Choose wisely. There is only one correct answer to each question.
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1.
Building in a peaceful, secluded area away from other development is a good way to enhance the value of your home.
False. While seclusion may sound idyllic, the best way to increase your home's value is to build where lots of other people want to live–near cities and other sources of economic development.
2.
Your cost basis equals the sales price of your house minus what you paid for it.
False. Your cost basis is what you paid to buy AND upgrade your home.
3.
Title insurance on a house protects the mortgage lender if you become insolvent.
False. Title insurance guarantees that the seller is the bona fide owner and has all rights to transfer ownership.
4.
Joan makes $4,000 a month and pays $500 a month to long-term debts. How much of a home loan would she likely be pre-approved for?
$820. Twenty-five percent of Joan's salary is $1,000. Thirty-three percent is $1,320; if you subtract her long-term debt payments, you are left with $820. Since $820 is less than $1,000, it is the maximum monthly payment the lender will allow on any loan it considers making to Joan.
5.
Capital gains on your home are taxed _______.
All of the above. The first $500,000 of capital gains on the sale of your home ($250,000 for single filers) can be excluded from your federal income tax, but this break is available only once every two years.