Money Essentials

1. As long as you can afford it, buying a home is always a smart idea.
2. When considering you for a loan, banks usually want to be sure that your monthly housing costs do not exceed ___ percent of your gross income, and that the sum of housing costs plus long-term debt payments are not more than ___ percent of income?
    36 and 28 percent
    26 and 38 percent
    28 and 36 percent
    38 and 26 percent
3. When choosing a mortgage, you should usually select a fixed-rate loan over an adjustable-rate loan when ...
    You plan to remain in the house for five or more years
    Your income may change sharply within the next three years
    You believe that interest rates are headed down during the next four years
    You are unable to decide what fixed rate is best
4. What does it mean to pay "points" on a mortgage loan?
    You are pre-paying a percentage of the loan principal in advance in order to obtain a lower monthly payment
    You are pre-paying a percentage of the interest up front in exchange for getting a lower interest rate
    You are pre-paying a mortgage broker to get him or her to work harder on finding you a loan
5. What's the most important factor in choosing a home?
    The view
    The amount of acreage in the lot
    The location
    The quality of the kitchen
6. Most real estate agents represent the ...
7. When selling a home, what is the main factor to consider in setting a price?
    What you paid for the house plus the cost of any renovations
    How much your neighbor got three years ago
    What it's worth to you and what you need for the next house
    How much similar homes have sold for within the past three months
8. What's the difference between a condominium and a cooperative, or co-op?
    The condo is a townhouse, while the co-op is an apartment
    The condo owner owns his home, while the co-op owner owns shares in a corporation
    The condo always costs more, while the co-op always costs less
    The condo owner rents his unit, while the co-op owner owns it outright
9. Mortgages whose interest payments rise or fall in step with prevailing interest rates are called ...
    Step up mortgages
    Adjustable rate mortgages
    Balloon mortgages
    Fixed rate mortgages
10. What is the difference between an appraisal and a home inspection?
    The buyer pays for the inspection in order check the home's defects while the seller pays for the appraisal in order to prove the value of the house
    The bank requires the inspection to make sure the house is free from defects while the seller demands the appraisal to support his list price
    The lender requires the buyer to pay for the appraisal to establish the home's worth, while the buyer pays for the inspection on his own to check for defects
    There's no real difference, they are the same thing
11. Your initial bid should always be at least 10 percent below the asking price.
12. Once you decide that you want to buy a home, what's the first thing you should do?
    Get an agent
    Look at homes
    Check your credit record
13. When you choose the location of a home, what single factor is traditionally likely to help most in maintaining, or even boosting, the resale value when it comes time to sell?
    How close it is to a large medical center
    How close it is to a big office district
    Whether it is in a good school district
    Whether the property taxes are low
14. How do most real estate agents get paid?
    By the seller, through a commission based on the sales price of the home
    By the buyer, who pays a commission based on the sales price of the home
    By both the buyer and seller, who split the agent's fee
15. Assuming that you and your spouse's (or partner's) parents are both well-off, and they want to help you raise a down payment for a home, what is the most they can give to you and your spouse in a single year without triggering the gift tax laws?

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