UNIT 13 HOUSING AFFORDABILITY

Question 1

Mortgage terms

Answer 1

Mortgage terms and payment plans are two of the biggest factors when deciding whether to own or rent a home

Question 2

Ownership expenses and ability to pay

Answer 2

Principal
Interest
Taxes
Insurance

Question 3

housing cost

Answer 3

28 percent if gross monthly income

Question 4

total debt

Answer 4

36 percent of gross monthly income

Question 5

Investment considerations

Answer 5

This increasing ownership interest, called equity, represents the paid-off share of the property held free of any mortgage. Equity builds even further as the property value rises.

Question 6

Capital Gain Exclusion

Answer 6

Capital gains is the difference between the original cost of the property and what it sells for today, minus certain expenses. The exemption may be used repeatedly as long as the homeowners have occupied the property as their primary residence for at least two of the past five years.

Question 7

Tax Benefits

Answer 7

To encourage home ownership, the federal government allows homeowners certain income tax advantages

Question 8

Tax deductions

Answer 8

-Mortgage interest payments on first and second homes (for mortgage balances below $1million, or $500,000 if married filing separately)
-Real estate taxes (but not interest paid on overdue taxes)

Note: State and local taxes are now capped at $10,000 for married filing jointly or $5,000 for
married filing separately.

-Certain loan origination fees
-Discount points (whether paid by buyer or seller)
-Loan prepayment penalties