Question 1

Lenders commonly use a TDS ratio of ___ and a GDS ratio of ___ to help determine the amount most people can comfortably afford for housing.

Accepted Answer

A)   20%,30%
B)   40%,20%
C)   40%,30%
D)   30%,20%
E)   20%,40%F) D) and E)
G) B) and D)

Question 2

You made a $100,000 down payment on a $400,000 house and financed the remaining amount with a Canadian fixed-rate mortgage.Your mortgage has a term of three years,an amortization period of 25 years,a quoted rate of 7% and payments are made monthly.Identify the correct statement.

Accepted Answer

A)   The 7% quoted rate does not represent the effective annual rate charged on the mortgage.
B)   The interest rate is fixed for 25 years.
C)   You will make a total of 36 monthly payments to pay off the mortgage.
D)   You have a high-ratio mortgage.
E)   Your interest rate is fixed for 3 years,variable for 22 years.F) A) and E)
G) C) and D)

Question 3

The gross debt service ratio is your monthly mortgage payment (including principal,interest,heating and taxes)as a percentage of your gross monthly income.

Accepted Answer

A) True 
 B)False

Question 4

The main financial benefit of renting is

Accepted Answer

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

Question 5

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

Accepted Answer

A) True 
 B)False  False

Question 6

Qualifying for a mortgage is much different then obtaining other forms of credit.

Accepted Answer

A) True 
 B)False

Question 7

Which document is used to transfer ownership of property from one party to another?

Accepted Answer

A)   Title
B)   Escrow account
C)   Settlement statement
D)   Appraisal
E)   DeedF) A) and E)
G) All of the above

Question 8

The purpose of a counteroffer is to

Accepted Answer

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.F) A) and E)
G) C) and D)

Question 9

A cooperative housing arrangement involves

Accepted Answer

A)   government-supported rental units.
B)   a nonprofit organization.
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.F) All of the above
G) A) and D)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an example of a conventional mortgage?

Accepted Answer

A)   a First Home mortgage
B)   a buy down
C)   a fixed rate mortgage
D)   a shared appreciation mortgage
E)   a home equity loanF) C) and D)
G) A) and C)

Question 12

Given the following,calculate the GDS ratio.All income and expense items are annual.

Accepted Answer

A)   28%
B)   41%
C)   44%
D)   52%
E)   63%F) A) and B)
G) B) and E)

Question 13

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

Accepted Answer

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

Question 14

Assuming semi-annual compounding and a quoted mortgage rate of 9 percent,what are the effective annual rate and the effective monthly rate?

Accepted Answer

A)   4.5 percent,1 percent
B)   9 percent,0.75 percent
C)   9.2 percent,0.736 percent
D)   18.81 percent,0.75 percent
E)   18.81 percent.0.736 percentF) A) and E)
G) A) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a common financial risk of home ownership?

Accepted Answer

A)   interest rates may change.
B)   property values may decrease.
C)   repairs and maintenance.
D)   susceptibility to macroeconomic factors
E)   capital gains taxes on the sale of a principal residence.F) All of the above
G) C) and D)

Question 17

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

Accepted Answer

A) True 
 B)False  True

Question 18

The Gross Debt Service (GDS) ratio measures:

Accepted Answer

A)   your monthly mortgage payment,including any outstanding debt as a percentage of gross monthly income.
B)   your monthly mortgage payment,including principal,interest,heating,and taxes as a percentage of gross monthly income.
C)   your monthly mortgage payment as a percentage of gross monthly income.
D)   your annual mortgage payment,including any outstanding debt,as a percentage of gross annual income.
E)   your annual mortgage payment,including principal,interest,heating,and taxes,as a percentage of gross annual income.F) A) and E)
G) D) and E)

Question 19

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

Accepted Answer

Selection of housing is influenced by an individual's or family's needs,values,and lifestyle,along with the financial situation and availability of financial resources.

Question 20

Zoning laws are restrictions on how the property area can be used.

Accepted Answer

A) True 
 B)False

Exam 7: Selecting and Financing Housing

Lenders commonly use a TDS ratio of ___ and a GDS ratio of ___ to help determine the amount most people can comfortably afford for housing.

Correct AnswerverifiedShow Answer

You made a $100,000 down payment on a $400,000 house and financed the remaining amount with a Canadian fixed-rate mortgage.Your mortgage has a term of three years,an amortization period of 25 years,a quoted rate of 7% and payments are made monthly.Identify the correct statement.

Correct AnswerverifiedShow Answer

The gross debt service ratio is your monthly mortgage payment (including principal,interest,heating and taxes)as a percentage of your gross monthly income.

Correct AnswerverifiedShow Answer

The main financial benefit of renting is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

Qualifying for a mortgage is much different then obtaining other forms of credit.

Correct AnswerverifiedShow Answer

Which document is used to transfer ownership of property from one party to another?

Correct AnswerverifiedShow Answer

The purpose of a counteroffer is to

Correct AnswerverifiedShow Answer

A cooperative housing arrangement involves

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an example of a conventional mortgage?

Correct AnswerverifiedShow Answer

Given the following,calculate the GDS ratio.All income and expense items are annual.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assuming semi-annual compounding and a quoted mortgage rate of 9 percent,what are the effective annual rate and the effective monthly rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a common financial risk of home ownership?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

The Gross Debt Service (GDS) ratio measures:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedSelection of housing is influenced by an individual's or family's needs,values,and lifestyle,along with the financial situation and availability of financial resources.

Zoning laws are restrictions on how the property area can be used.

Correct AnswerverifiedShow Answer

Lenders commonly use a TDS ratio of _ and a GDS ratio of _ to help determine the amount most people can comfortably afford for housing.

Correct Answer
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False

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True

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Selection of housing is influenced by an individual's or family's needs,values,and lifestyle,along with the financial situation and availability of financial resources.

Correct Answer
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