Finance Chapter 13 Buying a Home Flashcards

Key Concepts in Home Buying

• A mortgage is a loan specifically used to purchase real estate.
• A counteroffer is a rejection of an original offer, listing the acceptable terms.
• Closing costs are expenses involved in transferring ownership from the buyer to the seller.
• The Multiple Listing Service (MLS) is a marketing platform where agents share listings and commission agreements.
• An earnest money offer is a formal document indicating interest in a real estate contract.
• The appraised value represents the worth determined by a real estate appraiser.
• The assessed value is used to calculate property taxes owed on a home.
• A conventional loan lacks government backing and is offered through banks or mortgage brokers.
• A title search involves reviewing public records to verify ownership and claims on a property.
• Contingencies are conditions that limit a buyer's liability if unmet.

Financial Considerations

• Real estate agents earn commission income, typically a percentage of the sale price, commonly between 6% and 8%.
• A fixed-rate mortgage maintains a constant interest rate throughout the loan's term.
• The market value of a home indicates the highest price it can command in the marketplace.
• A seller’s acceptance is the formal agreement to the buyer's offer.
• A lien is a financial claim against property.
• Title insurance safeguards the buyer from claims due to defective titles.
• An adjustable-rate mortgage has an interest rate that adjusts with economic conditions.
• A deed is the legal document that transfers ownership of real property.

Truth Statements and Myths

• Interest on home loans and property taxes are tax-deductible.
• Renting or owning real estate does not qualify as a tax shelter.
• The most common source of down payment is not a bank.
• Each mortgage payment reduces debt and increases equity.
• A lien is not a right to use someone else's land.
• The MLS enhances home buyers' exposure to available listings.
• A seller accepting an offer as stated is not a counteroffer.
• The seller is responsible for paying the real estate agent’s commission.
• Lenders typically require buyers to obtain title insurance.
• Once an agreement is reached, the property is taken off the market until the deal finalizes.

Ownership and Financial Benefits

• Title establishes ownership of a property.
• Homeownership offers financial advantages, quality of life benefits, and tax savings.
• Tax deductions can lower the cost of homeownership.
• Earnest money serves to protect the seller during negotiations.

Mortgage Application Process

• Mortgage applications require checking references, credit history, and income.
• To qualify for a conventional loan, a borrower must have a good credit score.
• Financing a home purchase involves having funds for the down payment, meeting lending requirements, and selecting a mortgage type.

Test your knowledge on key terms related to buying a home with these flashcards from Finance Chapter 13. Learn essential definitions such as mortgage, counteroffer, and closing costs to enhance your understanding of real estate transactions.