Topics: Mortgage, Real estate, Mortgage loan Pages: 7 (1350 words) Published: February 14, 2014

Concept Check 7-1 (p. 186)

1.What are the main benefits and drawbacks of renting a place of residence? Advantages of renting are mobility, fewer responsibilities, and lower initial costs. Disadvantages are few financial benefits, restricted lifestyle, and legal concerns.

2.Which components of a lease are likely to be most negotiable? Some people will tell you that just about everything in a lease is negotiable; however, certain things are likely to be more flexible than others. Most negotiable items include rent, amount of security deposit, starting date of lease, and decorating

3.For the following situations, would you recommend that the person rent of buy their housing? (Circle your answer) A person who desires to reduce income taxes paid


A person who expects to be transferred for work soon


A person with few assets for housing expenses


Concept Check 7-2 (p. 191)
1.What are the advantages and disadvantages of owning a home? The advantages of owning a home are pride of ownership, financial benefits, and lifestyle flexibility. Disadvantages are financial uncertainty, limited mobility, and higher living costs.

2.What guidelines can be used to determine the amount to spend for a home purchase? In general, a person should make payments on the purchase of a home that involve about 25 to 30 percent of his or her income. This is a guideline and could be influenced by other factors such as the amount available for a down payment and other household expenses.

3.How can the quality of a school system benefit even homeowners in a community who do not have school-age children? The quality of a school system is an important factor affecting home prices in a community. By maintaining quality schools, all homeowners in an area benefit from stable and increasing property values. Concept Check 7-3 (p. 198)

1.What are the main sources of money for a down payment?
The main sources of a down payment are personal savings, pension plan funds, investments, and assistance from relatives.

2.What factors affect a person’s ability to qualify for a mortgage? The major factors that affect mortgage affordability are income, other debts, the amount available for a down payment, the length of the loan, and current mortgage rates.

3.How do changing interest rates affect the amount of mortgage a person can afford? As interest rates decline, home buyers can afford to take on a larger mortgage.

4.Under what conditions might an adjustable-rate mortgage be appropriate? An adjustable rate mortgage may be appropriate when interest rates are relatively high and they are expected to decline. This situation would benefit the borrower as rates decline, or the homeowner may refinance when rates drop at a lower-rate, fixed-rate mortgage.

5.For the following situations, select the type of home financing action that would be most appropriate: a.FIXED-RATE: A mortgage for a person who desires to finance a home purchase at current interest rates for the entire term of the loan.

b.REFINANCE: A homebuyer wants to reduce the amount of monthly payments since interest rates have declined over the past year.

c.HOME EQUITY LOAN: A homeowner wants to access funds that could be used to remodel the home.

d.V-A MORTGAGE: A person who served in the military, who does not have money for a down payment.

e.REVERSE MORTGAGE: A retired person who wants to obtain income from the value of her home. Concept Check 7-4 (p. 200)
1.What actions are recommended when planning to sell your home? When planning to sell your home, make needed repairs, consider new paint, clear out living and storage areas, and remove unnecessary furniture and other items.

2.What factors affect the selling price of a home?
Home prices are affected by location, size, condition, features, and current market...
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