Ch7: Selecting and Financing Housing

Question 1

How much of your take home pay should be spent on housing?

Answer 1

25-30%

Question 2

how much of your yearly income should be used as a limit for housing costs?

Answer 2

2.5 times

Question 3

What should you consider before deciding to rent or buy?

Answer 3

lifestyle, finances/cost, mobility, financial benefits

Question 4

What are some advantages of renting?

Answer 4

easy to move, fewer maintainance responsibilities, minimal financial commitments

Question 5

disadvantages of renting?

Answer 5

no tax benefits, limitations on remodeling, limitations on pets and other activities

Question 6

what is a lease?

Answer 6

a legal document that defines the conditions of a rental agreement

Question 7

What is included in a lease?

Answer 7

description and address of property
name and address of landlord
name of tenant 
effective date and length of lease
amount of security deposit
amount and due date of rent
included utilities
restriction
right to sublet, transfer clause
conditions under which the landlord can enter the unit

Question 8

How much is a security deposit?

Answer 8

one month’s rent

Question 9

What are the conditions of a security deposit?

Answer 9

held in the event of damages, returned at the end of the lease, deductions must be documented

Question 10

Renter’s insurance

Answer 10

covers contents of a rental property

Question 11

Utilities are not included if you are ______

Answer 11

renting a house

Question 12

What are the financial benefits of owning a home

Answer 12

property taxes and mortgage rent are tax deductable, potential increase in value of property, build equity

Question 13

types of housing

Answer 13

single-family housing
multi-unit housing
condo
cooperative
manufactured

Question 14

What is a condominium?

Answer 14

individual ownership of a unit in a building

NOT a building structure

Question 15

What is cooperative housing?

Answer 15

units owned by non-profit; shareholders purchase stock to live in building

Question 16

What are manufactured homes?

Answer 16

usually less than 1000 square feet fully or partially assembled in a factory and moved to site–land can be leased or bought

Question 17

Thoroughly investigate the quality and relationships of the ___________ before building a home

Answer 17

contractor

Question 18

What should a contract include when building a home?

Answer 18

time schedule (including estimated delays), cost estimates, description of work, pay schedule

Question 19

Consider your ______, ________ expenses, and how much you can have for a _____ ________ before buying a home

Answer 19

income, living, down payment

Question 20

Seek _______ through a ____ _______ to finance a home

Answer 20

preapproval, loan officer

Question 21

The Home Buying Process

Answer 21

1. Determine homeownership needs
2. Find and evaluate a home
3. Price the property
4. Obtain financing
5. Close the transaction

Question 22

When selecting a location for your home…

Answer 22

consider zoning laws and school disticts

Question 23

Real estate agents can…

Answer 23

1. show you homes that meet your needs
2. present your offer to sellers
3. negotiate price
4. Assist in obtaining financing
5. represent you at the closing

Question 24

what is an appraisal?

Answer 24

assessment of market value; required by mortgage company to obtain a loan

Question 25

What can affect the price of a home?

Answer 25

selling prices of homes in the area, demand for housing, length of time on the market, owner’s need to sell, financing, features and condition of the home

Question 26

What is a purchase agreement?

Answer 26

a buyer’s legan offer to purchase a home

Question 27

Where do property taxes go?

Answer 27

school funding (which is why poor neighborhoods have poor schools)

Question 28

What is a counteroffer?

Answer 28

the seller’s response to a buyer’s offer and vice versa as part of the negotiation process

Question 29

_____ _______ is deposited in good faith of a future purchase. No progress will be made in the selling process until the buyer follows up with funding or another condition.

Answer 29

Earnest Money

Question 30

A contingency clause is…

Answer 30

an offer dependent on some type of specification–usually obtaining funding or selling of the buyer’s home

Question 31

Mortgage insurance is required if….

Answer 31

the buyer makes a downpayment < 20%

Question 32

The Homeowners Protection Act requires that…

Answer 32

PMI is terminated when equity in the home exceeds 22%

Question 33

What is private mortgage insurance?

Answer 33

covers losses if a homeowner defaults on payments and the bank loses equity when selling

Question 34

What is a mortgage?

Answer 34

long-term loan on a specific property; usually 10, 15, 20, 25, or 30 years

Question 35

Phases of a mortgage

Answer 35

1. meeting for application and qualification with lender
2. lender verifies qualification with credit report
3. approval or denial–rate locked for 60-90 days

Question 36

Factors to qualify for a mortgage

Answer 36

income, debts, credit history (620< ), down payment (20%), length of loan, current mortgage rates

Question 37

___ are prepaid interest as a percent of loan amount

Answer 37

points; 1 pt = 1% of loan