of mortgage a person is eligible for would be increased by
A) higher interest rates.
B) a lower down payment.
C) high debt obligations.
D) a low family income.
E) lower interest rates.

E) lower interest rates.

Which of the following would increase the speed of equity growth for a homebuyer?
A) making a down payment of 10 percent instead of 20 percent
B) obtaining a mortgage interest rate of 9 percent instead of 8 percent
C) obtaining a 15-year mortgage instead

C) obtaining a 15-year mortgage instead of a 30-year mortgage

What is prepaid interest charged by a mortgage company?
A) escrow
B) points
C) origination fee
D) title fee
E) deed

B) points

Todd Foley is applying for a $100,000 mortgage. He can get a $600 monthly payment for principal and interest and no points, or a $520 monthly payment with 2 points? How many months will it take Todd to cover the cost of the discount points if he takes the

D) 25

A conventional mortgage usually involves
A) a variable interest rate.
B) a government guarantee.
C) a balloon payment.
D) equal payments.
E) a payment cap.

D) equal payments.

Most people select a place of residence based on available financial resources, needs, and lifestyle.

true

Budget guidelines are available to assist people in deciding how much to spend on housing.

true

Opportunity costs of housing can refer to time and effort involved in finding and repairing a place to live along with lost interest earnings on security deposits and down payments.

true

Ease of mobility is an advantage of renting.

true

A lease protects the rights of both the tenant and the landlord.

true

A security deposit is a fee charged to help you find an apartment or house to rent.

false

Condominiums involve the purchase of an individual living unit rather than an entire building.

true

Cooperative housing involves the renting of a living unit by the people involved in ownership of the building on a nonprofit basis.

true

Ease of mobility is a common advantage associated with home ownership.

false

Many people believe that location is the most important factor to consider when selecting a home.

true

Current interest rates can affect the price of a home.

true

Negotiating a purchase price for a home usually involves an offer and counteroffers.

true

The amount of the down payment will affect the amount of mortgage a person can afford.

true

Qualifying for a mortgage is similar to obtaining other forms of credit.

true

Prepaid interest may be a part of a mortgage agreement.

true

Amortization refers to changes in the monthly payment for a variable rate mortgage.

false

An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.

true

Adjustable rate mortgages with a payment cap can result in a situation of negative amortization.

true

A buy down results in reduced mortgage payments during the first few years of the loan as a result of an interest rate subsidy from a builder or real estate developer.

true

A balloon mortgage can help a homebuyer when interest rates are high but are expected to come down in the near future.

true

An escrow account is designed to reduce the cost of a mortgage.

false

An appraisal refers to the price for which a home has been sold.

false

Home improvements may contribute more to the value of the home than the cost of the renovations.

true

24. Renting is more advantageous than buying a home for
A) lower short-term living costs.
B) financial benefits.
C) long-term investment purposes.
D) receiving tax benefits.
E) permanence of residence.

A) lower short-term living costs.

25. A common opportunity cost associated with renting is
A) interest lost on the down payment.
B) interest lost on closing costs.
C) property taxes.
D) maintenance costs.
E) interest lost on the security deposit.

E) interest lost on the security deposit.

26. A cost associated with home buying would be
A) renter's insurance.
B) the security deposit.
C) annual appreciation of the property.
D) property taxes.
E) interest lost on the security deposit.

D) property taxes.

27. Renting would be most appropriate for people who
A) want to reduce their taxes.
B) have difficulty establishing credit.
C) have limited funds currently available.
D) enjoy remodeling their residence.
E) desire the financial benefits of increased equit

C) have limited funds currently available.

28. Brenda Williams plans to rent instead of buy her housing. What advantage of renting will Brenda encounter?
A) tax advantages
B) lower initial costs
C) community pride
D) financial benefits
E) home improvement flexibility

B) lower initial costs

29. The main financial benefit of renting is
A) tax deductions.
B) increased equity.
C) investment value growth.
D) lower initial costs.

D) lower initial costs.

30. The legal document involved in renting an apartment is called a(n)
A) service contract.
B) mortgage.
C) lease.
D) security deposit.
E) escrow account.

C) lease.

Which of the following is an example of a conventional mortgage?
A) an FHA mortgage
B) a buy down
C) a fixed rate mortgage
D) a shared appreciation mortgage
E) a home equity loan

C) a fixed rate mortgage

A VA-guaranteed loan program provides assistance to
A) military veterans.
B) recent college graduates.
C) low-income homebuyers.
D) government employees.
E) the elderly.

A) military veterans.

A possible disadvantage of FHA and VA mortgages can be
A) high risk.
B) a longer processing time.
C) high interest rates.
D) increased monthly payments.
E) down payment requirements.

B) a longer processing time.

The purpose of a rate cap with an adjustable rate mortgage is to
A) minimize interest costs.
B) prevent changes in the amount of the monthly payment.
C) increase negative amortization.
D) restrict the amount by which the interest rate can increase.
E) low

D) restrict the amount by which the interest rate can increase.

Negative amortization is the result of
A) a lower amount owed on the mortgage.
B) a higher amount owed on the mortgage.
C) a lower escrow account.
D) lower interest rates.
E) a lower down payment.

B) a higher amount owed on the mortgage.

Fran Laurel expects her income to rise every few years as she gains experience in her career. Which mortgage has payments that rise to different levels every 5 or 10 years?
A) buy down
B) shared appreciation mortgage
C) growing equity mortgage
D) balloon

E) graduated payment

A newly married couple is having trouble affording a home. What type of mortgage arrangement would reduce the monthly payment as a result of an interest rate subsidy from a builder or real estate developer?
A) FHA-insured loan
B) balloon mortgage
C) buy d

C) buy down

A short-term mortgage with a very large final payment is called a ____________ mortgage.
A) balloon
B) graduated payment
C) growing equity
D) shared appreciation
E) negative amortization

A) balloon

A home equity loan is also referred to as a ____________ mortgage.
A) shared appreciation
B) graduated payment
C) growing equity
D) second
E) buy down

D) second

Refinancing of a mortgage is recommended when
A) interest rates rise.
B) interest rates fall.
C) the escrow account balance declines.
D) two or more points are required by the lender at the time of closing.

B) interest rates fall.

Which of the following is an example of a closing cost?
A) origination fee
B) mortgage application fee
C) earnest money
D) title insurance
E) down payment

D) title insurance

The purpose of title insurance is to
A) transfer ownership of property.
B) reduce the chance of a decrease in property value.
C) guarantee the boundaries of the property.
D) protect an owner from changes in mortgage interest rates.
E) cover the closing co

C) guarantee the boundaries of the property.

Which document is used to transfer ownership of property from one party to another?
A) title
B) escrow account
C) settlement statement
D) appraisal
E) deed

E) deed

Which of the following expenses is paid from an escrow account?
A) title insurance
B) property insurance
C) points
D) loan application fee
E) real estate agent's commission

B) property insurance

The purpose of an appraisal is to
A) estimate the current value of a home.
B) reduce the amount paid for property taxes.
C) qualify for a reduced mortgage rate.
D) eliminate the need for home insurance.

A) estimate the current value of a home.

If you sell your home without the use of a real estate agent, you should still make use of a
A) broker.
B) insurance agent.
C) lawyer.
D) contractor.
E) rental agent.

C) lawyer.

The most common service provided by a real estate agent when selling your home is
A) providing legal advice.
B) qualifying buyers for a mortgage.
C) screening potential buyers.
D) making needed repairs.

C) screening potential buyers.

What factors influence the type of housing a family will select?

Selection of housing is influenced by an individual's or family's needs, values, and lifestyle, along with the financial situation and availability of financial resources.

Gerry Intel is considering buying a home. What actions would you recommend for her to take to accomplish this goal of buying a home?

The process of buying a home involves the following phases: (1) determining housing needs, (2) finding and evaluating a home, (3) pricing the property, (4) financing the home purchase, and (5) closing the transaction.

John Ashforth needs to sell his home because of a job transfer to another city. What actions should John take to sell his home?

When selling a home, you should first prepare the property by cleaning it and making minor repairs. You next need to determine the selling price by considering comparable homes, features of your home, and current interest rates and the demand for housing.