Question 1

Which of the following are disadvantages of home ownership?

Accepted Answer

A)  limited responsibility
B)  few financial benefits
C)  low initial costs.
D)  limited mobility.
E)  lifestyle flexibility.F) A) and B)
G) All of the above

Question 2

At the closing of home purchase, the "earnest" money has the purpose of:

Accepted Answer

A)  paying real estate property taxes.
B)  reducing the mortgage interest rate.
C)  paying a mortgage application fee.
D)  paying the real estate agent's commission.
E)  serving as evidence of serious intent.F) C) and D)
G) B) and D)

Question 3

Past interest rates can affect the price of a home.

Accepted Answer

A) True 
 B)False

Question 4

An escrow account is designed to reduce the cost of a mortgage.

Accepted Answer

A) True 
 B)False

Question 5

What is the maximum CMHC premium percentage

Accepted Answer

A)  1.25%
B)  1.8%
C)  2.4%
D)  3.6%
E)  3.8%F) A) and B)
G) A) and C)

Question 6

Negative amortization has the effect of:

Accepted Answer

A)  extending the number of payments to pay off the mortgage.
B)  decreasing the number of payments to pay off the mortgage.
C)  a lower escrow account.
D)  lower interest rates.
E)  a lower down payment.F) C) and D)
G) C) and E)

Question 7

The total debt service ratio is your monthly mortgage payment and other outstanding debts as a percentage of your gross monthly income.

Accepted Answer

A) True 
 B)False

Question 8

The most commonly considered factor when selecting a home is the

Accepted Answer

A)  size of the home.
B)  condition of the home.
C)  location of the home.
D)  local zoning laws.
E)  current interest rates.F) A) and B)
G) B) and D)

Question 9

The amount of mortgage a person is eligible for would be increased by

Accepted Answer

A)  higher interest rates.
B)  a lower down payment.
C)  high debt obligations.
D)  a low family income.
E)  a larger down payment.F) B) and E)
G) A) and B)

Question 10

The purpose of a rate cap with a variable rate mortgage is to

Accepted Answer

A)  minimize interest costs.
B)  prevent changes in the amount of the monthly payment.
C)  increase negative amortization.
D)  restrict the amount by which the interest rate can increase.
E)  lower the escrow account.F) B) and D)
G) A) and C)

Question 11

The purpose of an appraisal is to

Accepted Answer

A)  estimate the current value of a home.
B)  reduce the amount paid for property taxes.
C)  qualify for a reduced mortgage rate.
D)  eliminate the need for home insurance.
E)  reduce the mortgage payments.F) D) and E)
G) None of the above

Question 12

The main financial benefit of renting is

Accepted Answer

A)  tax deductions.
B)  increased equity.
C)  investment value growth.
D)  lower initial costs.
E)  high financial commitment.F) B) and D)
G) A) and B)

Question 13

A lease only protects the rights of the tenant.

Accepted Answer

A) True 
 B)False

Question 14

A split-rate mortgage helps to reduce interest rate risk.

Accepted Answer

A) True 
 B)False

Question 15

Step three of the home buying process is?

Accepted Answer

A)  Determine home ownership needs
B)  Find and evaluate a property to purchase
C)  Price the property
D)  Obtain Financing
E)  Close the purchase transactionF) A) and C)
G) A) and B)

Question 16

Real estate agents will provide you with services using an hourly rate.

Accepted Answer

A) True 
 B)False

Question 17

The amount of mortgage a person is eligible for would be increased by

Accepted Answer

A)  higher interest rates.
B)  a lower down payment.
C)  high debt obligations.
D)  a low family income.
E)  lower interest rates.F) All of the above
G) D) and E)

Question 18

Legal fees (for the purchase of a home typically costs) ?

Accepted Answer

A)  $200-300
B)  $750-1000
C)  $400-1500
D)  $500-2000
E)  $2,000+F) A) and E)
G) B) and E)

Question 19

Financial guidelines suggest that you should "spend no more than 25 to 30 percent of your take home pay on housing".

Accepted Answer

A) True 
 B)False

Question 20

The term "sub-prime mortgage crisis" refers to

Accepted Answer

A)  the difficulty new home owners have in negotiating a low interest rate with banks
B)  obtaining a mortgage interest rate of 8 percent instead of 7 percent
C)  the financial crisis precipitated in 2007 after a sharp increase in mortgage foreclosures
D)  lower interest rates on shorter term mortgages than longer term mortgages
E)  higher interest rates on shorter term mortgages than longer term mortgagesF) A) and D)
G) D) and E)

Exam 7: The Finances of Housing

Financial guidelines suggest that you should "spend no more than 25 to 30 percent of your take home pay on housing".

Correct AnswerverifiedShow Answer

An escrow account is designed to reduce the cost of a mortgage.

Correct AnswerverifiedShow Answer

The amount of mortgage a person is eligible for would be increased by

Correct AnswerverifiedShow Answer

A lease only protects the rights of the tenant.

Correct AnswerverifiedShow Answer

Legal fees (for the purchase of a home typically costs) ?

Correct AnswerverifiedShow Answer

The term "sub-prime mortgage crisis" refers to

Correct AnswerverifiedShow Answer

The main financial benefit of renting is

Correct AnswerverifiedShow Answer

Step three of the home buying process is?

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The amount of mortgage a person is eligible for would be increased by

Correct AnswerverifiedShow Answer

Past interest rates can affect the price of a home.

Correct AnswerverifiedShow Answer

Real estate agents will provide you with services using an hourly rate.

Correct AnswerverifiedShow Answer

At the closing of home purchase, the "earnest" money has the purpose of:

Correct AnswerverifiedShow Answer

Negative amortization has the effect of:

Correct AnswerverifiedShow Answer

The purpose of an appraisal is to

Correct AnswerverifiedShow Answer

Which of the following are disadvantages of home ownership?

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The purpose of a rate cap with a variable rate mortgage is to

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A split-rate mortgage helps to reduce interest rate risk.

Correct AnswerverifiedShow Answer

The most commonly considered factor when selecting a home is the

Correct AnswerverifiedShow Answer

What is the maximum CMHC premium percentage

Correct AnswerverifiedShow Answer

The total debt service ratio is your monthly mortgage payment and other outstanding debts as a percentage of your gross monthly income.

Correct AnswerverifiedShow Answer

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