Practice Quizzes
Quiz Review

1. Kathy was told there are 3 keys to getting a good lease.   Two of them are to negotiate a fair agreed-upon value for the car and get one with a low rent or finance charge.   The other is
A: find a car that doesn’t depreciate quickly
B: locate a reputable dealer
C:
have your attorney read the lease
D:
take the longest term lease you can find
2. Generally a car dealer gets money from the manufacturers for selling a car.   It is the
A: rebate
B: holdback
C:
kickback
D:
selling fee
3.  Home ownership is an investment – most people spend over _________ % of after-tax income
A: 16%
B: 21%
C:
26%
D:
31%
4. One of the following is not an advantage of living in a condo.   Which is it?
A: limited upkeep work
B: build equity for resale and investment
C:
a more free lifestyle
D:
own shares in the corporation
5. Select the one cost that is not involved in home ownership.
A: examination fee
B: down payment
C:
closing/settlement costs
D:
points/discount points
6.  Which of the following is not a one-time fee connected with purchasing a house?
A: down payment
B: private mortgage insurance
C:
closing costs
D:
points
7.  Jeremy does not like the idea of paying points.   A point is actually
A: one percent of the selling price of the house
B: one percent of the selling price minus the realtor’s fee
C:
one percent of the mortgage loan
D:
one percent of the taxable value of the house and property
8. Name the items that are kept in an escrow account.
A: principal, interest, title fee, insurance
B: principal, down payment, interest, insurance
C:
interest, taxes, insurance, down payment
D:
taxes, insurance
9.  Juan and Maria Valdez plan to marry soon and relocate with new jobs.   It is better for them to rent since they plan to do all this with the next __________ years.
A: 2 to 3
B: 3 to 4
C:
3 to 5
D:
4 to 6
10.  How does a lender determine your mortgage limit using PITI compared to 28% of your gross monthly income, 36% of your gross monthly income, and 80% of the appraised value of the house?   Go figure
A: the average of these three figures is used
B: the lowest of these three figures is used
C:
the highest of these three figures is used
D:
any of the above can be used
11. With private mortgage insurance, many lenders will allow you to borrow more than 80% of the appraised value of the home.   What is the purpose of this action?
A:  the insurance will pay for damages to the home during the course of the mortgage
B: it is required by federal and state law
C:
it protects the lender in the event the borrower is unable to make the mortgage payments
D:
it protects the bank from lawsuits
12. Which of these is not an advantage associated with an assumable loan?
A: the new buyer doesn’t incur the closing costs of a new loan
B: the new buyer may be able to get a lower interest rate than the current market rate
C:
it is easier for the seller to sell the home
D:
private mortgage insurance is not required
13. The feature of an ARM that limits how much the interest rate can change is called the
A: rate cap
B: payment cap
C:
margin cap
D:
initial rate cap
14. A _____________ mortgage is designed to let the homeowner pay off the mortgage early. Payments begin at the 30-year fixed rate, then increase each year.
A: balloon payment
B: growing equity
C:
shared appreciation
D:
graduated payments
15. The two primary advantages of a 15-year mortgage over a 30-year mortgage are
A: lower payments and prepayment privileges
B: give you more financial flexibility in the long run
C:
lower interest rate and earlier pay-off
D:
easier to obtain
16. The ____________ mortgage sets the payments in advance in such a way they rise steadily for 5 to 10 years then level off to allow a person to buy a home earlier in life.
A: balloon payment
B: growing equity
C:
shared appreciation
D:
graduated payments
17. You disagree with the Ed “Shifty” Smith, a car salesperson, on the price of an open-end lease.   He says it should only cost $6,000.   What should you actually pay over the life of the lease on a car now worth $23,000 that is expected to drop in value to $15,000 in 2 years?
A: $8,000
B: $7,000
C:
$7,500
D:
$9,000
18.  You are considering leasing an automobile on a two-year lease.  The vehicle was worth $30,000 new and is expected to drop to a value of just $20,000 in two years.  Excluding the financing charges, how much would you expect to pay for the lease?
A: $20,000
B: $10,000
C:
$25,000
D:
$30,000
19. You are considering obtaining a mortgage of $220,000.  A lower rate is offered, but you must pay 2 points to buy the rate down.  How much must you pay in dollars?
A: $1,100
B: $3,300
C:
$4,400
D:
$2,200
20. How much would the monthly payment be on a mortgage of $150,000 for 30 years at a rate of 6.0 percent?
A: $721.73
B: $743.66
C:
$779.48
D:
$899.33
21.  You have an annual gross income of $36,000.  You estimate $200 for monthly taxes and insurance on a new home.  You have a $400 per month car payment that will be paid off in two more years. Using the 28/36 rule for maximum mortgage payment (PITI) estimation, what is your maximum PITI payment using your monthly gross income as a guide (28%)?
A: $840
B: $1080
C:
$680
D:
$640
22.  You currently have an ARM that is charging you 7% with an index rate of 4%, a margin of 3%, and a periodic annual cap of 3.0 percent.  Assume that rates have now increased by 2% during the last seven months.  What rate will your ARM be adjusted to?
A: Stay at 7% fixed rate
B: 9%
C:
10%
D:
11%
23. The textbook points out that loan origination fees are most commonly in the range of  _________ percent of the loan amount
A: 0.5
B: 1.5
C:
1.0
D:
2.0
24.  You are in the process of purchasing a new home.  Expenses that you incur when finalizing the transfer of the ownership of the house are called ______________
A: end costs
B: finalization costs
C:
transfer fees
D:
closing costs
25.  You have just obtained a mortgage to purchase your home.  The ______ that you paid to obtain the loan are charges that must be paid at the time of the sale and serve to raise the effective interest rate on the loan
A: points
B: closing fees
C:
escrow fees
D:
security fees
 

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