11. The monthly interest on your mortgage was $690; you paid $650. The result is
ID: 2677818 • Letter: 1
Question
11. The monthly interest on your mortgage was $690; you paid $650. The result isa. growing equity. b. negative amortization. c. fixed interest expense. d. shrinking principal. e. indexed equity.
12. The act requiring mortgage lenders to give borrowers HUD booklets and good faith estimates of the closing costs is called the
a. Equal Credit Opportunity Act. b. Truth-in-Lending Act. c. Real Estate Settlement Procedures Act. d. Mortgage Lenders Act of 1980. e. None of the above.
13. Sean and Lisa (age 25 and 28, respectively) are purchasing their first home for $200,000 with a 5% down payment. They will withdraw the down payment from Lisa's IRA. They will have to pay ____ on the IRA withdrawal.
a. federal income taxes b. an early withdrawal penalty c. Social Security taxes d. a and b e. a, b, and c
14. Pete and Pam want to purchase a new home but don't know how much mortgage they can qualify for. The lender requires total installment loan payments not exceed 32% of gross monthly income. Based on Pete and Pam's financial data below, what is the maximum monthly mortgage payment for which they can qualify?
Monthly Gross Income $5,000
Car payment 400
Student loan payment 300
Current rent payment 1,000
a. $1,700 b. $1,600 c. $ 900 d. $ 600 e. $ 500
15. Consumers whose debt burden has become very heavy might apply for a(n)
a. personal loan. b. single payment loan. c. buy-down loan. d. consolidation loan. e. interim financing.
16. ____ loans do not have to be repaid until after you graduate from college.
a. Stafford and Perkins b. Stafford and PLUS c. Perkins and PLUS d. PLUS and SLS e. Perkins and SLS
17. If your installment loan has a variable interest rate,
a. the rate will remain the same over the life of the loan. b. the amount you borrowed will change with interest rates. c. you cannot accurately predict the total interest you will pay on the loan. d. you can calculate the total interest you will pay on the loan. e. your monthly loan payment will change every month.
18. The majority of loans made by savings and loan associations are ____ loans.
a. home improvement b. auto c. mortgage d. education e. consolidation
19. Your debt safety ratio
a. does not include your home mortgage payment. b. is acceptable if it stays below 30%. c. need not be calculated for consumer loans. d. is calculated only for credit card debt. e. is a percentage of your gross income.
20. Tom and Jane have been reviewing their financial statements. Using the following information, they have asked you to determine their debt safety ratio and advise them about assuming more debt in the future.
Assets $53,750
Monthly take-home income 3,800
Monthly mortgage payment 900
Monthly credit payments 300
Monthly loan payments 500
a. Tom and Jane have a manageable debt ratio and can assume more debt. b. Tom and Jane have a debt ratio that is very low and can consider assuming more debt. c. Tom and Jane have a debt ratio around the danger range and should wait before assuming more debt. d. Tom and Jane have a debt ratio that is very high and should assume no more debt. e. It is impossible to tell what they should do.
Explanation / Answer
The majority of loans made by savings and loan associations are ____ loans.
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