MRE_Chapter3

Question 1

Apartment Complex

Answer 1

The Building may be low-rise or high-rise and complexes including Parking, Security, Clubhouse

Question 2

Condominiums

Answer 2

Owners own their units individually and share ownership of common units (common Elements) like halls, elevator, swimming pool, etc. - For People who want security of owing property without maintenance - Ownership: Single Family & Commercial

Question 3

cooperative

Answer 3

Share a common walls and facilities within a large bldg

Question 4

PUD

Answer 4

• Planned Unit Developments (PUD) - Mastered Planned Communities - Self Contained Bldg: Housing, Recreation and Commercial

Question 5

MUD

Answer 5

• Mixed Use Developments- - Office Space, Store, Theater, Apt. complex, etc- - Self contained offices, laundry, beauty parlor, barber shops,etc

Question 6

Retired Community

Answer 6

• Are in Temperature Climates, like PUD. - Security & Convenience are major factor

Question 7

Converted-Use Properties

Answer 7

Warehouse, Office Bldg, Churches, Shops, bars,etc converted to Residential use

Question 8

Modular Homes

Answer 8

• Pr-fabricated homes - “stick-built” homes – Homes built on construction site - Pr-assembled rooms in a factory and driven to the bldg. Site on truck

Question 9

manufactured housing

Answer 9

• Mobile Home - Permanent principle residence or stationary vacation homes

Question 10

Decision to buy or rent property consideration

Answer 10

• Howl long a person whats to live in a particular area - A person’s financial situation - Housing affordability - Current Mortgage interest rates - Tax consequences of owing vs renting - What might happen to home prices and tax laws in the future

Question 11

FHA

Answer 11

Federal Housing Administration

Question 12

VA

Answer 12

Department of Veterans Affairs

Question 13

PITI

Answer 13

Principle, Interest, taxes and insurance

Question 14

Affordability Formula

Answer 14

Mortgage Payment (Principle+Interest) +Tax+ Insurance PITI + other debt expenses(student loan, car loan, etc) <= 36% of Gross monthly income (before tax)

Question 15

Capital Gain Rule

Answer 15

• Applicable to Only on Principle Residence - Married Couple filing Jointly: Up-to $500,000 excluded from capital gains - Single Filing: Up-to $250,000 excluded from Capital gains

Question 16

IRA Down payment

Answer 16

• First time home buyer allowed to withdraw up-to $10,000 from IRA account for downpayment without penalty - Income Tax should be paid on $10,000 - Must be spent within 120 days on a downpayment to avoid penalty

Question 17

Tax Deductions – Included

Answer 17

• Mortgage Interest payments ( Married: up-to $1 million, Single: $500k) - Real Estate taxes (but not interest paid on overdue taxes) - Certain loan origination fees - Loan Discount points - Loan Prepayment Penalties

Question 18

Tax Deductions – Excluded

Answer 18

• Appraisal fees, - Notary Fees, - Preparation Costs, - Mortgage Insurance Premiums - VA Funding fees

Question 19

“Basic Form” Policy

Answer 19

• Fire and Lightning - Glass Breakage - Windstorm and hail - Explosion - Riot and civil commotion - Damage by aircraft - Damage by vehicles - Damage from smoke - Vandalism and malicious mischief - Theft - Loss of property removed from the premises when it is endangered by fire of other perils

Question 20

“Board-form” Policy

Answer 20

• falling Objects - Damage due to the weight of ice, snow or sleet - Collapse of all or part of the building - Bursting, Cracking, Burning, or Bulging of a steam of water heating system - Accidental discharge, leakage or overflow of water or steam from withing a plumbing , heating or AC - Freezing or plumbing, heating and AC systems and Domestic appliances - Damage to electrical appliances, devices, fixture and wiring from short circuits or other accidental generated currents

Question 21

CLUE

Answer 21

Comprehensive Loss Underwriting Exchange (CLUE) - Is a Database of consumer claims history that enables insurance companies to access prior claims information in the underwriting an rating process - Contain up-to 5 years of history

Question 22

EIFS

Answer 22

Exterior Insulating Finishing System(EIFS) - Highly effective moisture barrier seal the moisture & trapping water in the home’s wall and resulting in massive wood rot. - Most insurance companies refuse to cover home with EIFS system

Question 23

National Flood Insurance Act 1968

Answer 23

• Help owners of property in flood-prone areas by subsidizing flood insurance - By taking land-use and land-control measures to improve future management for flooding areas

Question 24

NFIP

Answer 24

National Flood Insurance Program

Question 25

Where to buy Flood Insurance?

Answer 25

• Licensed property Insurance broker - National Flood Insurance Program (NFIP), - Designated servicing companies in each state

Question 26

What covered in Flood Insurance?

Answer 26

The physical damage to a building or personal property directly caused by a flood E.g Damage from sewer backups results of flood

Question 27

What is not covered in Flood Insurance?

Answer 27

Losses such as swimming pools, cars, money, animals, ground cover or underground systems

Question 28

Types of policies

Answer 28

• RCV – Replacement Cost Value - ACV – Actual Cost Value

Question 29

Co-Insurance Clause

Answer 29

Requires the homeowner to maintain insurance >= 80% of replacement cost of the dwelling for full replacement on loss If not, loss will be settled for Actual Cash Value or a prorated amount