Multiple Choice
In general, the (more/less) your car is worth, the (more/less) you’ll pay to insure it. Which combination correctly completes the statement?
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1. Introduction to Accounting
Useful Information
Multiple Choice
A good rule of thumb when budgeting for a home is to expect to make a _______ down payment.
A
50%
B
20%
C
2%
D
5%
Verified step by step guidance1
Understand the concept of a down payment: A down payment is the initial upfront portion of the total purchase price of a home, paid by the buyer. It is typically expressed as a percentage of the home's price.
Review common down payment percentages: In financial accounting and budgeting, typical down payment percentages for homes range from 5% to 20%, depending on factors such as loan type, lender requirements, and buyer's financial situation.
Analyze the options provided in the problem: The options given are 50%, 20%, 2%, and 5%. Consider which percentage aligns with common practices in home budgeting.
Identify the most realistic and widely accepted percentage: Based on industry standards, a 20% down payment is often considered ideal for avoiding private mortgage insurance (PMI) and securing better loan terms.
Conclude that the correct answer is 20%, as it reflects the standard rule of thumb for budgeting a home purchase in financial accounting.
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