Exam 8: The Home and Automobile Decision

The prepayment privilege allows the borrower to make early cash payments toward the principal balance on their loan.

A deposit included with an offer to buy that assures the seller that the buyer is serious about buying the house is called

A 48-month lease on a car with a 36-month manufacturer's warranty is a gamble.

Private mortgage insurance typically is not needed with a downpayment of 20% or larger. Why?

Name the steps in the housing decision.

The majority of people never live in rental housing.

Describe four ways to come up with the down payment money for buying a house.

A condominium is a good choice of housing for someone seeking an affordable, low-maintenance situation with some shared amenities.

Explain why the 28/36 percent rule is so important to understand.

What factors should be considered before signing a lease?

As a general rule, your PITI shouldn't exceed 28% of your pretax monthly income.

Whether or not you itemize your tax deductions, you reap tax benefits due to the tax deductibility of the interest payments on your mortgage.

The two primary advantages of a 15-year mortgage over a 30-year mortgage are

Hector a Maria have been married for almost one year now and are thinking about buying a house. Maria is an executive for a large, multi-national corporation with offices around the world. She has been told by her company that she will be transferred to a new location every three years. Hector is a car salesman and he is willing to move to wherever Maria gets transferred. Together they make $8,000 in gross monthly income and pay 40% in taxes and withholdings every month. Between them they have monthly payment of $400 in student loans and $700 in car loans, and their credit cards payments average $450 per month. They currently lease a luxury condo for $1,400 per month. They travel to Cancun every Christmas. Since they both work a lot of hours, they eat out at restaurants for most meals. They currently have nothing in savings but Hector's grandparents have said they will give them a 20% downpayment for the new home. -They have found a very nice town house available for $200,000. Assuming a 20% down payment and a 30-year fixed rate mortgage at 6.65%, what will their PITI be? Annual property taxes are $2,400 and homeowner's insurance premium is $900 per year.

Rhonda is buying a 2nd home to use as income property. She is financing 75% of the home's $100,000 value. Her bank is loaning her the money for 10 years at an APR of 4.5%. How much are Rhonda's mortgage payments?

If you are not yet committed to living in a particular geographic region, rental housing is a good option for you.

In evaluating your financial history, lenders generally focus on which of the following?

The debt limit ratio is

One of the main barriers to home ownership is the down payment.

Home owners have complete autonomy to remodel their dwelling to suit their own needs and tastes.