Test Bank For Personal Finance 10th Edition by Jack Kapoor

Test Bank For Personal Finance  10th Edition by Jack Kapoor
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Chapter 09
The Housing Decision: Factors and Finances

True / False Questions

1. Most people select a place of residence based on available financial resources, needs, and lifestyle.
True False

2. Ease of mobility is an advantage of renting.
True False

3. A lease protects the rights of both the tenant and the landlord.
True False

4. Condominiums involve the purchase of an individual living unit rather than an entire building.
True False

5. Cooperative housing is a form of housing in which the units in a building are owned by a nonprofit organization.
True False

6. Many people believe that location is the most important factor to consider when selecting a home.
True False

7. Current interest rates can affect the price of a home.
True False

8. Negotiating a purchase price for a home usually involves an offer and counteroffers.
True False

9. The amount of the down payment will affect the amount of the monthly mortgage needed to purchase a home.
True False

10. Prepaid interest may be a part of a mortgage agreement.
True False

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

12. An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.
True False

13. A balloon mortgage can help a homebuyer when interest rates are high but are expected to come down in the near future.
True False

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

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

16. Home improvements may contribute more to the value of the home than the cost of the renovations.
True False

17. 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

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

Multiple Choice Questions

19. Renting is more advantageous than buying a home when you are seeking:
A. lower short-term living costs.
B. a place to remodel.
C. a long-term investment.
D. tax benefits.
E. permanence of residence.

20. A common opportunity cost associated with renting is interest lost on money spent for:
A. the down payment.
B. closing costs.
C. property taxes.
D. maintenance costs.
E. the security deposit.

21. A cost associated with home buying would be:
A. renters insurance.
B. the security deposit.
C. annual appreciation of the property.
D. property taxes.
E. interest lost on the security deposit.

22. Renting would be most appropriate for people who:
A. want to reduce their taxes.
B. have difficulty establishing credit.
C. have limited funds currently available.
D. enjoy remodeling their residence.
E. desire the financial benefits of increased equity.

23. 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 appreciation
D. restricted lifestyle
E. home improvement flexibility

24. The legal document involved in renting an apartment is called a(n):
A. service contract.
B. mortgage.
C. lease.
D. security deposit.
E. escrow account.

25. 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 complete a lease period

26. The purpose of a security deposit is to:
A. pay for potential damages.
B. cover the costs of utilities.
C. pay for the tenants portion of real estate property taxes.
D. cover increases in monthly rent.
E. meet government housing regulations for a safe building.

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

28. Ownership of an individual housing unit in a building is commonly called:
A. a cooperative.
B. modular housing.
C. manufactured housing.
D. a condominium.
E. zoned housing.

29. A cooperative housing arrangement involves:
A. government-supported rental units.
B. a nonprofit organization that rents units to its shareholders.
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.

30. Prefabricated housing 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 partially assembled in factories.

31. Which of these is a common financial benefit of home ownership?
A. low security deposit
B. tax deductibility of the down payment
C. amortization of the equity
D. increased property value
E. no maintenance cost

32. Natasha and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction may reduce their taxable income by:
A. $1,000.
B. $2,240.
C. $3,000.
D. $4,000.
E. $8,000.

33. What is the name commonly used to refer to the recent national crisis in which with many mortgages were issued to borrowers with poor credit histories, resulting in numerous loan defaults?
A. mortgage meltdown
B. subprime crisis
C. credit default swap
D. credit score crisis
E. mortgage balloon crisis

34. 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 interest rates
C. decrease in down payment
D. increase in other financial obligations
E. increase in monthly living expenses

35. The most commonly considered factor when selecting a home is the:
A. size of the home.
B. condition of the home.
C. location of the home.
D. local zoning laws.
E. current interest rates.

36. 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.

37. Which types of problems are least likely to be covered by a home buyer warranty?
A. structural
B. wiring
C. plumbing
D. heating/cooling
E. appliance

38. 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 agents commission.

39. 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 agents commission.
E. to pay a mortgage application fee.

40. The amount of mortgage a person is eligible for would be increased by:
A. decreasing the value of the collateral
B. lowering the down payment
C. increasing other debt obligations
D. lowering the familys income
E. by decreasing the interest rate

41. Which of the following would increase the speed of equity growth for a homebuyer?
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

42. What is prepaid interest charged by a mortgage company called?
A. escrow
B. points
C. origination fee
D. title fee
E. deed

43. 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

44. 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.

45. 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

46. A VA-guaranteed loan program provides assistance to:
A. military veterans.
B. recent college graduates.
C. low-income homebuyers.
D. government employees.
E. the elderly.

47. A possible disadvantage of FHA and VA mortgages can be:
A. higher debt ratios for buyers.
B. a longer processing time.
C. loans may be assumable.
D. the monthly payments can be higher than those of other mortgages.
E. the high down payment requirements.

48. 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.
E. lower the escrow account.

49. 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

50. 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

51. A short-term mortgage with a very large final payment is called a ____________ mortgage.
A. balloon
B. graduated-payment
C. growing-equity
D. shared-appreciation
E. negative-amortization

52. 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

53. 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.

54. Which of the following is an example of a closing cost?
A. home inspection fees
B. realtor fees
C. earnest money
D. title insurance
E. down payment

55. 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 unknown claims on the property.
D. protect an owner from changes in mortgage interest rates.
E. cover the closing costs of a real estate transaction.

56. Which document is used to transfer ownership of property from one party to another?
A. title
B. escrow account
C. settlement statement
D. appraisal
E. deed

57. Which of the following expenses is paid from an escrow account?
A. title insurance
B. property insurance
C. points
D. loan application fee
E. real estate agents commission

58. The purpose of an appraisal is to:
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 fees paid to realtor.

59. If you sell your home without a real estate agent, you should still employ the services of a(n):
A. broker.
B. insurance agent.
C. lawyer.
D. contractor.
E. rental agent.

60. The most common service provided by a real estate agent when selling your home is:
A. providing legal advice.
B. qualifying buyers for a mortgage.
C. screening potential buyers.
D. making needed repairs.
E. attend home inspection.

61. Which one of the following is an advantage of renting?
A. unrestricted lifestyle
B. tax benefits
C. fewer responsibilities
D. an ability to build equity
E. increased equity

62. Which one of the following is an advantage of buying?
A. mobility
B. tax benefits
C. fewer responsibilities
D. minimal financial commitment
E. declining equity

63. A cost associated with renting would be:
A. property insurance.
B. maintenance costs.
C. title insurance.
D. security deposit.
E. points.

64. A is a building that contains exactly two separate homes.
A. mobile home
B. duplex
C. condominium
D. prefabricated home
E. cooperative

65. Gary Smith is purchasing one living unit in a building. What type of housing is Gary most likely going to live in?
A. condominium
B. duplex
C. cooperative
D. prefabricated home
E. mobile home

66. 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

67. 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

68. What is the most popular type of home ownership?
A. condominium
B. duplex
C. cooperative
D. prefabricated home
E. single family dwelling

69. The assessed value of your home is the:
A. value used to calculate property taxes.
B. estimated current market value.
C. the 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.

70. The appraised value of your home is the:
A. value used to calculate property taxes.
B. estimated current market value.
C. the 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.

71. 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%, 30year mortgage so her mortgage payment factor is 6.99. She expects to make a 20% down payment. What is Michelles 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

72. 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%, 15year mortgage so his mortgage payment factor is 8.43. He expects to make a 10% down payment. What is Duanes 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

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

74. 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

75. 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

76. Ted pays $4,500 in real estate property taxes and is in the 28 percent tax bracket. What is the value of this federal tax deduction?
A. $4,500.
B. $3,240.
C. $2,500.
D. $1,260.
E. $500.

77. Some real estate experts estimate that remodeling a kitchen can add 130 percent of the cost of remodeling to the value of the house. A remodeled kitchen costing $8,000 could add _____ to the value of the house.
A. $4,000
B. $8,000
C. $9,600
D. $10,400
E. $13,000

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

79. Paula has completed a mortgage application and provided evidence of employment, income, 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

80. 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.

81. Which type of home is most apt to depreciate in value?
A. cooperative
B. mobile home
C. condominium
D. duplex
E. previously owned single family home

82. 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(an):
A. walk-through.
B. zoning evaluation.
C. inspection.
D. title search.
E. handymans special.

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

Essay Questions

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

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

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

87. Explain how current interest rates can affect the price of a home.

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

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

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

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

Chapter 09 The Housing Decision: Factors and Finances Answer Key

True / False Questions

1. (p. 283) Most people select a place of residence based on available financial resources, needs, and lifestyle.
TRUE

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-01 Evaluate Available Housing Alternatives
Topic: Lifestyle and Choice of Housing

2. (p. 288) Ease of mobility is an advantage of renting.
TRUE

Blooms: Comprehension
Difficulty: Easy
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Advantages of Renting/Mobility

3. (p. 290) A lease protects the rights of both the tenant and the landlord.
TRUE

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Lease Rights


4. (p. 293) Condominiums involve the purchase of an individual living unit rather than an entire building.
TRUE

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Condominium

5. (p. 293) Cooperative housing is a form of housing in which the units in a building are owned by a nonprofit organization.
TRUE

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Cooperatives

6. (p. 295) Many people believe that location is the most important factor to consider when selecting a home.
TRUE

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Location


7. (p. 297) Current interest rates can affect the price of a home.
TRUE

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Factors Affecting House Prices/Interest Rates

8. (p. 297) Negotiating a purchase price for a home usually involves an offer and counteroffers.
TRUE

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Counteroffers

9. (p. 298) The amount of the down payment will affect the amount of the monthly mortgage needed to purchase a home.
TRUE

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Down Payment

10. (p. 301) Prepaid interest may be a part of a mortgage agreement.
TRUE

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Prepaid Interest

11. (p. 301) Amortization refers to changes in the monthly payment for a variable rate mortgage.
FALSE

Blooms: Knowledge
Difficulty: Hard
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Amortization

12. (p. 302) An FHA-insured mortgage has less risk than a conventional mortgage for the financial institution.
TRUE

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: FHA Mortgage

13. (p. 303) A balloon mortgage can help a homebuyer when interest rates are high but are expected to come down in the near future.
TRUE

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Balloon Mortgage

14. (p. 307) An escrow account is designed to reduce the cost of a mortgage.
FALSE

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Escrow Accounts

15. (p. 309) An appraisal refers to the price for which a home has been sold.
FALSE

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-05 Develop a Strategy for Selling a Home
Topic: Appraisals

16. (p. 309) Home improvements may contribute more to the value of the home than the cost of the renovations.
TRUE

Blooms: Comprehension
Difficulty: Easy
Learning Objective: 09-05 Develop a Strategy for Selling a Home
Topic: Home Improvements

17. (p. 303) The purpose of a rate cap in an adjustable rate mortgage is to limit the amount by which the interest rate can vary.
TRUE

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Rate Cap/Adjustable Rate Mortgage

18. (p. 306) A deed is the document that transfers ownership of the property from one person to another.
TRUE

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Deeds

Multiple Choice Questions

19. (p. 289) Renting is more advantageous than buying a home when you are seeking:
A. lower short-term living costs.
B. a place to remodel.
C. a long-term investment.
D. tax benefits.
E. permanence of residence.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Advantages of Renting

20. (p. 287) A common opportunity cost associated with renting is interest lost on money spent for:
A. the down payment.
B. closing costs.
C. property taxes.
D. maintenance costs.
E. the security deposit.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Opportunity Cost of Renting

21. (p. 289) A cost associated with home buying would be:
A. renters insurance.
B. the security deposit.
C. annual appreciation of the property.
D. property taxes.
E. interest lost on the security deposit.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Home Buying Costs/Property Tax

22. (p. 289) Renting would be most appropriate for people who:
A. want to reduce their taxes.
B. have difficulty establishing credit.
C. have limited funds currently available.
D. enjoy remodeling their residence.
E. desire the financial benefits of increased equity.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Advantages of Renting

23. (p. 288) 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 appreciation
D. restricted lifestyle
E. home improvement flexibility

Blooms: Comprehension
Difficulty: Easy
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Advantages of Renting

24. (p. 289) The legal document involved in renting an apartment is called a(n):
A. service contract.
B. mortgage.
C. lease.
D. security deposit.
E. escrow account.

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Leases

25. (p. 290) 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 complete a lease period

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Subletting

26. (p. 290) The purpose of a security deposit is to:
A. pay for potential damages.
B. cover the costs of utilities.
C. pay for the tenants portion of real estate property taxes.
D. cover increases in monthly rent.
E. meet government housing regulations for a safe building.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Security Deposit

27. (p. 293) A condominium involves:
A. renting a mobile home.
B. buying stock in a nonprofit organization.
C. ownership of an individual living unit.
D. government-subsidized housing.
E. renting a house with the option to buy.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Condominium

28. (p. 293) Ownership of an individual housing unit in a building is commonly called:
A. a cooperative.
B. modular housing.
C. manufactured housing.
D. a condominium.
E. zoned housing.

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Condominium

29. (p. 293) A cooperative housing arrangement involves:
A. government-supported rental units.
B. a nonprofit organization that rents units to its shareholders.
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.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Cooperatives

30. (p. 294) Prefabricated housing 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 partially assembled in factories.

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Prefabricated Housing

31. (p. 291) Which of these is a common financial benefit of home ownership?
A. low security deposit
B. tax deductibility of the down payment
C. amortization of the equity
D. increased property value
E. no maintenance cost

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Benefits of Home Ownership

32. (p. 291) Natasha and Al received a statement reporting that they paid $8,000 in mortgage interest during the past year. If they are in a 28 percent tax bracket, this deduction may reduce their taxable income by:
A. $1,000.
B. $2,240.
C. $3,000.
D. $4,000.
E. $8,000.
Taxable income is reduced by the $8,000 of mortgage interest.

Blooms: Application
Difficulty: Hard
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Effect of Mortgage Interest on Taxable Income

33. (p. 301) What is the name commonly used to refer to the recent national crisis in which with many mortgages were issued to borrowers with poor credit histories, resulting in numerous loan defaults?
A. mortgage meltdown
B. subprime crisis
C. credit default swap
D. credit score crisis
E. mortgage balloon crisis

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Subprime Crisis

34. (p. 294-295) 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 interest rates
C. decrease in down payment
D. increase in other financial obligations
E. increase in monthly living expenses

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Factors Affecting Home Affordability

35. (p. 295) The most commonly considered factor when selecting a home is the:
A. size of the home.
B. condition of the home.
C. location of the home.
D. local zoning laws.
E. current interest rates.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Location

36. (p. 295) 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.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Zoning

37. (p. 307) Which types of problems are least likely to be covered by a home buyer warranty?
A. structural
B. wiring
C. plumbing
D. heating/cooling
E. appliance

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Home Warranty

38. (p. 297) 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 agents commission.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Counteroffers

39. (p. 297) 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 agents commission.
E. to pay a mortgage application fee.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Earnest Money

40. (p. 299) The amount of mortgage a person is eligible for would be increased by:
A. decreasing the value of the collateral
B. lowering the down payment
C. increasing other debt obligations
D. lowering the familys income
E. by decreasing the interest rate

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Factors Affecting Mortgage Size

41. (p. 299) Which of the following would increase the speed of equity growth for a homebuyer?
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

Blooms: Comprehension
Difficulty: Hard
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Equity Growth

42. (p. 301) What is prepaid interest charged by a mortgage company called?
A. escrow
B. points
C. origination fee
D. title fee
E. deed

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Prepaid Interest

43. (p. 301) 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
Number of months = (.02 x $100,000)/($600 520) = 25 months (Change as shown.)

Blooms: Application
Difficulty: Hard
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Refinancing/Months to Cover Closing Costs

44. (p. 301) 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.

Blooms: Comprehension
Difficulty: Easy
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Conventional Mortgage

45. (p. 301) 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

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Conventional Mortgage

46. (p. 302-303) A VA-guaranteed loan program provides assistance to:
A. military veterans.
B. recent college graduates.
C. low-income homebuyers.
D. government employees.
E. the elderly.

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: VA Loan Program

47. (p. 302-303) A possible disadvantage of FHA and VA mortgages can be:
A. higher debt ratios for buyers.
B. a longer processing time.
C. loans may be assumable.
D. the monthly payments can be higher than those of other mortgages.
E. the high down payment requirements.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: FHA/VA Loans

48. (p. 303) 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.
E. lower the escrow account.

Blooms: Comprehension
Difficulty: Hard
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Rate Cap

49. (p. 304) 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

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Negative Amortization

50. (p. 304) 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

Blooms: Analysis
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Mortgage Options

51. (p. 303) A short-term mortgage with a very large final payment is called a ____________ mortgage.
A. balloon
B. graduated-payment
C. growing-equity
D. shared-appreciation
E. negative-amortization

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Balloon Mortgage

52. (p. 304) 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

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Second Mortgage/Home Equity Loan

53. (p. 305) 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.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Refinancing Mortgage

54. (p. 306) Which of the following is an example of a closing cost?
A. home inspection fees
B. realtor fees
C. earnest money
D. title insurance
E. down payment

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Closing Costs

55. (p. 306) 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 unknown claims on the property.
D. protect an owner from changes in mortgage interest rates.
E. cover the closing costs of a real estate transaction.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Title Insurance

56. (p. 306) Which document is used to transfer ownership of property from one party to another?
A. title
B. escrow account
C. settlement statement
D. appraisal
E. deed

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Deeds

57. (p. 307) Which of the following expenses is paid from an escrow account?
A. title insurance
B. property insurance
C. points
D. loan application fee
E. real estate agents commission

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Escrow Accounts

58. (p. 309) The purpose of an appraisal is to:
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 fees paid to realtor.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-05 Develop a Strategy for Selling a Home
Topic: Appraisals

59. (p. 309) If you sell your home without a real estate agent, you should still employ the services of a(n):
A. broker.
B. insurance agent.
C. lawyer.
D. contractor.
E. rental agent.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-05 Develop a Strategy for Selling a Home
Topic: Selling Your Home Yourself

60. (p. 310) The most common service provided by a real estate agent when selling your home is:
A. providing legal advice.
B. qualifying buyers for a mortgage.
C. screening potential buyers.
D. making needed repairs.
E. attend home inspection.

Blooms: Knowledge
Difficulty: Hard
Learning Objective: 09-05 Develop a Strategy for Selling a Home
Topic: Role of Real Estate Agent

61. (p. 288) Which one of the following is an advantage of renting?
A. unrestricted lifestyle
B. tax benefits
C. fewer responsibilities
D. an ability to build equity
E. increased equity

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Advantages of Renting

62. (p. 291) Which one of the following is an advantage of buying?
A. mobility
B. tax benefits
C. fewer responsibilities
D. minimal financial commitment
E. declining equity

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Advantages of Buying

63. (p. 289) A cost associated with renting would be:
A. property insurance.
B. maintenance costs.
C. title insurance.
D. security deposit.
E. points.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Rental Costs

64. (p. 293) A is a building that contains exactly two separate homes.
A. mobile home
B. duplex
C. condominium
D. prefabricated home
E. cooperative

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Duplex

65. (p. 293) Gary Smith is purchasing one living unit in a building. What type of housing is Gary most likely going to live in?
A. condominium
B. duplex
C. cooperative
D. prefabricated home
E. mobile home

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Condominium

66. (p. 293) 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

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Cooperatives

67. (p. 294) 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

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Prefabricated Home

68. (p. 292) What is the most popular type of home ownership?
A. condominium
B. duplex
C. cooperative
D. prefabricated home
E. single family dwelling

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Single Family Dwelling

69. (p. 293) The assessed value of your home is the:
A. value used to calculate property taxes.
B. estimated current market value.
C. the 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.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Assessed Value

70. (p. 301) The appraised value of your home is the:
A. value used to calculate property taxes.
B. estimated current market value.
C. the 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.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Appraised Value

71. (p. 299) 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%, 30year mortgage so her mortgage payment factor is 6.99. She expects to make a 20% down payment. What is Michelles 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
See page 299 for detailed example.
Step 1) $45,000/12 = $3,750
Step 2) $3,750 x .38 = $1,425
Step 3) $1,425 750 250 = $425
Step 4) ($425/6.99) x $1,000 = $60,801
Step 5) $60,801/(1 .2) = $76,000 (rounded)

Blooms: Application
Difficulty: Hard
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Affordable Home Purchase Price Calculation

72. (p. 299) 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%, 15year mortgage so his mortgage payment factor is 8.43. He expects to make a 10% down payment. What is Duanes 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
See page 299 for detailed example.
Step 1) $60,000/12 = $5,000
Step 2) $5,000 x .33 = $1,650
Step 3) $1,650 400 = $1,250
Step 4) ($1,250/8.43) x $1,000 = $148,280
Step 5) $148,280/(1 .1) = $164,800 (rounded)

Blooms: Application
Difficulty: Hard
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Affordable Home Purchase Price Calculation

73. (p. 305) A loan based on the equity of the home that provides the homeowner with tax-free income and which is paid back when the home is sold is called a(an):
A. conventional mortgage.
B. growing equity mortgage.
C. second mortgage.
D. reverse mortgage.
E. adjustable rate mortgage.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Reverse Mortgage

74. (p. 289) 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
Earnings = $800 (.04) = $32

Blooms: Application
Difficulty: Easy
Learning Objective: 09-02 Analyze the Costs and Benefits Associated with Renting
Topic: Interest on Security Deposit

75. (p. 305) 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
Number of months = $1,400/($980 870) = 13 months

Blooms: Application
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Months to Cover Costs of Refinancing

76. (p. 291) Ted pays $4,500 in real estate property taxes and is in the 28 percent tax bracket. What is the value of this federal tax deduction?
A. $4,500.
B. $3,240.
C. $2,500.
D. $1,260.
E. $500.
Tax deduction value = $4,500(.28) = $1,260

Blooms: Application
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Real Estate Property Tax Deduction

77. (p. 295) Some real estate experts estimate that remodeling a kitchen can add 130 percent of the cost of remodeling to the value of the house. A remodeled kitchen costing $8,000 could add _____ to the value of the house.
A. $4,000
B. $8,000
C. $9,600
D. $10,400
E. $13,000
$8,000(1.3) = $10,400

Blooms: Application
Difficulty: Easy
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Remodeling/Home Value

78. (p. 298) A contract condition that states that the agreement is binding only if a certain event occurs is a(n):
A. dual agency.
B. contingency clause.
C. counteroffer.
D. zoning law.
E. prefabrication.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Contingency Clause

79. (p. 301) Paula has completed a mortgage application and provided evidence of employment, income, 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

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Prequalification

80. (p. 295) 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.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Sweat Equity

81. (p. 294) Which type of home is most apt to depreciate in value?
A. cooperative
B. mobile home
C. condominium
D. duplex
E. previously owned single family home

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Mobile Home Depreciation

82. (p. 296) 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(an):
A. walk-through.
B. zoning evaluation.
C. inspection.
D. title search.
E. handymans special.

Blooms: Application
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Home Inspection

83. (p. 307) Legislation that requires that loan applicants be given certain information, including an estimate of closing costs, before the closing is known as:
A. Real Estate Settlement Procedures Act
B. Cooperative Lending Act
C. Truth in Lending Act
D. Title Insurance Act
E. Real Estate Investment Act

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: RESPA

Essay Questions

84. (p. 283) What factors influence the type of housing a family will select?
Answers will vary

Feedback: Selection of housing is influenced by an individuals or familys needs, values, and lifestyle, along with the financial situation and availability of financial resources.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-01 Evaluate Available Housing Alternatives
Topic: Factors Influences Housing Choice

85. (p. 292) Gerry Intel is considering buying a home. What actions would you recommend for her to take to accomplish this goal of buying a home?
Answers will vary

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

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Steps in the Home Buying Process

86. (p. 309) John Ashford needs to sell his home because of a job transfer to another city. What actions should John take to sell his home?
Answers will vary

Feedback: When selling a home, you should first prepare the property by cleaning it and making needed repairs. You next need to determine the selling price by considering comparable homes, features of your home, current interest rates, and the demand for housing. Finally, you need to decide whether to sell the property by yourself or use the services of a real estate agent.

Blooms: Knowledge
Difficulty: Medium
Learning Objective: 09-05 Develop a Strategy for Selling a Home
Topic: Selling a Home

87. (p. 297) Explain how current interest rates can affect the price of a home.
Answers will vary

Feedback: The main factors in a home price are recent selling prices in the area, current demand, time on market, financing options, condition, and owners need to sell. Also, when interest rates are low, more people will qualify for a loan of a given size, and therefore demand may be higher for housing.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Effect of Interest Rates on Home Prices

88. (p. 301) Explain what amortization is and how a down payment and loan duration impact it.
Answers will vary

Feedback: Amortization is the reduction of a loan balance through payments made over a period of time. 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: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Effect of Down Payment and Mortgage Term on Amortization

89. (p. 304) Explain negative amortization and how such a situation can occur.
Answers will vary

Feedback: Negative amortization refers to a circumstance in which the principal of the loan grows despite payments being made. This can happen when the rate on an adjustable rate loan goes up but payments remain the same.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Negative Amortization

90. (p. 307) What is the purpose of an escrow account and what costs are typically included?
Answers will vary

Feedback: An escrow account protects the lender from loss due to unpaid real estate taxes or damage from fire or other hazards. Real estate taxes and homeowners insurance are typically deposited in an escrow account.

Blooms: Comprehension
Difficulty: Medium
Learning Objective: 09-04 Calculate the Costs Associated with Purchasing a Home
Topic: Escrow Accounts

91. (p. 293) Differentiate between a cooperative and a condominium. Be sure to include a discussion of the ownership and responsibility for the common areas.
Answers will vary

Feedback: 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 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, 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 structure.

Blooms: Analysis
Difficulty: Hard
Learning Objective: 09-03 Implement the Home-Buying Process
Topic: Cooperatives & Condominiums

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