GEB 3006 UPDATED EXAM SCRIPT QUESTIONS AND
SOLUTIONS GRADED A+
✔✔When shopping for a car, you should immediately offer your current car as a trade-in
to strengthen your bargaining power. - ✔✔False
✔✔Zero percent financing is always a great deal since a zero percent interest rate is
lower than any bank would ever offer. - ✔✔False
✔✔Is is always advisable to have your auto financing arranged in advanced before you
start negotiating on a car. - ✔✔True
✔✔Assume that a dealer has offered you $10,000 for your car as a trade-in which will
save you 7% sales tax on your new car's tax value. If you decide to sell the car to a third
party, you need to get more than ______. - ✔✔10,700
✔✔Assume you drive 10,000 miles per year and get 20 miles to the gallon. If your car
requires premium gas, how much more will this cost you over a 5 year period assuming
that premium gas costs $0.60/gallon more than regular? - ✔✔$1,500
✔✔Depreciation on autos tends to be highest in years _______. - ✔✔1 to 3
✔✔Leasing cars is generally much cheaper than buying cars since the payment is so
much lower. - ✔✔False
✔✔Generally, you need to plan to stay in a house for about ______ years to reduce the
risk of losing money on the house when you resell it. - ✔✔5yrs
✔✔What are some of the disadvantages of owning a house? - ✔✔All of the above
✔✔Which of the following statements is TRUE? - ✔✔Real estate commissions are
usually 6% and paid by the seller.
✔✔Monthly escrow for property taxes and insurance can add up to ____ more to the
mortgage payment. - ✔✔40%
✔✔PITI stands for principal, interest, taxes and insurance. - ✔✔True
✔✔The housing expense ratio of PITI divided by gross monthly income should not
exceed a maximum of ____. - ✔✔28% for conventional loans and 29% for FHA loans
, ✔✔The total debt ratio of (PITI + long term debt obligations) divided by gross monthly
income should not exceed _____. - ✔✔36% for conventional loans and 43% for FHA
loans.
✔✔Before shopping for a house, buyers should get _______ for their mortgage. -
✔✔Preapproved
✔✔Assume a homeowner is paying Private Mortgage Insurance (PMI). At what point
should the homeowner contact the mortgage company and request that PMI be
stopped? - ✔✔When the homeowner's equity in the house reaches 20%.
✔✔In order to get the lowest interest available, your FICO score should be: 7 - ✔✔60
and above
✔✔Assume that a house is sold for $300,000. The square footage is as follows: Area
under air conditioning and heating - ✔✔2,800 Garage 400 Patio 200 Total 3,400 The
cost per square foot as traditionally calculated in the real estate industry is: $107.14
✔✔In comparison to a 15 year fixed rate mortgage, a 30 year fixed rate mortgage will: -
✔✔Pay more in total interest over the life of the loan
✔✔A homeowner decides to get a second mortgage at 7% to pay down credit card debt
with an interest rate of 20%. While this appears to be a good move, the primary risk is
that the homeowner could lose his/her home if they fail to make payments on the new
second mortgage. - ✔✔True
✔✔Which of the following would tend to have the highest interest rate at any given time.
- ✔✔HELOC
✔✔Fixed rate home mortgages should be refinanced when interest rates - ✔✔Decrease
✔✔Assume you pay $3,000 in closing costs to refinance your mortgage at a new rate of
4%. You will save $100 per month for the next 30 years. How long must the homeowner
stay in the house using TVM breakeven? - ✔✔31.66 months
✔✔Which of the following statements is TRUE? - ✔✔Early in the life of a mortgage,
most of the payment goes toward interest with very little being applied to principal.
✔✔The primary risk of having an adjustable rate (ARM) mortgage is: - ✔✔Interest rates
could increase.
✔✔Which of the following are features of a conventional or conforming mortgage? -
✔✔All of the above.
SOLUTIONS GRADED A+
✔✔When shopping for a car, you should immediately offer your current car as a trade-in
to strengthen your bargaining power. - ✔✔False
✔✔Zero percent financing is always a great deal since a zero percent interest rate is
lower than any bank would ever offer. - ✔✔False
✔✔Is is always advisable to have your auto financing arranged in advanced before you
start negotiating on a car. - ✔✔True
✔✔Assume that a dealer has offered you $10,000 for your car as a trade-in which will
save you 7% sales tax on your new car's tax value. If you decide to sell the car to a third
party, you need to get more than ______. - ✔✔10,700
✔✔Assume you drive 10,000 miles per year and get 20 miles to the gallon. If your car
requires premium gas, how much more will this cost you over a 5 year period assuming
that premium gas costs $0.60/gallon more than regular? - ✔✔$1,500
✔✔Depreciation on autos tends to be highest in years _______. - ✔✔1 to 3
✔✔Leasing cars is generally much cheaper than buying cars since the payment is so
much lower. - ✔✔False
✔✔Generally, you need to plan to stay in a house for about ______ years to reduce the
risk of losing money on the house when you resell it. - ✔✔5yrs
✔✔What are some of the disadvantages of owning a house? - ✔✔All of the above
✔✔Which of the following statements is TRUE? - ✔✔Real estate commissions are
usually 6% and paid by the seller.
✔✔Monthly escrow for property taxes and insurance can add up to ____ more to the
mortgage payment. - ✔✔40%
✔✔PITI stands for principal, interest, taxes and insurance. - ✔✔True
✔✔The housing expense ratio of PITI divided by gross monthly income should not
exceed a maximum of ____. - ✔✔28% for conventional loans and 29% for FHA loans
, ✔✔The total debt ratio of (PITI + long term debt obligations) divided by gross monthly
income should not exceed _____. - ✔✔36% for conventional loans and 43% for FHA
loans.
✔✔Before shopping for a house, buyers should get _______ for their mortgage. -
✔✔Preapproved
✔✔Assume a homeowner is paying Private Mortgage Insurance (PMI). At what point
should the homeowner contact the mortgage company and request that PMI be
stopped? - ✔✔When the homeowner's equity in the house reaches 20%.
✔✔In order to get the lowest interest available, your FICO score should be: 7 - ✔✔60
and above
✔✔Assume that a house is sold for $300,000. The square footage is as follows: Area
under air conditioning and heating - ✔✔2,800 Garage 400 Patio 200 Total 3,400 The
cost per square foot as traditionally calculated in the real estate industry is: $107.14
✔✔In comparison to a 15 year fixed rate mortgage, a 30 year fixed rate mortgage will: -
✔✔Pay more in total interest over the life of the loan
✔✔A homeowner decides to get a second mortgage at 7% to pay down credit card debt
with an interest rate of 20%. While this appears to be a good move, the primary risk is
that the homeowner could lose his/her home if they fail to make payments on the new
second mortgage. - ✔✔True
✔✔Which of the following would tend to have the highest interest rate at any given time.
- ✔✔HELOC
✔✔Fixed rate home mortgages should be refinanced when interest rates - ✔✔Decrease
✔✔Assume you pay $3,000 in closing costs to refinance your mortgage at a new rate of
4%. You will save $100 per month for the next 30 years. How long must the homeowner
stay in the house using TVM breakeven? - ✔✔31.66 months
✔✔Which of the following statements is TRUE? - ✔✔Early in the life of a mortgage,
most of the payment goes toward interest with very little being applied to principal.
✔✔The primary risk of having an adjustable rate (ARM) mortgage is: - ✔✔Interest rates
could increase.
✔✔Which of the following are features of a conventional or conforming mortgage? -
✔✔All of the above.
