AnswersPersonal Finance - EL3403Mortgages and Home Ownership

Mortgages and Home Ownership Answers

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21
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Which accurately describes the terms of this mortgage? Check all that apply.

A
The homeowner is borrowing $360,000.
B
The monthly interest rate is 4 percent.
C
Monthly payments must be made for 30 years.
D
The annual interest rate is 4.8 percent.
E
The homeowner is borrowing $200,000.
F
Monthly payments must be made for 360 years.
22
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What impact might an economic downturn have on a borrower’s fixed-rate mortgage?

A
It might cause a borrower’s payments to go up.
B
It might cause a borrower’s payments to go down.
C
It has no impact because a fixed-rate mortgage cannot change.
D
It has no impact because the economy does not affect interest rates.
23

The graph shows the average price of homes in the United States from 2009 to 2014.

Question illustration
A
The cost of a new home in the United States will continue to be inexpensive.
B
Rising home prices in recent years means that more people will need to take out mortgages.
C
More people will be able to pay cash for new homes and not need to take out a mortgage.
D
Based on recent trends, fewer people will need mortgages in the future.
24

What best explains the relationship between a borrower’s credit score and a down payment requirement?

A
Someone with a high credit score may be required to make a higher down payment.
B
Someone with a high credit score may be required to make a lower down payment.
C
Someone with a low credit score may be required to make a lower down payment.
D
Someone with a low credit score may not have to make a down payment.
25

If someone buys a home for $200,000 and makes a 20 percent down payment, that person will have to

A
pay $20,000 up front.
B
pay $40,000 up front.
C
take out a mortgage for $200,000.
D
take out a mortgage for $220,000.
26

Borrowers choosing an adjustable-rate mortgage

A
pay a higher interest rate during the first few years.
B
are often forced to sell their homes after the first year.
C
often pay a lower interest rate during the first few years.
D
agree to accept no risk when borrowing money.
27

[BLANK]

A
interest
B
fee
C
point
D
principal
28

The image and chart show the terms of a sample balloon payment mortgage.According to the terms of the sample balloon payment mortgage, what will most likely occur at the end of the regular payment term?

Question illustration
A
the remaining principal of $173,073 will be due immediately
B
the interest rate will change to decrease the monthly payment
C
the loan’s terms have all been met and it is paid in full
D
the monthly payments will increase due to an increase in principal
29

A borrower with bad credit is likely to be charged

A
a low interest rate.
B
a high interest rate.
C
no interest rate.
D
higher property taxes.
30

Borrowers choosing an adjustable-rate mortgage

A
pay a higher interest rate during the first few years.
B
are often forced to sell their homes after the first year.
C
often pay a lower interest rate during the first few years.
D
agree to accept no risk when borrowing money.
31

The chart shows the costs associated with the purchase of a new home.

Question illustration
A
It is too expensive for most people to buy a new home.
B
There are additional fees and costs involved in taking out a mortgage.
C
Making a down payment means taxes do not have to be paid.
D
Fees and taxes make up about 50 percent of the costs of buying a home.

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