7.4 FA HW Buying a Home

Which of the following is an example of a recurring cost associated with homeownership?

• Attorney fee

• Title search

• Mortgage payments

• Official sale taxes

Answer explanation

Mortgage payments are an example of a recurring cost associated with homeownership, as they are regular payments made to the lender for the loan used to purchase the home.

What is the closing in the context of purchasing a home?

• The process of paying closing costs

• A meeting attended by the buyer, seller, their attorneys, and the lending institution

• The act of searching for a home

• The initial rate of an adjustable mortgage

Answer explanation

The closing in the context of purchasing a home refers to a meeting attended by the buyer, seller, their attorneys, and the lending institution.

Tags

CCSS.RI.11-12.3

CCSS.RI.11-12.5

CCSS.RI.8.3

CCSS.RI.9-10.3

CCSS.RI.9-10.5

What is earnest money deposit?

• A fee paid to the attorney for representation at the closing.

• The money paid to the seller by an interested buyer to show that the buyer is serious about buying the house.

• A fee charged by the lending institution for the paperwork involved in the loan application process.

• A tax that is charged for the transfer of title from the seller to the buyer.

Answer explanation

Earnest money deposit is the money paid to the seller by an interested buyer to show that the buyer is serious about buying the house.

What is the purpose of a title search?

• To ensure the buyer pays the correct amount of transfer tax.

• To verify that the seller actually holds title to the property being sold.

• To calculate the amount of prepaid interest due at closing.

• To determine the number of origination points to be paid.

Answer explanation

The purpose of a title search is to verify that the seller actually holds title to the property being sold.

What are origination points?

• Extra fees charged by the lending institution for the use of their money.

• Taxes collected from the buyer as a percentage of the loan amount.

• Fees paid to the attorney for legal representation in property transactions.

• Interest that accrues at the beginning of each month on a mortgage.

Answer explanation

Origination points are extra fees charged by the lending institution for the use of their money, making the first answer choice the correct one.

What is transfer tax?

• A fee for the paperwork involved in the loan application process.

• A fee paid to the attorney for representation at the closing.

• A fee that is charged for the transfer of title from the seller to the buyer.

• An extra fee charged by the lending institution for the use of their money.

Answer explanation

Transfer tax is a fee charged for the transfer of title from the seller to the buyer.

After making a 15% down payment on a $600,000 home, what is the loan amount that Leah and Josh need to finance?

• $510,000

• $490,000

• $600,000

• $510,500

Answer explanation

The loan amount is $600,000 - (15% of $600,000) = $510,000. Therefore, the correct answer is $510,000.

Tags

CCSS.6.RP.A.3C

How is the daily interest rate calculated for Leah and Josh's loan?

• By dividing the annual interest by 365

• By dividing the annual interest by 30

• By multiplying the annual interest by the number of days in a year

• By adding the annual interest to the loan amount and then dividing by 365

Answer explanation

The daily interest rate is calculated by dividing the annual interest by 365.

Tags

CCSS.7.RP.A.3

What might Leah and Josh expect to pay in total at the closing, as a percentage of the purchase price?

• 1% to 3%

• 2% to 7%

• 5% to 10%

• 8% to 12%

Answer explanation

Leah and Josh might expect to pay in total at the closing, as a percentage of the purchase price, between 2% to 7%, which is the correct choice.

Trudy and Tom have been approved for a 15-year mortgage with an APR of 5.75%. What is their first monthly payment on a $300,000 loan using the new monthly payment formula?

• $2,491.23

• $2,750.00

• $3,000.00

• $3,250.00

Answer explanation

Using the new monthly payment formula, the first monthly payment on a $300,000 loan with a 15-year mortgage at 5.75% APR is $2,491.23, which is the correct choice.