Personal Finance: Other Costs of Buying a Home

Which of the following is not true about a loan discount point? a. A point is purchased at the time of closing. b. A point is purchased for 1% of the loan amount. c. A point reduces the interest rate by 1%. d. A point bought will reduce the monthly mortgage payment.

Why are closing costs a one time fee? a. Payment of closing costs is required because it is a sign to the lending institution that the investor has every intention of making payments on time. b. If closing costs were paid over time, they would most likely be forgotten and never paid off. c. Most home buyers pay for their houses in full, and consequently pay for the closing costs in full as well. d. The closing costs cover titles, taxes, and realtor costs. After closing, the only monetary obligation is to the lending party.

A lender estimates that the closing costs on a $293,600 home loan will be $11,010. The actual closing costs were 3.25% of the loan amount. Determine if the closing costs were higher or lower than the estimate and by what percent? a. higher by 0.25% b. higher by 0.5% c. lower by 0.25% d. lower by 0.5%

In which of the following cases would you most likely buy a point when closing on a home loan? a. The monthly payment is reduced by $8 and you plan to sell the home at the end of 3 years. b. The monthly payment is reduced by $10 and you plan to sell the home at the end of 4 years. c. The monthly payment is reduced by $12 and you plan to sell the home at the end of 5 years. d. The monthly payment is reduced by $14 and you plan to sell the home at the end of 7 years.

Without buying points, a monthly mortgage payment will be $958. Buying 1 point at closing would reduce the payment to $948.75. If each point costs $1000.00, rounded to the nearest year, how long would it take to break even by buying 1 point? a. 7 years b. 8 years c. 9 years d. 10 years

Yolanda closed on a 20 year home loan for $83,000. She chooses to buy only 1 point at closing. By buying a point at her closing, Yolanda reduced her monthly payment by $7.63. Based on the fact that Yolanda chose to buy a point at closing, what would you infer is the minimum amount of time that she will own the home? a. 6 years b. 11 years c. 16 years d. 20 years

A lender estimates the closing costs on a home loan will be 3% of the loan amount of $180,000. The actual closing costs are listed below. Evaluate the lender's good faith estimate. a. The lender made an excellent estimate; it was equal to the actual closing costs. b. The lender made a very good estimate; it was within 0.25% of the actual closing costs. c. The lender made a fairly good estimate; it was between 0.25% and 0.5% of the actual closing costs. d. The lender made a poor estimate; it was higher than 0.5% of the actual closing costs.

A lender estimates the closing costs on a home loan of $50,000 as listed below. If the lender's good faith estimates are accurate, are they a reasonable amount for closing costs? Why or why not? a. Yes, because the lender esitmated 3.08% of the home loan in closing costs which falls between 3 - 5%. b. Yes, because the lender estimated 4.6% of the home loan in closing costs which does not fall between 3 - 5%. c. No, because the lender estimated 6.2% of the home loan in closing costs which does not fall between 3 - 5%. d. No, because the lender estimated 17.7% of the home loan in closing costs which does fall between 3 - 5%.

Mr. and Mrs. Zeller close on a 20 year home loan for $150,000. The monthly payment with no points is $1,160, but if they buy a point it is $1,150. What might you infer if Mr.and Mrs. Zeller choose not to buy a point? a. They plan to sell the house at the end of 5 years. b. They plan to sell the house at the end of 15 years. c. They plan to sell the house at the end of 20 years. d. They plan to sell the house at the end of 25 years.

A lender estimates that the closing costs on a $165,000 home loan will be $6,187.50. The actual closing costs were 3.5% of the loan amount. Determine if the closing costs were higher or lower than the estimate and by what percent? a. higher by 0.25% b. higher by 0.5% c. lower by 0.25% d. lower by 0.5%