Math 1 Flashcards
amortization
Paying off an amount owed (i.e. a loan) over time. When purchasing a home, this is the process by which loan principal decreases over the life of a loan. Each mortgage payment includes some payment applied to the interest of the loan and some applied towards reducing the principal (amount that must be paid back).
principal
The money initially borrowed for a loan
that must be paid back.
calculation and paying back of loans
Paying back a loan costs more than the amount of principal borrowed because interest is added. The first payments made on a loan are mostly applied to interest rather than the principal. Over time, less of the payment goes towards interest as there is
less interest to be charged on the principal.
Can you bring calculators to testing?
When testing for your license, testing centers prefer that you use their calculators since they have been pre-checked. They do not provide financial calculators, since they do not make you go through complex calculations of this nature. The Division of Real Estate wants you to understand certain math principles as a real estate licensee, but basic math is what is tested.
N
Stands for the Number of payment periods
on a loan calculator app.
(Don’t worry, this is not tested.)
PV
Stands for Present Value on a loan
calculator app.
(Don’t worry, this is not tested.)
I/YR
Stands for Interest per Year on a loan
calculator app.
(Don’t worry, this is not tested.)
P&| payment
Principal and Interest payment only.
PITI payment
Principal, Interest, Taxes, and Insurance payment. This occurs when taxes and insurance are included in the loan payment.
LOAN DISCOUNT POINTS
- An amount that is charged to reduce the interest
rate of a loan.
qualifying ratios
Requirements set by the lender stating what the maximum allowable housing expense to income ratio, and housing expense plus other debt to
income ratio can be in order to qualify for a loan. PITI payments divided by gross monthly income gives the Housing Expense Ratio. PITI added to all monthly debts, divided by gross monthly income,
gives the Total Obligations Ratio.
loan to value ratio
The cost of the loan (the sales price minus the down payment) divided by the value of the home (the sales price). You can also start from the loan to value ratio and work backwards to calculate the purchase price.
property measurement
640 is the number of acres in a section of ground. Thus, a tract identified as the N 1/2 of the SE 1/4, of the SW 1/4, of the N 1/2 would take the 640 and divide it by 2, then 4, then 4, then 2: that tract would be 10 acres. Start with 640 and divide by the denominators in the identification in this way.
acre
There are 43,560 square feet in an acre. Convert this when calculating property measurements that use both feet and acres.
seller minimum listing
Sellers usually have a target for how much money they want to nake off of their property, after taking commissions and taxes into account. Calculate this by adding the minimum value the sellers want for the property to the closing costs. Then, divide that by the percentage NOT included in commission (i.e. divide by 94% if there is a 6% commission).
$280,000 (the minimum the seller wants to make) + $4000 (closing costs) / 94% 100% - 6% commission) = a minimum listing price of $302,127.66
% split
The way in which a commission is split between the agent and the brokerage. If a selling agent is on a 70% split, the broker keeps 30% of the agent’s commission from the sale.
subject property
The property to be sold by the seller.
comparable sales approach
The process of helping sellers figure out a reasonable price at which to sell their homes. To do this, the agent needs to find other properties in the neighborhood similar to the property for sale and make adjustments for differences. If the subject is better, we add; in other words, if the home to be sold has a fireplace and the comparable home does not, add the value of the fireplace to the value of the comparable home. This is the more common approach for estimating the cost of property.
depreciation
The diminishing of value of a home over time. This calculation is done to make the cost approach to appraising more accurate by accounting for home age. When you calculate this, be sure to remove the value of the lot first, as it does not depreciate
the way a house does!
Ann Chovie borrowed $180,000 for 30 years at 5.5% interest. Her monthly P&I payment is:
A: 1000
B: 1867
C: 1388
D: 1022
D: 1022
Jack and Jill hired Agent Alex to sell their home. Alex sells their home for $250,000. Assuming a 7% commission, how much commission do Jack and Jill owe?
A: 18800
B: 17500
C: 15400
D: 16200
B: 17500
Mortgage points which is often called _____ are fees paid directly to the lender at closing in exchange for a reduced interest rate
A: Loan Points
B: Discount Points
C: Value Points
D: None Of The Above
B: Discount Points
A property sells for $420,000 with a 35% down payment. What is the loan to value ratio?
A: 65%
B: 60%
C: 55%
D: 50%
A: 65%
How many acres are in a tract identified as the N ½ of the SE ¼ of the SW ¼ of the N ½?
A: 5 Acres
B: 10 Acres
C: 15 Acres
D: 20 Acres
B: 10 Acres
Smarty Pants wants to net a minimum of $120,000 from the sale of his home. If closing costs are $4500 and his broker charges 5% commission, his home must sell for:
A: $130,816
B: $118,275
C: $131,053
D: $126,789
C: $131,053
Ross and Rachel listed their house for $425,000. It sold for 98% of the list price. The total commission was 7%. The Commission was split equally between the cooperating brokers. If the selling agent was on a 75% split, what is the broker’s share of the commission?
A: $7,289
B: $3,644
C: $10,933
D: $3,719
B: $3,644
Ross and Rachel listed their house for $425,000. It sold for 98% of the list price. The total commission was 7%. The Commission was split equally between the cooperating brokers. If the selling agent was on a 75% split, what is the agent’s share of the commission?
A: $7,289
B: $3,644
C: $10,933
D: $3,719
C: $10,933
Sam sold his home. After paying a 6% commission, and $1200 in closing costs, he received a check for $225,000. What was the purchase price for the property?
A: $211,508
B: $235,628
C: $240,638
D: $271,208
C: $240,638
straight line depreciation
The amount of depreciation is calculated by dividing the cost to build the home by the total years of useful life and then multiplying by the number of years that the home has existed.
income approach to appraising
Determining the value of a property based on how much money it could make, i.e. if it is used as a rental property or business. Start with the amount of money it could produce per year (PGI), then subtract vacancy and collection loss (VC to get Eftective Gross Income (EGI). Then subtract operating expenses (OE: based on taxes, insurance, variable expenses, and reserve to get the Net Operating Income (NOl). Divide the NOl by the capitalization rate (R) to get the property’s value (V).
PGI - VAC - OE = NOI. NOI/R = V
loan origination fee
A fee for processing a loan application and agreement, usually paid at signing. This is
typically a percentage of the total loan.
A property in UT has 5 bedrooms, 3 baths, 3 car garage and a professionally landscaped lot. A nearby property sold for $525,000. It has a fire place & 4 bedrooms. If the fireplace is valued at $1800 and the bedroom is at $8000 and the landscaping is valued at $8,000, what is the adjusted sales price of the property?
A: $539,200
B: $510,800
C: $507,200
D: $542,800
A: $539,200
Mr. Squarepants sold his home for $300,000 to Mr. Crabs. Mr. Crabs made a 15% down payment, paid a 1% origination fee, and paid $750 in other closing costs. How much did Mr. Crabs have to bring to closing?
A: $44,880
B: $45,750
C: $48,000
D: $48,300
D: $48,300
Blake Buyer bought a house for $350,000. The house appraised for $365,000. When Blake applies for a 90% mortgage, the loan amount will be:
A: 328500
B: 315000
C: 326800
D: $314,500
B: 315000
Betsy was charged a 1% loan origination fee of $2500. What was her loan amount?
A: $250,000
B: $225,000
C: $202,500
D: $200,000
A: $250,000
Alex was charged a fee of $2300 for loan discount points. If the loan amount was $285,890, what percentage was she charged for her discount points?
A: 0.4%
B: 0.6%
C: 0.8%
D: 1.0%
C: 0.8%
Jim and Jill purchased a house 20 years ago. The house is now worth $550,000. If it has appreciated 6% per year, what was their original purchase price for their home?
A: $387,728
B: $307,117
C: $518,868
D: $171,493
D: $171,493
A property sells for $620,000 with a 25% down payment. What is the loan to value ratio?
A: 75%
B: 90%
C: 25%
D: 50%
A: 75%
A property sells for $420,000 with a 20% down payment. What is the loan amount?
A: $84,000
B: $336,000
C: $231,000
D: $400,000
B: $336,000
Jack and Rebecca hired Agent Alexis to sell their home. Alexis sells their home for $450,000. Assuming a 6% commission, how much commission do Jack and Rebecca owe?
A: $6,000
B: $13,500
C: $27,000
D: $36,000
C: $27,000
Tim purchased 6 lots at $18,000 each. He divided them into 8 lots that he then sold for $14,000. What was Tim’s profit on these lots?
A: $8,000
B: $2,000
C: $4,000
D: $6,000
C: $4,000
Amy and Allen have fallen in love with a home and decide to make an offer. The one thing they don’t love about the home is the carpet. If the house is 4000 square feet, and they decide to recarpet 2300 square feet with carpet that will cost them $18 per square yard, what will the total cost be for their new carpet?
A: $10,000
B: $8,000
C: $4,600
D: $41,400
C: $4,600
A property in UT has 6 bedrooms, 4 baths, 3 car garage and a professionally landscaped lot. A nearby property sold for $1,625,000. It has 4 car garage & 4 bedrooms. If the extra garage is valued at $2600 and the bedroom is at $8000 each and the landscaping is valued at $10,000, what is the adjusted sales price of the property?
A: $1,622,400
B: $1,645,600
C: $1,653,600
D: $1,648,400
D: $1,648,400
