### What is a down payment? - [ ] A loan taken to buy a home - [x] The amount of cash a buyer pays upfront at closing on a real estate purchase - [ ] The fee charged by real estate agents - [ ] The interest rate on a mortgage > **Explanation:** A down payment is the upfront cash payment made by the buyer to the seller during the closing of a real estate purchase. It typically ranges from 3% to 25% of the purchase price. ### How does the size of a down payment affect mortgage rates? - [ ] Larger down payments result in higher interest rates - [x] Larger down payments can secure more favorable rates and terms - [ ] The size of the down payment does not affect mortgage rates - [ ] Smaller down payments lead to zero interest rates > **Explanation:** Generally, larger down payments can help buyers secure more favorable mortgage rates and terms because they reduce the risk for lenders. ### What is the range of a typical down payment? - [ ] 1 to 2% - [ ] 5 to 50% - [x] 3 to 25% - [ ] 10 to 60% > **Explanation:** The typical down payment ranges from 3% to 25% of the purchase price, depending on the type of loan. ### What can be a traditional source of a down payment? - [ ] Lottery winnings - [x] The buyer's savings - [ ] A loan from the seller - [ ] Government grants > **Explanation:** Traditionally, the source of the down payment came from the buyer's savings. ### Which of the following is NOT a common source of a down payment? - [ ] A mortgage on another property - [ ] The sale of an existing home - [ ] A gift from parents - [x] A loan taken for the down payment itself > **Explanation:** Common sources of a down payment include savings, a gift from parents, a mortgage on another property, or the sale of an existing home. Loans specifically taken for the down payment itself are typically not permitted. ### What does a larger down payment signify for the buyer? - [ ] More debt - [ ] Lower personal equity - [x] Higher personal equity in the property - [ ] High-interest mortgage > **Explanation:** A larger down payment signifies higher personal equity the buyer invests in the purchase of the real estate. ### When is a down payment typically made? - [ ] Throughout the loan term - [x] At the real estate closing - [ ] When applying for a mortgage - [ ] After moving in > **Explanation:** A down payment is typically made at the time of closing the real estate transaction. ### What can a buyer expect with a larger down payment? - [x] Better financing terms - [ ] Higher interest rates - [ ] No effect on financing terms - [ ] Higher monthly mortgage payments > **Explanation:** With a larger down payment, a buyer can expect better financing terms such as lower interest rates and more favorable loan conditions. ### Why are larger down payments appealing to lenders? - [ ] They increase the seller's profits - [x] They reduce the lender's risk - [ ] They guarantee approval for any loan - [ ] They eliminate the need for appraisals > **Explanation:** Larger down payments are appealing to lenders because they reduce the risk of the borrower defaulting on the loan. ### How is the amount of a down payment related to personal equity? - [ ] It decreases personal equity - [x] It increases personal equity - [ ] It has no effect on personal equity - [ ] It reduces lender's equity > **Explanation:** The down payment represents the amount of personal equity that the buyer invests in the purchase of the real estate, thereby increasing their ownership stake.