Chapter 09 Testbank - Static

Student: ___________________________________________________________________________

1. A lease provides protection to both the tenant and the landlord.  
True    False

2. Condominiums involve the purchase of an individual housing unit in a building rather than an
entire building.  
True    False

3. Real estate professionals believe that location is the most important factor to consider when
selecting a home.  
True    False

4. Negotiating a purchase price for a home can involve an offer and a counteroffer.  
True    False

5. The amount of the down payment will affect the size of the mortgage loan needed to purchase
a home.  
True    False

6. Prepaid interest may be a part of a mortgage agreement.  

True    False

7. Amortization refers to changes in the monthly payment for a variable rate mortgage.  
True    False

8. An FHA-insured mortgage has low down payment requirements and is fully assumable with no
prepayment penalties.  
True    False

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

10. An appraisal refers to the price for which a home has been sold.  
True    False

11. Home improvements may or may not increase the selling price of the home.  
True    False

12. The purpose of a rate cap in an adjustable rate mortgage is to limit the amount by which the
interest rate can vary.  
True    False

13. A deed is the document that transfers ownership of the property from one party to another.  
True    False

14. Real estate advisors suggest a price-to-rent ratio of 25 or lower when you buy to possibly
avoid a lower home value after your purchase.  
True    False

15. A payment cap keeps the payments on an adjustable-rate mortgage at a given level or limits
the amount to which those payments can rise.  
True    False

16. Renting is more advantageous than buying a home when you are seeking: 
A. lower living costs in the short run.
B. fewer restrictions regarding remodeling.
C. a long-term investment.
D. tax deductions for property taxes.
E. permanence of residence.

17. A common cost associated with renting is: 

A. the down payment.
B. closing costs.
C. property taxes.
D. maintenance costs.
E. the security deposit.

 
18. A major expense associated with home ownership would be: 
A. renter's insurance.
B. the security deposit.
C. increased value of the property.
D. real estate taxes.
E. interest lost on the security deposit.

19. Renting would be most appropriate for people who: 

A. want more tax deduction benefits.
B. desire to do their own maintenance and repairs.
C. have limited initial funds available.
D. enjoy remodeling their residence.
E. desire unmonitored parties.

20. Kate plans to rent instead of buying her housing. Which advantage of renting will she
realize? 
A. Tax deductions
B. Lower initial costs
C. Property value increases
D. Restricted lifestyle
E. Home remodeling flexibility

21. The legal document involved in renting an apartment is called a: 

A. service contract.
B. mortgage.
C. lease.
D. security deposit.
E. escrow account.

22. What does it mean to sublet an apartment? 

A. Increase the rent
B. Lower maintenance costs
C. Convert the units to condominiums
D. Meet certain government housing regulations
E. Obtain another tenant to take over rent payments during the lease period

23. The purpose of a security deposit is to: 

A. pay for any damages that may occur during the lease period.
B. cover the costs of utilities.
C. pay for the tenant's portion of real estate property taxes.
D. cover increases in monthly rent.
E. meet government housing regulations for a safe building.

 
24. A condominium involves: 
A. renting a mobile home.
B. buying stock in a nonprofit organization.
C. ownership of an individual housing unit in a building.
D. government-subsidized housing.
E. renting a house with the option to buy.

25. Multi unit dwellings include: 

A. a cooperative.
B. a mobile home.
C. a manufactured home.
D. a townhouse.
E. a condominium.

26. A cooperative housing arrangement involves: 

A. government-supported rental units.
B. a nonprofit organization whose residents must own its stock.
C. individual ownership of a living unit in a building.
D. factory built and on-site assembly.
E. housing units owned by a real estate developer.

27. Prefabricated homes refers to: 

A. nonprofit ownership.
B. government leasing of living units.
C. rental units available to government employees.
D. ownership available to low-income individuals.
E. housing units that are partially assembled in factories.

28. Which of these is a potential financial benefit of home ownership? 

A. Low security deposit
B. Tax deductibility of the down payment
C. Lifestyle flexibility
D. Increases in property value
E. No maintenance cost

29. Which of the following would increase the amount that a person could afford to spend on a
home? 
A. Increase in family income
B. Increase in insurance payments
C. Decrease in initial maintenance and repairs
D. Increase in utility bills
E. Increase in monthly living expenses

 
30. As you determine how much of a home you can afford, consider the price of the house along
with the quality and: 
A. size of the home.
B. school zone.
C. location of the home.
D. local zoning laws.
E. outdoor living area.

31. The purpose of zoning laws is to: 

A. restrict property use.
B. encourage new housing development.
C. minimize people moving from an area.
D. reduce real estate property taxes.
E. assist real estate agents in finding homes for sale.

32. Which type of repair problem is more likely to be covered by a new homeowner service
contract? 
A. Structural damage
B. Roof damage from a hurricane
C. Paint for worn exterior
D. Heating and cooling system failure
E. Remodeling the kitchen

33. The purpose of a counteroffer is to: 

A. negotiate the purchase price.
B. reduce mortgage payments.
C. lower real estate property taxes.
D. avoid paying points at closing.
E. avoid paying the real estate agent's commission.

34. Earnest money is used: 

A. to pay real estate property taxes.
B. to reduce the mortgage interest rate.
C. as evidence of good faith by a homebuyer.
D. to pay the real estate agent's commission.
E. to pay a mortgage application fee.

 
35. The amount of mortgage a person is eligible for will be larger by: 
A. decreasing the value of the collateral.
B. lowering the down payment.
C. increasing other debt obligations.
D. lowering the family's income.
E. decreasing the interest rate.

36. Which of the following would increase the equity in a home at a faster rate? 
A. Making a down payment of 10 percent instead of 20 percent
B. Obtaining a mortgage interest rate of 9 percent instead of 8 percent
C. Obtaining a 15-year mortgage instead of a 30-year mortgage
D. Making larger deposits to the escrow account
E. Obtaining an interest-only mortgage

37. Prepaid interest charged by a mortgage lender is called: 

A. Escrow
B. Points
C. Origination fee
D. Title fee
E. Deed

38. Todd Foley is applying for a $100,000 mortgage. He can select either a $600 monthly payment
with no points or a $ 520 payment with two points. How many months will it take Todd to cover
the cost of the discount points if he takes the lower monthly payment? 
A. 6
B. 10
C. 18
D. 25
E. 48

39. A conventional mortgage usually involves: 

A. a variable interest rate.
B. a government guarantee.
C. a balloon payment.
D. equal payments.
E. a payment cap.

 
40. Which of the following is an example of a conventional mortgage? 
A. An FHA mortgage
B. A buy-down
C. A fixed-rate mortgage
D. A shared-appreciation mortgage
E. A home equity loan

41. A VA-guaranteed loan program provides assistance to: 

A. armed services veterans.
B. recent college graduates.
C. low-income homebuyers.
D. government employees.
E. the elderly.

42. A possible disadvantage of FHA and VA mortgages can be: 

A. higher debt ratios for buyers.
B. a longer processing time due to a backlog of applications.
C. loans may be assumable.
D. the monthly payments will always be higher than those of other mortgages.
E. the high down payment requirements.

43. The purpose of a rate cap with an adjustable rate mortgage is to: 

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 or decrease during the ARM term.
E. lower the escrow account.

44. Which one of these situations creates negative amortization? 

A. Increasing the amount of the monthly mortgage payment
B. Paying less than the monthly interest on a mortgage
C. Decreasing the amount paid into an escrow account
D. Lowering the mortgage interest rate
E. Decreasing the amount of the down payment

 
45. A newly married couple is having trouble affording a home. What type of mortgage
arrangement would reduce the monthly payment as a result of an interest rate subsidy from a
builder or real estate developer? 
A. FHA-insured loan
B. Balloon mortgage
C. Buy-down
D. Shared-appreciation mortgage
E. Growing-equity mortgage

46. A home equity loan may also be referred to as a ____________ mortgage. 

A. shared-appreciation
B. graduated-payment
C. growing-equity
D. second
E. buy-down

47. Refinancing of a mortgage is recommended when: 

A. interest rates rise.
B. interest rates fall.
C. the escrow account balance declines.
D. two or more points are required by the lender at the time of closing.
E. the escrow account balance increases.

48. Which of the following is an example of a closing cost? 

A. Home inspection fees
B. Moving expenses
C. Earnest money
D. Title insurance
E. Down payment

49. The purpose of title insurance is to: 

A. transfer ownership of property.
B. reduce the chance of a decrease in property value.
C. protect an owner from unforeseen property claims.
D. protect an owner from changes in mortgage interest rates.
E. cover the closing costs of a real estate transaction.

 
50. Which document does the seller use to guarantee the title is good? 
A. Title
B. Escrow account
C. Settlement statement
D. Appraisal
E. Warranty deed

51. Which of the following expenses is paid from an escrow account? 

A. Title insurance
B. Property taxes
C. Points
D. Loan application fee
E. Real estate agent's commission

52. An appraisal is likely to cost between: 

A. $50 – $100.
B. $100 – $200.
C. $200 – $300.
D. $300 – $400.
E. $400 – $500.

53. If you sell your home without a real estate agent, you should still employ the services of a
_____ to assist you with the contract and the closing. 
A. broker.
B. insurance agent.
C. lawyer.
D. contractor.
E. rental agent.

54. One service provided by a real estate agent when selling your home is: 
A. providing legal advice.
B. completing a mortgage application.
C. screening potential buyers.
D. making needed repairs.
E. conducting a home inspection.

55. Which one of the following is an advantage of renting? 

A. Unrestricted lifestyle
B. Tax benefits
C. Fewer responsibilities
D. Increased value of real estate
E. Increased maintenance costs

 
56. Which one of the following is an advantage of buying? 
A. Ease of Mobility
B. Financial benefits
C. Fewer responsibilities
D. Minimal financial commitment
E. Declining equity

57. A cost associated with renting would be: 

A. property insurance.
B. property taxes.
C. down payment and closing costs.
D. security deposit.
E. mortgage interest.

58. A _________ is a building that contains exactly two separate homes. 

A. mobile home
B. duplex
C. condominium
D. prefabricated home
E. cooperative

59. Gary Smith is purchasing one housing unit in a building with several units. What type of
housing is Gary most likely going to live in? 
A. Condominium
B. Duplex
C. Cooperative
D. Prefabricated home
E. Mobile home

60. James Monroe is a member of a nonprofit organization that allows him to rent a living unit in a
building. What type of housing is James most likely living in? 
A. A condominium
B. A duplex
C. A cooperative
D. A prefabricated home
E. A mobile home

 
61. Jennifer Garland is purchasing a home that was assembled in a factory and then moved to the
living site. What type of housing is Jennifer purchasing? 
A. Condominium
B. Duplex
C. Cooperative
D. Prefabricated home
E. Penthouse

62. What is the most popular form of housing? 

A. Condominium
B. Duplex
C. Cooperative
D. Prefabricated home
E. Single-family dwelling

63. The assessed value of your home is the: 

A. value used to calculate property taxes.
B. estimated current market value.
C. price you paid to purchase the home.
D. amount of money a buyer has offered to purchase the home.
E. cost basis assigned to your home by your insurance company.

64. The appraised value of your home is the: 

A. value used to calculate property taxes.
B. estimated current value of the property.
C. price you paid to purchase the home.
D. amount of money a buyer has offered to purchase the home.
E. cost remaining after the down payment.

65. Michelle Duncan wants to know what price home she can afford. Her annual gross income is
$45,000. She owes $750 per month on other debts and expects her property taxes and
homeowners insurance to cost $250 per month. She knows she can get a 7.5%, 30 year mortgage
so her mortgage payment factor is 6.99. She expects to make a 20% down payment. What is
Michelle's affordable home purchase price? Round your answer to the nearest $100. 
A. $76,000
B. $60,800
C. $304,000
D. $42,500
E. $254,800

 
66. Duane Miller wants to know what price home he can afford. His annual gross income is
$60,000. He has no other debt expenses and expects property taxes and insurance to cost $400
per month. He knows he can get a 6%, 15 year mortgage so his mortgage payment factor is 8.43.
He expects to make a 10% down payment. What is Duane's affordable home purchase price?
Round your answer to the nearest $100. 
A. $148,300
B. $177,900
C. $164,800
D. $197,700
E. $1,483,000

67. A loan based on the high equity in a home that provides the homeowner with tax-free income
and which is paid back when the home is sold is called a: 
A. conventional mortgage.
B. growing equity mortgage.
C. second mortgage.
D. reverse mortgage.
E. adjustable rate mortgage.

68. A renter is required to pay a security deposit of $800, on which 4 percent interest will be paid.
What amount would the person earn each year? 
A. $100
B. $64
C. $32
D. $16
E. $4

69. If closing costs of $1,400 are associated with the refinance of a mortgage that would reduce
the monthly payment from $980 to $870, it would take approximately ____ months to cover these
costs. 
A. 6
B. 9
C. 13
D. 17
E. 22

70. A contract condition that states that the agreement is binding only if a certain event occurs is
a: 
A. dual agency.
B. contingency clause.
C. counteroffer.
D. zoning law.
E. prefabrication.

 
71. Paula has completed a mortgage application and provided evidence of employment, income,
assets owned, and existing debt to the potential lending institution. Although Paula has not even
begun the process of looking at possible homes to buy, she is eagerly awaiting news from the
lender as to whether she has been approved for a mortgage. In what stage of the application
process is she? 
A. Appraisal
B. Prequalification
C. Assessment
D. Amortization
E. Home inspection

72. Noelle and Larry have decided to perform the landscaping of their new home by themselves.
They also plan to take a do-it-yourself class at a local home store so they can replace the tile in
the master bathroom without using a contractor. The effect of performing these tasks themselves
will result in an increase in their: 
A. principal.
B. contingencies.
C. escrow account.
D. sweat equity.
E. buy-down.

73. Which type of home has a tendency to depreciate in value? 

A. Cooperative
B. Mobile home
C. Condominium
D. Duplex
E. Previously-owned single family home

74. Brett has hired a professional to assess the soundness of the roof, foundation, and building
materials of a potential home he is considering. The professional will also be checking other
aspects of the home including the plumbing, heating, and cooling systems. Brett is paying for a: 
A. walk-through.
B. zoning evaluation.
C. home inspection.
D. title search.
E. handyman's special.

75. Legislation that requires that loan applicants be given certain information, including an
estimate of the closing costs, before the actual closing is known as: 
A. the Real Estate Settlement Procedures Act.
B. the Cooperative Lending Act.
C. the Truth in Lending Act.
D. the Title Insurance Act.
E. the Real Estate Investment Act.

 
76. During which phase of the home-buying process would you assess types of housing
available? 
A. Price the property
B. Find and evaluate a property to purchase
C. Obtain financing
D. Determine home ownership needs
E. Close the purchase transaction

77. The Homeowners Protection Act requires that a PMI policy be terminated automatically when
a homeowner's equity reaches _____ percent of the property value at the time the mortgage was
executed. 
A. 5
B. 9
C. 12
D. 18
E. 22

78. Private Mortgage Insurance is usually required if the down payment is less than _____ percent
of the purchase price of the home. 
A. 5
B. 8
C. 12
D. 15
E. 20

79. What is the term used to describe the reduction of the balance owed on a loan with each
payment made over a period of time? 
A. a buy-down.
B. shared-appreciation.
C. prepaid interest.
D. amortization.
E. a rate cap.

80. Money that is usually deposited with the lending institution for the payment of property taxes
and homeowner's insurance is called: 
A. points.
B. an escrow account.
C. a rate cap.
D. closing costs.
E. a buy-down.

 
81. Most people do not select a place of residence based on: 
A. lifestyle.
B. needs.
C. financial resources.
D. attitudes.
E. credit score.

82. A lease is a legal document that provides the right to take legal action by the ____ for
nonpayment of rent. 
A. landlord
B. builder
C. realtor
D. tenant
E. homeowner

83. Which home improvement is least likely to increase the value of your home? 
A. Energy efficient features
B. A remodeled kitchen
C. An extra bathroom
D. A finished basement
E. An exercise room

84. A payment cap on an adjustable-rate mortgage can result in negative amortization when: 
A. interest rates decrease but the amount of the monthly payment does not.
B. the amount of the monthly payment increases and interest rates do not.
C. the amount of the monthly payment decreases and interest rates do not.
D. interest rates rise but the amount of the monthly payment does not.
E. the loan stretches out to 40 years.

85. Which of the following can help you prepare your home for selling? 
A. Moving furniture to the garage
B. Painting worn exterior
C. Closing the drapes when showing your home
D. Trimming the grass around old vehicles in the yard
E. Turning off the lights to conserve energy when showing your home

 
86. Which procedure is a security measure if you are selling your home without a real estate
professional? 
A. Closing the drapes when showing your home
B. Turning off the lights when showing your home
C. Showing your home only when two or more adults are at home
D. Clearing the garage of clutter before showing your home
E. Mowing the lawn before showing your home

87. A real estate short sale occurs when: 

A. you are selling the home without a real estate professional.
B. an appraisal is too costly to obtain.
C. an estimate of the current value of the property is not available.
D. the new selling price is less than the amount owed on a previous mortgage.
E. the home is sold for less than the list price.

88. A home worth $200,000 with $120,000 still owed on the mortgage would have equity of
$80,000, which is ____ percent of the home’s value. 
A. 20%
B. 40%
C. 60%
D. 67%
E. 80%

89. A home worth $300,000 with $180,000 still owed on the mortgage would have equity of: 
A. $300,000
B. $180,000
C. $120,000
D. $100,000
E. $80,000

90. What is the affordable monthly mortgage payment if your monthly gross income is $60,000
and monthly payments on an auto loan are $400? 
A. $6,000
B. $5,000
C. $1,900
D. $1,500
E. $400

 
91. Which of the following serves as collateral for the mortgage? 
A. Your income
B. The amount of your down payment
C. The length of your loan
D. Current mortgage rates
E. The home you buy

92. You believe that interest rates may drop and have decided not to lock in an interest rate on
your loan during the loan commitment process. This is called a: 
A. buy-down.
B. discount point.
C. float.
D. rate cap.
E. payment cap.

93. Which of the following is most commonly used as a base index for setting rates for adjustable
rate mortgages? 
A. Federal Reserve Bank
B. Karl’s mortgage calculator
C. Realtor.com
D. London Interbank Offered Rate
E. Bankrate.com

94. Selecting a place of residence is reflected by your: 

A. lifestyle.
B. gender.
C. favorite restaurant.
D. credit score.
E. number of years employed.

95. Which of the following is not an advantage of renting? 

A. Ease of mobility
B. More financial benefits than home ownership
C. Fewer responsibilities for maintenance and repairs
D. Lower initial costs
E. No expenses related to property taxes

 
96. Which of the following is a form of housing in which the units in a building are owned by a
nonprofit organization? 
A. Mobile home
B. Condominium
C. Cooperative housing
D. Duplex
E. Townhouse

97. Which of the following can affect the price of a home? 

A. Cost of the home inspection
B. Number of realtors in the area
C. Cost of the appraisal
D. Current interest rates
E. Number of loan officers in the area

98. Property taxes are based on the assessed value. Who determines this value and what can you
do if you disagree with this assessment? 

 
 

99.  What factors influence the type of housing a family will select? 

 
 

100.  Gerry Intel is considering buying a home. What actions would you recommend for her to
take to accomplish this goal of buying a home? 

 
 
101.  John Ashford needs to sell his home because of a job transfer to another city. What actions
should John take to prepare his home for selling? 

 
 

102.  What should you consider to determine the price you offer for a home? 

 
 

103.  Explain what amortization is and how a down payment and loan duration impact it. 

 
 

104.  Explain negative amortization and how such a situation can occur. 

 
 

105.  What is the purpose of an escrow account and what costs are typically included? 

 
 
106.  Differentiate between a cooperative and a condominium. Be sure to include a discussion of
the ownership and responsibility for the common areas. 

 
 
Chapter 09 Testbank - Static Key
 

1. A lease provides protection to both the tenant and the landlord.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Basic
Topic: Rental costs and contracts
 

2. Condominiums involve the purchase of an individual housing unit in a building rather than an
entire building.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Housing options
 

3. Real estate professionals believe that location is the most important factor to consider when
selecting a home.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Home purchase considerations and negotiations
 
4. Negotiating a purchase price for a home can involve an offer and a counteroffer.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

5. The amount of the down payment will affect the size of the mortgage loan needed to purchase
a home.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage terms, rates, and payments
 

6. Prepaid interest may be a part of a mortgage agreement.  

TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage terms, rates, and payments
 

7. Amortization refers to changes in the monthly payment for a variable rate mortgage.  
FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Mortgage terms, rates, and payments
 
8. An FHA-insured mortgage has low down payment requirements and is fully assumable with no
prepayment penalties.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Home purchase financing alternatives
 

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

FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Escrow accounts
 

10. An appraisal refers to the price for which a home has been sold.  
FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

11. Home improvements may or may not increase the selling price of the home.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Understand
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Basic
Topic: Home sales preparations and procedures
 
12. The purpose of a rate cap in an adjustable rate mortgage is to limit the amount by which the
interest rate can vary.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage terms, rates, and payments
 

13. A deed is the document that transfers ownership of the property from one party to another.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Closing costs and procedures
 

14. Real estate advisors suggest a price-to-rent ratio of 25 or lower when you buy to possibly
avoid a lower home value after your purchase.  
FALSE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rent versus buy decision
 

15. A payment cap keeps the payments on an adjustable-rate mortgage at a given level or limits
the amount to which those payments can rise.  
TRUE

Accessibility: Keyboard Navigation

Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage terms, rates, and payments
 
16. Renting is more advantageous than buying a home when you are seeking: 
A. lower living costs in the short run.
B. fewer restrictions regarding remodeling.
C. a long-term investment.
D. tax deductions for property taxes.
E. permanence of residence.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rent versus buy decision
 

17. A common cost associated with renting is: 

A. the down payment.
B. closing costs.
C. property taxes.
D. maintenance costs.
E. the security deposit.保证金
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rental costs and contracts
 

18. A major expense associated with home ownership would be: 

A. renter's insurance.
B. the security deposit.
C. increased value of the property.
D. real estate taxes.
E. interest lost on the security deposit.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home affordability and ratios
 

19. Renting would be most appropriate for people who: 

A. want more tax deduction benefits.
B. desire to do their own maintenance and repairs.
C. have limited initial funds available.
D. enjoy remodeling their residence.
E. desire unmonitored parties.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rent versus buy decision
 
20. Kate plans to rent instead of buying her housing. Which advantage of renting will she
realize? 
A. Tax deductions
B. Lower initial costs (ease of mobility)
C. Property value increases
D. Restricted lifestyle
E. Home remodeling flexibility

21. The legal document involved in renting an apartment is called a: 

A. service contract.
B. mortgage.
C. lease.
D. security deposit.
E. escrow account.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Basic
Topic: Rental costs and contracts
 

22. What does it mean to sublet 转租 an apartment? 

A. Increase the rent
B. Lower maintenance costs
C. Convert the units to condominiums
D. Meet certain government housing regulations
E. Obtain another tenant to take over rent payments during the lease period
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rental costs and contracts
 

23. The purpose of a security deposit is to: 

A. pay for any damages that may occur during the lease period.
B. cover the costs of utilities.
C. pay for the tenant's portion of real estate property taxes.
D. cover increases in monthly rent.
E. meet government housing regulations for a safe building.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rental costs and contracts
 
24. A condominium 独立产权的公寓 involves: 
A. renting a mobile home.
B. buying stock in a nonprofit organization.
C. ownership of an individual housing unit in a building.
D. government-subsidized housing.
E. renting a house with the option to buy.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Housing options
 

25. Multiunit dwellings 多单元住宅 include: 

A. a cooperative.
B. a mobile home.
C. a manufactured home.
D. a townhouse.
E. a condominium.

26. A cooperative housing arrangement involves: 

A. government-supported rental units.
B. a nonprofit organization whose residents must own its stock.
C. individual ownership of a living unit in a building.
D. factory built and on-site assembly.
E. housing units owned by a real estate developer.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Housing options
 

27. Prefabricated homes refers to: 

A. nonprofit ownership.
B. government leasing of living units.
C. rental units available to government employees.
D. ownership available to low-income individuals.
E. housing units that are partially assembled in factories. 部分组装在工厂里的住房单元
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Housing options
 
28. Which of these is a potential financial benefit of home ownership? 
A. Low security deposit
B. Tax deductibility of the down payment
C. Lifestyle flexibility
D. Increases in property value
E. No maintenance cost
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

29. Which of the following would increase the amount that a person could afford to spend on a
home? 
A. Increase in family income
B. Increase in insurance payments
C. Decrease in initial maintenance and repairs
D. Increase in utility bills
E. Increase in monthly living expenses
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Advanced
Topic: Home affordability and ratios
 

30. As you determine how much of a home you can afford, consider the price of the house along
with the quality and: 
A. size of the home.
B. school zone.
C. location of the home.
D. local zoning laws.
E. outdoor living area.

31. The purpose of zoning laws 分区法 is to: 

A. restrict property use.
B. encourage new housing development.
C. minimize people moving from an area.
D. reduce real estate property taxes.
E. assist real estate agents in finding homes for sale.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase selection process
 
32. Which type of repair problem is more likely to be covered by a new homeowner service
contract? 
A. Structural damage
B. Roof damage from a hurricane
C. Paint for worn exterior
D. Heating and cooling system failure
E. Remodeling the kitchen
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

33. The purpose of a counteroffer 买方还价 is to: 

A. negotiate the purchase price.
B. reduce mortgage payments.
C. lower real estate property taxes.
D. avoid paying points at closing.
E. avoid paying the real estate agent's commission.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

34. Earnest money is used: 

A. to pay real estate property taxes.
B. to reduce the mortgage interest rate.
C. as evidence of good faith by a homebuyer.
D. to pay the real estate agent's commission.
E. to pay a mortgage application fee.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

35. The amount of mortgage a person is eligible for will be larger by: 

A. decreasing the value of the collateral.
B. lowering the down payment.
C. increasing other debt obligations.
D. lowering the family's income.
E. decreasing the interest rate.

 
36. Which of the following would increase the equity in a home at a faster rate? 
A. Making a down payment of 10 percent instead of 20 percent
B. Obtaining a mortgage interest rate of 9 percent instead of 8 percent
C. Obtaining a 15-year mortgage instead of a 30-year mortgage
D. Making larger deposits to the escrow account
E. Obtaining an interest-only mortgage
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Mortgage terms, rates, and payments
 

37. Prepaid interest charged by a mortgage lender is called: 

A. Escrow
B. Points
C. Origination fee
D. Title fee
E. Deed
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage terms, rates, and payments
 

38. Todd Foley is applying for a $100,000 mortgage. He can select either a $600 monthly payment
with no points or a $ 520 payment with two points. How many months will it take Todd to cover
the cost of the discount points if he takes the lower monthly payment? 
A. 6
B. 10
C. 18
D. 25
E. 48

100,000 x 2% = 2,000; 2,000 / (600-520) = 25

 
Accessibility: Keyboard Navigation
Blooms: Apply
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Mortgage terms, rates, and payments
 

39. A conventional mortgage usually involves: 

A. a variable interest rate.
B. a government guarantee.
C. a balloon payment.
D. equal payments.
E. a payment cap.

 
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Basic
Topic: Mortgage terms, rates, and payments
 
40. Which of the following is an example of a conventional mortgage? 
A. An FHA mortgage
B. A buy-down
C. A fixed-rate mortgage
D. A shared-appreciation mortgage
E. A home equity loan
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Home purchase financing alternatives
 

41. A VA-guaranteed loan program provides assistance to: 

A. armed services veterans. 武装部队退伍军人
B. recent college graduates.
C. low-income homebuyers.
D. government employees.
E. the elderly.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Basic
Topic: Home purchase financing alternatives
 

42. A possible disadvantage of FHA and VA mortgages can be: 

A. higher debt ratios for buyers.
B. a longer processing time due to a backlog of applications.
C. loans may be assumable.
D. the monthly payments will always be higher than those of other mortgages.
E. the high down payment requirements.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Home purchase financing alternatives
 

43. The purpose of a rate cap 限制 with an adjustable rate mortgage is to: 

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 or decrease during the ARM term.
E. lower the escrow account.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Mortgage terms, rates, and payments
 
44. Which one of these situations creates negative amortization? 
A. Increasing the amount of the monthly mortgage payment
B. Paying less than the monthly interest on a mortgage
C. Decreasing the amount paid into an escrow account
D. Lowering the mortgage interest rate
E. Decreasing the amount of the down payment

45. A newly married couple is having trouble affording a home. What type of mortgage
arrangement would reduce the monthly payment as a result of an interest rate subsidy from a
builder or real estate developer? 什么样的抵押贷款安排会因为建筑商或房地产开发商的利率补贴而减少月供
A. FHA-insured loan
B. Balloon mortgage
C. Buy-down
D. Shared-appreciation mortgage
E. Growing-equity mortgage
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Buyer incentives
 

46. A home equity loan may also be referred to as a ____________ mortgage. 

A. shared-appreciation
B. graduated-payment
C. growing-equity
D. second
E. buy-down
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Basic
Topic: Home equity loans
 

47. Refinancing of a mortgage is recommended when: 

A. interest rates rise.
B. interest rates fall.
C. the escrow account balance declines.
D. two or more points are required by the lender at the time of closing.
E. the escrow account balance increases.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage refinancing
 
48. Which of the following is an example of a closing cost? 结算费用，成交价
A. Home inspection fees
B. Moving expenses
C. Earnest money
D. Title insurance 产权保险
E. Down payment
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Closing costs and procedures
 

49. The purpose of title insurance is to: 

A. transfer ownership of property.
B. reduce the chance of a decrease in property value.
C. protect an owner from unforeseen property claims.
D. protect an owner from changes in mortgage interest rates.
E. cover the closing costs of a real estate transaction.

50. Which document does the seller use to guarantee the title is good? 
A. Title
B. Escrow account
C. Settlement statement
D. Appraisal
E. Warranty deed
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Basic
Topic: Closing costs and procedures
 

51. Which of the following expenses is paid from an escrow account? 

A. Title insurance
B. Property taxes
C. Points
D. Loan application fee
E. Real estate agent's commission
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Escrow accounts
 
52. An appraisal 估价 is likely to cost between: 
A. $50 – $100.
B. $100 – $200.
C. $200 – $300.
D. $300 – $400.
E. $400 – $500.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

53. If you sell your home without a real estate agent, you should still employ the services of a
_____ to assist you with the contract and the closing. 
A. broker.
B. insurance agent.
C. lawyer.
D. contractor.
E. rental agent.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Intermediate
Topic: Home sales preparations and procedures
 

54. One service provided by a real estate agent when selling your home is: 
A. providing legal advice.
B. completing a mortgage application.
C. screening potential buyers.
D. making needed repairs.
E. conducting a home inspection.

55. Which one of the following is an advantage of renting? 

A. Unrestricted lifestyle
B. Tax benefits
C. Fewer responsibilities
D. Increased value of real estate
E. Increased maintenance costs
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rent versus buy decision
 
56. Which one of the following is an advantage of buying? 
A. Ease of Mobility
B. Financial benefits
C. Fewer responsibilities
D. Minimal financial commitment
E. Declining equity
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Rent versus buy decision
 

57. A cost associated with renting would be: 

A. property insurance.
B. property taxes.
C. down payment and closing costs.
D. security deposit.
E. mortgage interest.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rental costs and contracts
 

58. A _________ is a building that contains exactly two separate homes. 

A. mobile home
B. duplex 占两层楼的公寓套房
C. condominium
D. prefabricated home
E. cooperative
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Housing options
 

59. Gary Smith is purchasing one housing unit in a building with several units. What type of
housing is Gary most likely going to live in? 
A. Condominium 公寓
B. Duplex
C. Cooperative
D. Prefabricated home
E. Mobile home

 
60. James Monroe is a member of a nonprofit organization that allows him to rent a living unit in a
building. What type of housing is James most likely living in? 
A. A condominium
B. A duplex
C. A cooperative
D. A prefabricated home
E. A mobile home
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Housing options
 

61. Jennifer Garland is purchasing a home that was assembled in a factory and then moved to the
living site. What type of housing is Jennifer purchasing? 
A. Condominium
B. Duplex
C. Cooperative
D. Prefabricated home
E. Penthouse
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Housing options
 

62. What is the most popular form of housing? 

A. Condominium
B. Duplex
C. Cooperative
D. Prefabricated home
E. Single-family dwelling
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Housing options
 

63. The assessed value of your home is the: 

A. value used to calculate property taxes.
B. estimated current market value.
C. price you paid to purchase the home.
D. amount of money a buyer has offered to purchase the home.
E. cost basis assigned to your home by your insurance company.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 
64. The appraised value of your home is the: 
A. value used to calculate property taxes.
B. estimated current value of the property.
C. price you paid to purchase the home.
D. amount of money a buyer has offered to purchase the home.
E. cost remaining after the down payment.

65. Michelle Duncan wants to know what price home she can afford. Her annual gross income is
$45,000. She owes $750 per month on other debts and expects her property taxes and
homeowners insurance to cost $250 per month. She knows she can get a 7.5%, 30 year mortgage
so her mortgage payment factor is 6.99. She expects to make a 20% down payment. What is
Michelle's affordable home purchase price? Round your answer to the nearest $100. 
A. $76,000
B. $60,800
C. $304,000
D. $42,500
E. $254,800

45,000 / 12 = 3,750; 3,750 x .38 = 1,425; 1,425 - 750 - 250 = 425; 425 / 6.99 x 1,000 = 60,801.14; 60,801.14 /
(1-.20) = 76,001.43 = $76,000 rounded.

Accessibility: Keyboard Navigation

Blooms: Apply
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Home affordability and ratios
 

66. Duane Miller wants to know what price home he can afford. His annual gross income is
$60,000. He has no other debt expenses and expects property taxes and insurance to cost $400
per month. He knows he can get a 6%, 15 year mortgage so his mortgage payment factor is 8.43.
He expects to make a 10% down payment. What is Duane's affordable home purchase price?
Round your answer to the nearest $100. 
A. $148,300
B. $177,900
C. $164,800
D. $197,700
E. $1,483,000

60,000 / 12 = 5,000; 5,000 x .33 = 1,650; 1,650 - 400 = 1,250; 1,250 / 8.43 x 1,000 = 148,279.95; 148,279.95 / (1
- .10) = 164,755.50 = $164,800 rounded.

Accessibility: Keyboard Navigation

Blooms: Apply
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Home affordability and ratios
 
67.  A loan based on the high equity in a home that provides the homeowner with tax-free
income and which is paid back when the home is sold is called a: 
A. conventional mortgage.
B. growing equity mortgage.
C. second mortgage.
D. reverse mortgage. 反向抵押贷款
E. adjustable rate mortgage.

68. A renter is required to pay a security deposit of $800, on which 4 percent interest will be paid.
What amount would the person earn each year? 
A. $100
B. $64
C. $32
D. $16
E. $4

800x.04 = $32
 69. If closing costs of $1,400 are associated with the refinance of a mortgage that would reduce
the monthly payment from $980 to $870, it would take approximately ____ months to cover these
costs. 
A. 6
B. 9
C. 13
D. 17
E. 22
1,400 / (980 - 870) = 12.73 = 13 rounded.
 

Accessibility: Keyboard Navigation

Blooms: Apply
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage refinancing
 

70. A contract condition that states that the agreement is binding only if a certain event occurs is
a: 
A. dual agency.
B. contingency clause. 应急条款
C. counteroffer.
D. zoning law.
E. prefabrication.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

71. Paula has completed a mortgage application and provided evidence of employment, income,
assets owned, and existing debt to the potential lending institution. Although Paula has not even
begun the process of looking at possible homes to buy, she is eagerly awaiting news from the
lender as to whether she has been approved for a mortgage. In what stage of the application
process is she? 
A. Appraisal
B. Prequalification
C. Assessment
D. Amortization
E. Home inspection
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage applications
 
72. Noelle and Larry have decided to perform the landscaping of their new home by themselves.
They also plan to take a do-it-yourself class at a local home store so they can replace the tile in
the master bathroom without using a contractor. The effect of performing these tasks themselves
will result in an increase in their: 
A. principal.
B. contingencies.
C. escrow account.
D. sweat equity. 劳动
E. buy-down.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home sales preparations and procedures
 

73. Which type of home has a tendency to depreciate in value? 

A. Cooperative
B. Mobile home
C. Condominium
D. Duplex
E. Previously-owned single family home
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase selection process
 

74. Brett has hired a professional to assess the soundness of the roof, foundation, and building
materials of a potential home he is considering. The professional will also be checking other
aspects of the home including the plumbing, heating, and cooling systems. Brett is paying for a: 
A. walk-through.
B. zoning evaluation.
C. home inspection.
D. title search.
E. handyman's special.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home inspections
 
75. Legislation that requires that loan applicants be given certain information, including an
estimate of the closing costs, before the actual closing is known as: 
A. the Real Estate Settlement Procedures Act.
B. the Cooperative Lending Act.
C. the Truth in Lending Act.
D. the Title Insurance Act.
E. the Real Estate Investment Act.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Closing costs and procedures
 

76. During which phase of the home-buying process would you assess types of housing
available? 
A. Price the property
B. Find and evaluate a property to purchase
C. Obtain financing
D. Determine home ownership needs
E. Close the purchase transaction
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Housing options
 

77. The Homeowners Protection Act requires that a PMI policy be terminated automatically when
a homeowner's equity reaches _____ percent of the property value at the time the mortgage was
executed. 
A. 5
B. 9
C. 12
D. 18
E. 22

78. Private Mortgage Insurance is usually required if the down payment is less than _____ percent
of the purchase price of the home. 
A. 5
B. 8
C. 12
D. 15
E. 20
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage terms, rates, and payments
 
79. What is the term used to describe the reduction of the balance owed on a loan with each
payment made over a period of time? 
A. a buy-down.
B. shared-appreciation.
C. prepaid interest.
D. amortization. 分期偿还
E. a rate cap.

80. Money that is usually deposited with the lending institution for the payment of property taxes
and homeowner's insurance is called: 
A. points.
B. an escrow account.
C. a rate cap.
D. closing costs.
E. a buy-down.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Escrow accounts
 

81. Most people do not select a place of residence based on: 

A. lifestyle.
B. needs.
C. financial resources.
D. attitudes.
E. credit score.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-01 Evaluate available housing alternatives.
Level of Difficulty: Basic
Topic: Home purchase selection process
 

82. A lease is a legal document that provides the right to take legal action by the ____ for
nonpayment of rent. 
A. landlord
B. builder
C. realtor
D. tenant
E. homeowner
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Basic
Topic: Rental costs and contracts
 
83. Which home improvement is least likely to increase the value of your home? 
A. Energy efficient features
B. A remodeled kitchen
C. An extra bathroom
D. A finished basement
E. An exercise room
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Basic
Topic: Home sales preparations and procedures
 

84. A payment cap on an adjustable-rate mortgage can result in negative amortization when: 
A. interest rates decrease but the amount of the monthly payment does not.
B. the amount of the monthly payment increases and interest rates do not.
C. the amount of the monthly payment decreases and interest rates do not.
D. interest rates rise but the amount of the monthly payment does not.
E. the loan stretches out to 40 years.

85. Which of the following can help you prepare your home for selling? 
A. Moving furniture to the garage
B. Painting worn exterior
C. Closing the drapes when showing your home
D. Trimming the grass around old vehicles in the yard
E. Turning off the lights to conserve energy when showing your home
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Basic
Topic: Home sales preparations and procedures
 

86. Which procedure is a security measure if you are selling your home without a real estate
professional? 
A. Closing the drapes when showing your home
B. Turning off the lights when showing your home
C. Showing your home only when two or more adults are at home
D. Clearing the garage of clutter before showing your home
E. Mowing the lawn before showing your home
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Intermediate
Topic: Home sales preparations and procedures
 
87. A real estate short sale occurs when: 
A. you are selling the home without a real estate professional.
B. an appraisal is too costly to obtain.
C. an estimate of the current value of the property is not available.
D. the new selling price is less than the amount owed on a previous mortgage.
E. the home is sold for less than the list price.
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Advanced
Topic: Home sales preparations and procedures
 

88. A home worth $200,000 with $120,000 still owed on the mortgage would have equity of
$80,000, which is ____ percent of the home’s value. 
A. 20%
B. 40%
C. 60%
D. 67%
E. 80%

$80,000 / $200,000 = .40 = 40%.

 

89. A home worth $300,000 with $180,000 still owed on the mortgage would have equity of: 
A. $300,000
B. $180,000
C. $120,000
D. $100,000
E. $80,000

$300,000 - $180,000 = $120,000.

 

90. What is the affordable monthly mortgage payment if your monthly gross income is $60,000
and monthly payments on an auto loan are $400? 
A. $6,000
B. $5,000
C. $1,900
D. $1,500
E. $400

$60,000 / 12 = $5,000; $5,000 x .38 = $1,900; $1,900 - $400 = $1,500.

Accessibility: Keyboard Navigation

Blooms: Apply
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Mortgage terms, rates, and payments
 
91. Which of the following serves as collateral for the mortgage? 
A. Your income
B. The amount of your down payment
C. The length of your loan
D. Current mortgage rates
E. The home you buy
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Basic
Topic: Mortgage terms, rates, and payments
 

92. You believe that interest rates may drop and have decided not to lock in an interest rate on
your loan during the loan commitment process. This is called a: 
A. buy-down.
B. discount point.
C. float.
D. rate cap.
E. payment cap.
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Mortgage terms, rates, and payments
 

93. Which of the following is most commonly used as a base index for setting rates for adjustable
rate mortgages? 
A. Federal Reserve Bank
B. Karl’s mortgage calculator
C. Realtor.com
D. London Interbank Offered Rate
E. Bankrate.com
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Advanced
Topic: Mortgage terms, rates, and payments
 

94. Selecting a place of residence is reflected by your: 

A. lifestyle.
B. gender.
C. favorite restaurant.
D. credit score.
E. number of years employed.
95. Which of the following is not an advantage of renting? 
A. Ease of mobility
B. More financial benefits than home ownership
C. Fewer responsibilities for maintenance and repairs
D. Lower initial costs
E. No expenses related to property taxes
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-02 Analyze the costs and benefits associated with renting.
Level of Difficulty: Intermediate
Topic: Rent versus buy decision
 

96. Which of the following is a form of housing in which the units in a building are owned by a
nonprofit organization? 
A. Mobile home
B. Condominium
C. Cooperative housing
D. Duplex
E. Townhouse
Accessibility: Keyboard Navigation
Blooms: Remember
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Housing options
 

97. Which of the following can affect the price of a home? 

A. Cost of the home inspection
B. Number of realtors in the area
C. Cost of the appraisal
D. Current interest rates
E. Number of loan officers in the area
Accessibility: Keyboard Navigation
Blooms: Understand
Gradable: automatic
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Basic
Topic: Home purchase financing alternatives
 
98. Property taxes are based on the assessed value. Who determines this value and what can you
do if you disagree with this assessment? 

The assessed value is the amount that your local government determines your property to be worth for tax
purposes. If you disagree with this assessment, you can take the following actions:

1.  Know the appeal deadline. Contact the local assessor’s office.

2.  Check for mistakes, such as reporting incorrect square footage or incorrectly stating the number of
bedrooms.

3.  Determine the issues to emphasize. Note items that might affect the value of your home versus
comparable homes in your area.

4.  Prepare for the hearing. Gather evidence and prepare an organized presentation with photos and
spreadsheets.

Blooms: Understand
Gradable: manual
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Real and personal property taxes
 

99.  What factors influence the type of housing a family will select? 

Selection of housing is influenced by an individual's or family's needs, desires, attitudes, and

lifestyle, as well as with his/her life situation and financial factors.

Blooms: Understand
Gradable: manual
Learning Objective: 09-01 Evaluate available housing alternatives.
Level of Difficulty: Intermediate
Topic: Home purchase selection process
 

100.  Gerry Intel is considering buying a home. What actions would you recommend for her to
take to accomplish this goal of buying a home? 

The process of buying a home involves the following phases: (1) determining home ownership
needs, (2) finding and evaluating a property to purchase, (3) pricing the property, (4) obtaining
financing for the home purchase, and (5) closing the purchase transaction.

Blooms: Remember
Gradable: manual
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 
101.  John Ashford needs to sell his home because of a job transfer to another city. What actions
should John take to prepare his home for selling? 

When selling a home, you should first prepare the property by:

1. Making needed repairs and painting worn exterior and interior areas.

2. Clearing the garage and exterior areas of toys, debris, etc.

3. Keeping the lawn cut and the leaves raked.

4. Keeping the kitchen and bathroom cleaned.

5. Avoiding offensive odors by removing garbage and keeping pet areas clean.

6. Removing excess furniture and other unneeded items to make the areas look larger.

7. Opening drapes and turning on lights when showing the home.

8. Using energy-saving lightbulbs and water-saving faucets.

Blooms: Understand
Gradable: manual
Learning Objective: 09-05 Develop a strategy for selling a home.
Level of Difficulty: Intermediate
Topic: Home sales preparations and procedures
 

102.  What should you consider to determine the price you offer for a home? 

The main factors to consider in a home price are recent selling prices in the area, current demand
for housing, the length of time the home has been on the market, financing options, features and
condition of the home, and owner's need to sell. Also, you will have to offer a higher price in times
of low interest rates and high demand for homes.

Blooms: Understand
Gradable: manual
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Intermediate
Topic: Home purchase considerations and negotiations
 

103.  Explain what amortization is and how a down payment and loan duration impact it. 

Amortization is the reduction of a loan balance through payments made over a period of time. The
payments made during the early years of the mortgage are applied mainly to interest, with only
small reductions in the principal of the loan. As the amount owed declines, the monthly payments
have an increasing impact on the loan balance. Near the end of the mortgage term, nearly all of
each payment is applied to the balance. A large down payment will lower the amount of a loan
required and thus reduce the amount needed to be amortized. A shorter loan duration will raise
the payments needed to amortize a loan but reduce the total sum of the loan payments.
 

Blooms: Understand
Gradable: manual
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Mortgage terms, rates, and payments
 

104.  Explain negative amortization and how such a situation can occur. 

When payment amounts do not rise but interest rates do on an adjustable-rate mortgage, the
amount owed can increase in months in which the mortgage payment does not cover the interest
owed. This increased loan balance, called negative amortization, means the amount of the home
equity is decreasing instead of increasing. This will usually cause the borrower to make payments
for a period longer than planned.

Blooms: Understand
Gradable: manual
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Home purchase financing alternatives
Topic: Mortgage terms, rates, and payments
 

105.  What is the purpose of an escrow account and what costs are typically included? 

An escrow account protects the lender from financial loss due to unpaid real estate taxes or
damage from fire or other hazards. Property taxes, homeowners insurance, and PMI are typically
paid from an escrow account.

Blooms: Understand
Gradable: manual
Learning Objective: 09-04 Calculate the costs associated with purchasing a home.
Level of Difficulty: Intermediate
Topic: Escrow accounts
 

106.  Differentiate between a cooperative and a condominium. Be sure to include a discussion of

the ownership and responsibility for the common areas. 

In cooperative housing, the units in the building are owned by a nonprofit organization. The
shareholders purchase stock to obtain the right to live in a unit in the building. The residents do
not own the units but have the right to occupy a unit for as long as they own stock in the
cooperative association. The title for the property belongs to the cooperative association. The
cooperative is different from the condominium in which residents own their individual building
units. Condominiums are individually-owned units in a building with several units. Individual
ownership does not include the commons areas such as hallways, outside grounds, and
recreational areas. Common areas are owned by the condominium association, which is run by
the people who own the housing units. Condominium owners are charged a monthly fee to cover
the maintenance, repairs, improvements, and insurance for the building and common areas.

 
Blooms: Understand
Gradable: manual
Learning Objective: 09-03 Explain the home-buying process.
Level of Difficulty: Advanced
Topic: Evaluating housing options
 

Chapter 09 Testbank - Static Summary

 Category #  of  Quest
ions
Accessibility:  Keyboard Navigation 97
Blooms: Apply 8
Blooms: Remember 44
Blooms: Understand 54
Gradable: automatic 97
Gradable: manual 9
Learning Objective: 09-01 Evaluate available housing alternativ 3
es.
Learning Objective: 09-02 Analyze the costs and benefits ass 14
ociated with renting.
Learning Objective: 09-03 Explain the home-buying process. 32
Learning Objective: 09-04 Calculate the costs associated with  44
purchasing a home.
Learning Objective: 09-05 Develop a strategy for selling a ho 13
me.
Level of Difficulty: Advanced 14
Level of Difficulty: Basic 24
Level of Difficulty: Intermediate 68
Topic: Buyer incentives 1
Topic: Closing costs and procedures 5
Topic: Escrow accounts 4
Topic: Evaluating housing options 1
Topic: Home affordability and ratios 5
Topic: Home equity loans 1
Topic: Home inspections 1
Topic: Home purchase considerations and negotiations 13
Topic: Home purchase financing alternatives 6
Topic: Home purchase selection process 6
Topic: Home sales preparations and procedures 11
Topic: Housing options 12
Topic: Mortgage applications 1
Topic: Mortgage refinancing 2
Topic: Mortgage terms, rates, and payments 21
Topic: Real and personal property taxes 1
Topic: Rent versus buy decision 7
Topic: Rental costs and contracts 8
Topic: Reverse mortgages 1