Questions and Answers
What does the term 'Cost of living' refer to?
What is meant by the 'Standard of living'?
What does 'House poor' mean?
When someone spends so much of their income on the costs of homeownership that they struggle to reach other financial goals.
What is 'Renting'?
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What is a 'Fixed-rate mortgage'?
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What is 'Mortgage principal'?
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What are 'Amenities'?
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What is a 'Leasing contract'?
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What is a 'Legal contract'?
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What is an 'Acknowledge clause'?
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What does 'The second foundation' refer to?
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What is a 'Mortgage'?
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What is a 'down payment'?
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What is 'Private Mortgage Insurance (PMI)'?
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What is 'Equity'?
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If you're ________, your house payment or rent is more than you can afford and still pay your other bills.
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The total amount still owed on a house is the __________.
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You'll want to have a(n) ______ ______ of 10-20% of the total cost of the house you want to buy.
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________ means you pay someone else each month for a place to live.
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___________ refers to the average amount needed for housing, food, clothes, and other goods and services.
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__________ is the difference between what a house is worth and what is still owed on it.
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Apartment ________ such as a pool, fitness center, and other perks are nice but usually mean higher rent prices.
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An apartment lease is a ___________ for a set period of time.
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A fixed-rate mortgage means your payment and interest rate won't ________.
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Whether you're renting or buying, your monthly payment should be ________ of your take-home pay.
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Having a large down payment (at least 20%) has benefits such as ________.
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Appreciation means that the value of a home you buy will continue to ________ over time.
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When buying a house, you'll typically need a ______% down payment to avoid paying PMI.
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What does 'preapproved' mean in the context of buying a house?
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What is another word used for 'renting'?
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What does the 'A' stand for in the home loan option referred to as an ARM?
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Whether you rent an apartment or buy a house, try to keep your monthly payment below _______% of your take-home pay.
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A loan obtained for a home purchase is a(n):
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Study Notes
Key Financial Concepts in Housing and Real Estate
- Cost of Living: The average expense required to maintain a certain standard of living, covering basic goods and services.
- Standard of Living: Refers to the wealth, comfort, material goods, and necessities accessible to a specific population.
- House Poor: A situation where a significant portion of income is devoted to homeownership costs, hindering the ability to meet other financial goals.
- Renting: Involves making periodic payments to a landlord for the use of a property, typically on a monthly basis.
- Fixed-Rate Mortgage: A mortgage that maintains a constant interest rate throughout the life of the loan, providing predictable monthly payments.
- Mortgage Principal: The initial amount borrowed to purchase a home, which must be repaid.
- Amenities: Features or services that enhance comfort, convenience, or enjoyment in a living space.
- Leasing Contract: A legally binding agreement that grants a tenant rights to occupy a property owned by another party for a specified duration.
- Legal Contract: An enforceable agreement between two or more parties, significant in transactions such as renting or buying property.
- Acknowledge Clause: The section of a legal document signed by all involved parties, confirming their agreement.
Home Financing and Investment
- Second Foundation: A principle advocating for individuals to eliminate debt and maintain a debt-free status.
- Mortgage: A loan specifically used for purchasing a home, where the property serves as collateral.
- Down Payment: An upfront payment made during the purchase of a home, usually comprising 10-20% of the property's total price.
- Private Mortgage Insurance (PMI): Insurance that protects lenders in case of borrower default; this cost does not contribute to mortgage principal reduction.
- Equity: The difference between a home's market value and the outstanding mortgage balance, representing the owner’s stake in the property.
Housing Costs and Budgeting
- House Poor: Indicates financial strain from housing expenses that exceed affordable limits, impacting overall financial health.
- Monthly Payments: Recommended to stay under 25% of take-home pay for housing, whether renting or owning.
- Large Down Payment Advantages: Making a substantial down payment (at least 20%) reduces monthly payments and can eliminate PMI costs.
- Appreciation: The expectation that a home’s value will increase over time, contributing to investment growth.
- Preapproval: Essential first step in home purchasing, determining how much a bank is willing to lend based on financial background.
Terms related to Renting and Home Buying
- Leasing: Synonymous with renting, whereby payment is made for property use.
- Adjustable-Rate Mortgage (ARM): A mortgage type where interest rates may change periodically, affecting monthly payments.
- Monthly Payment Guidelines: Aim to keep housing costs below 25% of take-home pay for better financial stability.
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Description
Test your knowledge on housing and real estate concepts with these flashcards from Chapter 11 of Personal Finance. The quiz covers essential terms like cost of living, standard of living, and being house poor. Perfect for understanding financial implications in real estate.