2nd part of Finance Real estate
Interest rates that are more than ______ over the current market rate are considered predatory lending.
5%
Title search
A search of public records to provide a title commitment or abstract of title
Curtis is completing a residential loan application. Which of the following would he include in the assets section?
Amount on deposit at his bank
Inflated appraisal
An appraiser secretly works with a borrower and provides a misleading appraisal report to the lender.
Which of these might a lender use to verify the data provided by loan applicants?
Bank statements Credit report Pay stubs Verification of deposit Verification of employment
Biff is completing a residential loan application. Which of the following would he include in the liabilities section?
Car loan
"Boot"
Cash an investor receives from sale proceeds is _______ and is taxable.
This could happen if a factory were put in next door that changed and impacted property value.
External obsolescence
Which action can be taken if you don't pay a lien against your property?
Foreclosure
Another term for a valuation is ______.
Formal appraisal
What factors affect the ARM?
Initial rate Index Margin Lender
With a straight mortgage, what type of payments are made up until the end of the loan term?
Interest
Adjustable rate
Interest rate fluctuates based on the economic index to which it's tied
Straight
Only interest is paid until the end of the loan term, when the principal is repaid in full
Evidence of title
Proves ownership of the property
Voluntary conveyance of deed
This helps the borrower avoid the stigma of foreclosure, but can still have a serious impact on credit. It is initiated by the borrower.
NADL Program
This is a direct home loan program from the VA to eligible Native American veterans.
Bankruptcy
This is an option for a borrower who is in serious financial distress and is not to be taken lightly.
Debt to income
Total monthly debt payments against gross monthly income
Sgt. Johnson is an active member of the Marines. He's been serving for 10 years. He wants to buy a home with no money down. What loan option seems like the best fit?
VA
What type of loan can be obtained with no down payment?
VA
Which of the following terms means the price a property is worth to its owner as currently enjoyed?
Value in use
Borrowers provide a lot of unsubstantiated information on the loan application. Which of these items might a lender use to verify the information provided by borrowers?
Verification of employment Verification of deposit Bank statements Credit report Pay stubs
Sally, a lender with A+ Banking, has received a loan application from a prospective buyer hoping to purchase a four-bedroom house. What does Sally do with the information she's received?
Verify it
Which of the following statements is true about the VA's Native American Direct Loan program?
Veterans who use this program must live on federal trust land.
Rather than face foreclosure, Tony decides to cut his losses. He voluntarily conveys his property to his lender. What type of foreclosure alternative is this?
Voluntary conveyance of deed
200% rule
When exchanging more than one property, the combined fair market value of the properties can't be more than 200% of the value of the relinquished property.
Judicial Foreclosure
With this method of foreclosure, the property is sold by the court after the lender has provided sufficient public notice.
Net worth
the difference between assets and liabilities
Calvin purchased a house for $220,000, financing $200,000 using a 30-year conventional mortgage at 4% interest. His monthly payment is $955, including both principal and interest. The annual property taxes are $1,400 and the combined annual insurance premium is $900. What's Calvin's PITI payment each month?
$1,146.67
Sophia's annual property taxes are $1,295, and her annual insurance premium is $942. How much of her monthly mortgage payment goes toward taxes and insurance?
$186.42
A homeowner's monthly mortgage payment is $580.23. If the taxes are $83.33 and the insurance is $41.66, how much of the monthly payment is principal plus interest?
$455.24
John uses the VA home loan to purchase property. His mortgage is $200,000. Then, two years later, John defaults on his loan. How much will the VA reimburse the lender?
$50,000
Your client, Judy, with a credit score of 620, has been approved for an FHA loan for a home with a sales price of $200,000. What is the minimum down payment that will apply?
$7,000
Buster's total monthly mortgage payment is $939.86. His taxes are $1,800 annually, and his insurance is $900 annually. How much of Buster's total payment is applied to the principal plus interest?
$714.86 Divide annual taxes plus insurance by 12 to come up with the monthly payment amount, then subtract this sum from the total monthly payment amount to arrive at the principal and interest portion of the payment.
Steph and Bob are buying their first house. Their principal plus interest will be $643.66 every month. Taxes on the property are $1,400 annually, and combined insurance is $800 annually. How much will their total monthly mortgage payment be?
$826.99
Which section of the Internal Revenue Code allows the owner of real property to sell that property, then reinvest the proceeds in a "like-kind" property and defer paying any capital gains taxes?
1031
Which of the following is the credit score range?
300 and 850
In the residential mortgage market, charging borrowers more than ______ over market rate for interest is considered a predatory lending practice.
5%
What's the minimum qualifying credit score for an FHA mortgage loan?
500
Homeowners over the age of ______ are eligible for the HECM program.
62
Which range of credit scores represents the average score for Americans overall?
670 to 739
What's the most common ratio for borrowers who use split, or piggyback, mortgages?
80/10/10
Which of the following ratios are among those acceptable in a piggyback financing arrangement?
80/10/10
Consumers in the _______ range are well above the average credit score and generally have an easy time getting approved for new credit.
800+
Disaster Relief
A 90-day moratorium on foreclosures for homeowners with an FHA loan who are trying to repair or rebuild after a natural disaster.
You have a client who wants to obtain a VA loan. You refer them to ______.
A VA-approved lender
Client Bette asked licensee Frank about a home equity line of credit versus home equity loan. Which of the following offers an brief overview of what a home equity line of credit is?
A borrower borrows against the equity in the house and pays back the amount withdrawn plus interest.
Cathy is hoping to purchase a home using a VA loan. A VA-assigned real estate appraiser is required to provide ______ for the property.
A certificate of reasonable value
What is the HECM program?
A form of reverse mortgage insured by the FHA
What is another name for an installment sale contract?
A land contract
Home equity loan
A lump-sum loan that must be repaid by the homeowner
What is the Torrens system?
A title search method that goes back as far as the previous title search
When completing the Assets section of the application, what information should the borrower be prepared to provide?
Account number Cash or market value Name of bank or company
Although the credit reports from each of the major reporting agencies may vary, you can expect to find the same type of information. Which of these items can be found on our sample credit report?
Accounts in good standing Contact information for the credit reporting company Credit history inquiries Personal information Potentially negative items
Three-property rule
An investor can identify up to three replacement properties with no fair market value restriction, provided they meet the debt load requirement.
What is an appraisal?
An opinion or estimate of a property's value as of a specific date
By when must a borrower be provided with a closing disclosure?
At least three days prior to closing
How can a foreclosure process be temporarily stalled?
By filing for Chapter 7 bankruptcy
Percy is buying a home with an FHA loan. He uses the ______ to borrow enough money to cover the cost of replacing most of the windows in the home, which will improve its energy usage by 15%.
Energy Efficient Mortgage
Ted is in foreclosure but has some equity in his property. An investor suggests that Ted enter into a sales contract with him for a substantially higher price than the investor would actually be paying. The investor pockets the cash and allow the house to be foreclosed on. What sort of scheme is this?
Equity skimming
Goldie and Kurt are looking at purchasing their first home. Their credit history is a little shaky and they don't have enough money saved to put down 20%. What type of loan seems most appropriate?
FHA
Lydia put the minimum 3.5% down on her $210,000 home. She'll have to pay an MIP. What type of loan does Lydia have?
FHA
When borrowers miss scheduled mortgage payments, allow their property to go into disrepair, or ______, they could face loan default.
Fail to pay property taxes
What's a loan origination fee?
Fees charged by a lender for processing or originating a loan
With what type of loan do the principal and interest payments remain the same for the life of the loan?
Fixed-rate
Which of these transactions must comply with Appraiser Independence Requirements?
Four-unit residence being purchased with a conventional loan
The amount of the ______ a veteran must pay depends on factors such as military status, down payment amount, and whether the veteran's entitlement is being used for the first time or a subsequent time.
Funding fee
Lenders use credit scores when determining whether to approve a loan application. What does the score tell the lender?
How likely the applicant is to repay the money that's been borrowed
What makes the HECM program safer for borrowers than a traditional reverse mortgage?
If more equity is paid out than remains, the homeowner doesn't have to make up the difference.
Borrowers must list their assets when completing a residential loan application. What are assets?
Items of value a borrower owns
AIR sets certain criteria for selecting an appraiser. Which of these appraiser requirements does AIR specify? Select all that apply.
Licensed or certified in the state where the property is located Knowledgeable about the local market Qualified to appraise the property involved in the transaction Able to access the data needed to perform an appraisal
Martha and Ben are selling their home to Linda and her three kids. They've purchased title insurance for obtaining insurance of good title. Whom does the title insurance protect?
Linda and her kids
How do you calculate a loan origination fee?
Loan amount x origination rate (divide a percentage by 100 to obtain the rate, so an origination fee of 2% is the same as 0.02)
The lender, the depository institution, and the _______ all complete parts of the request for verification of deposit form.
Loan applicant
Some items on a credit report may be viewed negatively by a lender. Which of these items would you expect to find in this section of the report?
Loan with a past due balance Bankruptcies Liens Court judgments Accounts sent to collections
Which of these are characteristics the appraiser notes about the neighborhood where the subject property is located?
Location type (urban, rural, etc.) Property value trends (stable, increasing, or decreasing) Supply vs. demand Growth of neighborhood
As a mortgage broker, Mike is very familiar with the ways that the FHA has influenced the mortgage market. Here's one example: The Rodriguez family obtained their three-bedroom home with an FHA loan 10 years ago, which they will have paid off in another 20 years. Which FHA benefit applies here?
Long-term amortized loan
Liabilities
Obligations or debts owed by the borrower
Current employers provide quite a bit of information to the lender. Which of these items are provided?
Probability of continued employment Gross base pay amount Overtime, bonuses, or commissions paid Likely continuance of bonus or overtime pay Information about last and next pay increase
Valuation
Process of forming an opinion of a property's value
Title insurance
Protects the buyer from defects in the title
Loan Estimate
Provides approximate loan-related costs, along with loan's terms
Loan Transfer Disclosure
Provides details if the loan were sold to another servicer
Closing Disclosure
Provides final loan terms and closing costs for the borrower
Which of the following are regulations that have been enacted to prevent predatory lending?
Real Estate Settlement Procedures Act (RESPA) Homeowner and Equity Protection Act (HOEPA) Truth in Lending Act (TILA)
Two examples of loan adjustments or modifications are moratorium and ______.
Recasting
Which of the following are forms of loan adjustments? Choose all that apply.
Recasting Moratorium (forbearance)
A mortgage that allows the lender to sue the borrower for damages if foreclosure occurs is called a ______ mortgage.
Recourse
FHA-insured loan programs cover all of the following EXCEPT ______.
Recreational vehicles
Which alternative to foreclosure is being utilized when a lender creates a schedule for the borrower to catch up on delinquent mortgage payments?
Repayment plan
Which of the following is a significant drawback to an FHA loan as compared to conventional financing?
Required mortgage insurance must remain in place for the life of the loan.
What information does Schedule B-1 of a title commitment provide?
Requirements that must met before a title policy will be issued
What qualifying ratios are used in a VA home loan?
Residual income and debt-to-income
The Accounts in Good Standing section lists accounts that may be viewed favorably by a lender. These are generally accounts without any late payments or that have been paid off or closed. What type of accounts may be listed here?
Revolving Installment
Which section of a commitment identifies exceptions to title insurance coverage?
Schedule B-2
Which of these items did the Federal Housing Administration (FHA) implement to stabilize and improve the mortgage market?
Set construction standards for homes purchased with FHA loans
Several parties are involved in the loan approval process. Who are four of the major players in a typical financing arrangement?
Settlement agent Underwriter Borrower Lender
Ray is in a bit of a predicament. He owes more on his mortgage than his property is worth, but can no longer afford the payments. He receives permission from his lender to sell the property for less than what he owes. What is this an example of?
Short sale
With this alternative to foreclosure, borrowers receive permission from their lender to sell the property for less than the amount owed on the borrower's mortgage.
Short sale
Which of these loan transactions must comply with AIR?
Single-family residence, conventional loan Four-unit residence, conventional
The Federal Housing Administration has a mission which includes ______ through the establishment of lending standards and by insuring mortgages.
Stabilizing the mortgage market
What's the first step an appraiser will perform when conducting an appraisal?
State the problem.
Samuel and Yoshi have worked at the same firm for a few months and get along well. Samuel mentions he has a credit score in the low 800s. Yoshi, who's just starting out, persuades Samuel to sign for a loan to help Yoshi buy a property, since his credit isn't good enough. Yoshi promises to make the mortgage payments, but two months after the deal closes, Yoshi moves across the country. Samuel's now stuck with a $400,000 mortgage. What type of scheme is this?
Straw buyer
Evaluation
Study of a property, potentially for land use or marketability
A lender wants to ensure that the legal description of a property is accurate, and determine whether any improvements, encroachments, or lot size changes have been made. What may the lender request to determine this?
Survey
Which term describes the legal regulation of a property to the detriment of the owner, and must include reimbursement for the property owner?
Taking
FHA loan program basics
The FHA covers the lender against loss if the borrower defaults. The FHA collects a mortgage insurance premium on each loan. FHA loans are only available from FHA-approved lenders.
Residual income
The amount of money left after housing expenses, debts, obligations, and monthly shelter expenses are met
Which statement best describes the most common approach used to reconcile the three appraisal approaches?
The appraiser may weigh one or two approaches more heavily than the others, as appropriate for the property type.
Straw buyers
The borrower's identity is concealed behind someone else's name and credit history.
Recasting
The lender reconfigures the loan, including the term, to reduce the payment amount.
Dana and Phil have evaluated their situation, and have decided to purchase a unit in a cooperative housing project. Which FHA loan program might work for them?
Title II, Section 203(n)
What's the purpose of the appraiser independence requirements?
To protect parties, such as investors and homebuyers
Predatory lending
practice of charging fees and interest much higher than necessary
Five factors are used to determine a FICO® credit score. What are they?
Age of accounts Credit usage Payment history Types of accounts Inquiries
When appraisers look past how a property is being used to determine a more optimal function, what are they determining?
Highest and best use
Which loan program is only available to homeowners who are 62 or older?
Home Equity Conversion Mortgage
With this common loan type, the home is used as collateral and the loan creates a second mortgage if the first mortgage hasn't been paid off.
Home equity
Which three of the following statements apply to a home equity line of credit?
The draw period varies. An appraisal is often required. No interest is paid by the borrower until funds are drawn on the loan.
Cash-Out Refinancing
This program can be used to refinance a non-VA loan into a VA loan.
Short sale
This results in proceeds that aren't enough to cover what is owed and has to be negotiated with the lender.
Patty is buying a three-bedroom mountain home. After applying for a loan, she received the Loan Estimate at least _______ business days after submitting the loan application.
Three
You've met Vladimir the appraiser. He likes to tell it like it is. Soon we'll learn more from Vladimir about the appraisal process. Let's start by reviewing purpose. What purpose do Vladimir and other appraisers serve?
To determine a property's value
Becca works out a deal with May (who is a nice woman) to reduce the sales price to $214,000, and Becca will provide $4,000 in cash at closing to make up the difference between the CRV and the new sales price. The VA must approve the source of the extra funds that Becca is paying to May. Why?
To ensure that Becca is not borrowing the funds.
What is the purpose of the loan transfer disclosure?
To notify the borrower that the loan is being resold on the secondary market, and how and where to make future payments
What's the purpose of PMI?
To protect the lender in case of borrower default when the borrower has put down less than 20%
Appraisal
Unbiased estimate of value of a specific property on a specific date
How to calculate LTV
(Amount financed / property value) x 100
Total housing ratio
(Monthly housing expenses / gross monthly income) x 100
How do you calculate total debt ratio?
(Total of monthly debt obligations / monthly gross income) x 100
How do you calculate the housing ratio?
([Principal + interest + taxes + insurance + association fees] / monthly gross income) x 100
This type of loan is temporary in nature, usually 90 days, and provides funds in addition to an existing loan until permanent financing can be obtained.
Bridge
How might a borrower avoid paying the mortgage insurance premium required by an FHA loan?
Get conventional financing
repayment plan
If this can be arranged with the lender, it can help the borrower get caught up and avoid foreclosure.
Marketable title
Means that the property's title is free and clear of liens and only subject to loan payoff and any taxes owed
______ lending was a contributing factor to the housing collapse in the mid-2000s.
Predatory
Sarah is selling her home and must provide proof of ownership. She's received an abstract of title. Which of the following statements is NOT correct?
The attorney's opinion provides a guarantee of title.
For tax years 2018 to 2025, a borrower can write off the interest on a home equity loan only if ______.
The funds are used to buy, build, or improve the home that secures the loan
Which party is typically responsible for loan-related closing costs?
Buyer
Yancey purchased a home six months ago using a VA loan. Due to an inheritance, he is suddenly able to pay off his mortgage. Will he pay a pre-payment penalty?
No
ch 11 bankruptcy
Primarily used by corporations or partnerships
Moratorium (forbearance)
The lender agrees to temporarily suspend payments in an effort to help the borrower avoid default and foreclosure.
Which of the following factors carries the least weight when calculating a credit score?
Type of accounts
Next, let's get into the different appraisal approaches. When using the sales comparison approach, how many comparables is there space for in the URAR?
three
Jamal is active military. His cousin, Piper, is in the National Guard. If they both qualify for a VA loan ______.
Jamal will pay less than Piper for his funding fee.
Good Neighbor Next Door
Law enforcement, teachers, firefighters, and EMTs get a 50% discount on certain foreclosed FHA-insured properties
Title insurance is a common method for obtaining insurance of good title. Who is protected by title insurance?
Lender+ Borrower
When a borrower is completing a loan application, obligations owed by the borrower are listed in the ______ section.
Liabilities
Monty has certain goals in life, and most of those goals revolve around making money. He loves following the market and deciding where to invest his money. What is available to people like Monty as a result of stability in the mortgage industry created by the FHA?
MBS investment
Foreclosure by entry and possession is not a common practice in every state. In those where this method of foreclosure is used, what may happen after court permission is obtained to physically take possession of the property?
The mortgagee can take the property peacefully, and in the presence of a witness.
Illegal property flipping
The property is purchased, falsely appraised at a higher value, and then quickly sold.
How are creditors or lien holders paid during a foreclosure process?
The property is sold at auction and lien holders are paid from the proceeds of the sale.
Which of the following statements about the VA guaranteed home loan program is true?
The service member's length of service, duty status, and character of service determine eligibility.
Which of the following best describes a non-recourse mortgage?
A mortgage with a clause that prohibits the lender from suing the borrower for unpaid amounts if foreclosure occurs
Captain Kirk is a veteran who sells his home to Leonard. Leonard is also a veteran, and they agree to let Leonard assume Captain Kirk's VA loan for the property. They agree to a novation, which is ______.
A new contract with the lender using a substitution of entitlement
What type of property is Valerie appraising if she's using the sales comparison approach?
A single-family residence built six years ago
What three of the below items about property is needed in the loan application?
Address Loan Purpose Type of occupancy
Income may come from a variety of sources, some viewed more favorably than others. Which of these are sources of income a lender might consider?
Alimony Bonuses Child support Government entitlement funds Normal wages or earnings Pensions
What's included in a total debt ratio (a.k.a., debt-to-income ratio, total obligation, back-end ratio)?
All recurring (or installment) debt that will last longer than 10 months, such as monthly mortgage, car, credit, and loan payments
What's a loan-to-value (LTV) ratio?
Amount being borrowed compared to the value of a property (either the appraised value or sales price, whichever is less)
What type of property is Gerald appraising if he's using the cost approach?
An industrial warehouse
Several parties have a role in completing parts of the form. Which of these parties are involved?
Applicant Lender Applicant's Employer
Which of the following actions toward an appraiser would be considered improper?
Asking an appraiser to remove information about adverse property conditions from an appraisal report
SAH and SHA Grants
Available to veterans with total and permanent service-related disabilities; used to adapt housing to accommodate the disability.
As part of a deficiency judgment sought by a lender, a ______ may be placed on any current and future property the borrower owns until the lender recovers all losses.
Blanket lien
Put yourself in the lender's shoes for a moment. Which borrower's net worth is the most favorable?
Borrower C's assets are twice as much as her liabilities.
Which party to the loan approval process is responsible for completing a loan application and supplying supporting documentation?
Buyer
_______ are part of the loan-approval process and are responsible for completing a loan application and supplying supporting documentation.
Buyer
Which of the following tells the lender how much entitlement the veteran has available under the VA loan program?
Certificate of eligibility
Jonathon is selling his home to Chris and Samantha. He's at closing, and the underwriting fee must be paid. Who pays for that?
Chris and Samantha
The loan application is used to gather information needed to determine whether the applicant can repay the loan. What information is requested in the application?
Credit references Borrower net worth Employment history
Credit scores are calculated using information from which of these items?
Credit report
Amortized
Debt is paid off by making periodic payments consisting of interest and principal
One alternative to foreclosure is a voluntary conveyance of ______.
Deed
Rather than be foreclosed on, Jarod turned his deed over to his bank. This is called a ______.
Deed in lieu
Several parties have a role in completing parts of the verification of deposit form. Which of these parties are involved?
Depository institution Applicant Lender
Juaquin is an appraiser. What purpose do Juaquin and other appraisers serve?
Determine a property's value
With a VA loan, the certificate of reasonable value is used to ______.
Determine the value of the loan that the VA will guarantee
Which is a requirement for veterans to use the VA's Specially Adapted Housing grant?
Have permanent and total service-connected disability
From a lender's perspective, what does a credit score on the low end indicate?
Higher risk
Appraiser Jamie is looking past how a property is being used to determine a higher value. What is Jamie determining?
Highest and best use
Your client has a VA loan and wants to refinance to a lower rate. Which of the following is likely the simplest option?
Interest rate reduction refinance
Growing equity
Interest rate remains the same, but monthly payments increase over time according to a set schedule
What is the purpose of verification of deposit form?
It allows the lender to verify the cash deposits listed on the applicant's loan application.
What is the purpose of the request for verification of employment?
It allows the lender to verify the employment listed on the applicant's loan application.
As an appraiser, Vladimir's first step in the valuation process is to identify the problem. What are two benefits of stating the problem up front?
It informs the appraiser's approach. It helps the appraiser identify the type of data required.
Assets
Items of value belonging to the borrower
What's included in the housing ratio (a.k.a., front-end ratio)?
Monthly housing obligation, (principal, interest, taxes, insurance), homeowners or condo association fees
Arnold has gotten behind on his mortgage payments. His lender agrees to temporarily suspend payments to help Arnold catch up. What is this an example of?
Moratorium (or forbearance)
Which term describes a lender temporarily agreeing to suspend payments to help the borrower get caught up?
Moratorium (or forbearance)
What type of borrower information does the loan application request?
Name Social Security number Current address Number and ages of dependents Marital status
The personal information section includes either information you reported to the credit reporting agency, or information your creditors or other sources reported to the agency. What information can you find in this section?
Name and name variations Year of birth Employers Spouse or co-applicant name Addresses
Your buyer, Chet, is a veteran trying to buy a house, but the certificate of reasonable value came in $10,000 lower than the agreed-upon sales price. What can Chet do?
Negotiate with the seller
Lendright Home Loans asked a trustee to begin foreclosure proceedings as permitted by the power-of-sale clause in the security instrument. This action does not need to involve the courts. What type of foreclosure process is being used?
Non-judicial foreclosure
Which may result in borrower default? Check all that apply.
Not paying for homeowners insurance Not paying personal income taxes, resulting in a lien on the property Poor property management
Foreclosure by Advertisement
Notification of pending auction, public auction, notice of eviction
Borrowers must list their liabilities when completing a residential loan application. What are liabilities?
Obligations a borrower owes
Abstract of title
Obtained from a title insurance company to provide evidence of title
One of the final sections the borrower completes is Declarations. What does this section seek to uncover? Select all that apply.
Outstanding judgments Bankruptcies or foreclosures within the last seven years Current delinquency or default on debt obligations Additional loan to acquire property Intention to occupy the property as a primary residence
First, let's talk about the buyer's options when the CRV is less than the sales price. Here's the situation: Becca is purchasing a three-bedroom, two bath Craftsman. She's offered $218,000, and the seller, May, has agreed. But the CRV returned a value of $210,000. In order to obtain her VA loan, what could Becca choose to do? Select all that apply.
Pay May the $8,000 balance in cash. Ask May to reduce the price to $210,000. Increase her down payment by $4,000 and ask May to sell for $214,000
Which of the following factors carries the heaviest weight when calculating a credit score?
Payment history
Foreclosure by Writ of entry
Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed
Which of the following best describes foreclosure by writ of entry?
Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed
Foreclosure by Entry and possession
Petition to enter, repossession, notice of eviction
Which of the following best describes foreclosure by entry and possession?
Petition to enter, repossession, notice of eviction
Which of the following occurs when the property is damaged or just has normal wear and tear?
Physical depreciation
ch 7 bankruptcy
Primarily used by individuals, the title is conveyed to a trustee, and cancels all debt secured by the property
When an individual is self-employed, proving income and finances to a lender may take a little extra effort than for other individuals who are not self-employed. According to the resource, what additional documents may a self-employed individual need to provide when obtaining a loan? Select all that apply.
Tax returns Profit-and-loss statement IRS Form 4506-T
Maria is applying for a loan. Maria's employer has been asked to provide employment verification. Who else must complete parts of the request for proof of employment form?
The lender
Johnston fell on hard times and couldn't keep up with his mortgage payments, so his bank ended up foreclosing on his property. Johnston owns another property, a farm across town that he bought for his elderly mother-in-law. What may happen to that property if the bank experienced losses in the process of foreclosing?
The lender may seek a deficiency judgment and blanket lien and put a lien against the farm until the debt on the foreclosed property is paid.
John's home is up for sale. He originally bought it five years ago for $300,000. Its current value is $350,000. His real estate agent notified him that a buyer just made an offer on his home for $365,000, which is the price other similar homes in the neighborhood are selling for and John accepts. What does the price of $365,000 represent?
The market value
Non-Judicial Foreclosure
This method may be used if a power of sale clause is included in the mortgage or deed of trust.
(IRRR) interest rate reduction refinance
This program allows a VA loan to be refinanced in order to obtain a lower interest rate.
Before we dig into the details of the URAR, let's start with the purpose of this report. What is its purpose?
To provide the lender with an accurate opinion of the property's market value
Which of these is a reason a lender may require a survey be performed?
To uncover potential changes that may have occurred to the property over time
One of the pieces of information the depository institution provides is the average balance for the applicant's accounts. What time period does this average cover?
Two months
The FHA places limits on how much the seller can contribute to the buyer's closing costs. Which of these items is the seller allowed to cover for the buyer, as long as the total contribution doesn't exceed 6% of the sales price?
Up front mortgage premium Prepaid property tax Interest rate buydown Origination fee Mortgage payment protection insurance
Home Equity Line of Credit (HELOC)
Used similarly to a credit card
As it happens, the property that Sam bought didn't use his entire entitlement. He and his family found another property a year later and decided they'd like to move. However, he hadn't sold the first property yet. Is he allowed to use the remaining entitlement with a second loan?
Yes, its called partial entitlement
PMI may terminate, either automatically or by request, if certain criteria are met. Which of the following statements are true? Select all that apply.
Yvonne's a licensed real estate agent and has been making large payments on her conventional mortgage loan principal every time she earns a commission. She'll be able to request PMI termination when her LTV reaches 80%. Eileen borrowed $250,000 on a 30-year conventional mortgage loan. Based on her amortization schedule, her LTV will reach 78% next year. Market values have dropped considerably, though, and Eileen's actual LTV is still at about 83%. Eileen's PMI should still terminate automatically next year.
Energy Efficient Mortgage
Allows the borrower to incorporate the cost of adding energy-efficient features in combination with an FHA-insured mortgage
95% rule
An investor can exchange multiple properties as long as the properties total at least 95% of the value of the relinquished property.
What is the three-property rule as it relates to tax-deferred exchanges?
An investor can identify up to three replacement properties and not encounter a restriction regarding fair market value as long as debt load requirement is met.
Which of the following are characteristics of RESPA?
Applies to mortgage loans and settlement services Includes provisions for buyers who are victims of over-charging
When an adjustable rate mortgage (ARM) makes its initial adjustment, it does so to its fully indexed rate. What makes up the fully indexed rate?
Margin plus index
Reverse Annuity Mortgage (RAM)
As funds are drawn by the homeowner over time, the bank gains ownership of the property
Danica graduated from college last year, landed herself a great job, and now she's ready to buy a condo in a great complex. She just hopes that her student loan won't get in the way of a mortgage approval from her lender. Which FHA strategy for mortgage market stabilization may impact Danica's purchase?
Borrower qualifying standards
A loan made based on the amount of equity available in an person's home or property is called a ______.
Home equity loan
What advantage does the 1031 tax-deferred exchange offer?
It allows investors to defer capital gains taxes when selling a property, provided they buy another property.
Which of the following is a true statement about HUD's Good Neighbor Program?
It allows qualified individuals to buy a home at a 50% discount.
What four components make up PITI?
Principal Interest Insurance Taxes
A like-kind exchange, or 1031 exchange, is also referred to as a ______.
Tax-deferred exchange
Alex has a loan where the payments start out mostly paying the interest and, over time, an ever-increasing percentage goes to principal. What type of loan does he have?
Amortized loan
The Chens are an older couple who want to retire near the beach. Even though the home they want to buy is smaller than their current house, its location makes it cost quite a bit more. They're glad when the home's appraisal comes in a little bit higher than the sale price, as it increases their confidence in their investment. Which FHA benefit applies to the Chens?
Appraiser licensing
The Federal Housing Administration's qualifying standards for a mortgage loan ______, but the mortgage insurance the FHA provides balances the risk for the lender.
Are somewhat less stringent than standards for conventional loans
Joe loves working outside and is glad to put his skills to use building homes. He can point to houses all over town that he helped build. He feels good knowing that he's been a part of providing safe, healthy homes for the community where he lives, and that they are quality structures that will shelter people for many years to come. Which FHA benefit is at work here?
Construction standards
Which of the following applicants fall within the guidelines for an FHA-insured loan?
Gena is a single mom with three kids. Her credit score is 620, her housing ratio is 29%, and her total debt obligations come to 40%.
The Bransons have a conventional loan for which they were required to obtain private mortgage insurance. Their local real estate market has been going like gangbusters, and their house is now appraised at twice their loan balance! Will their PMI be cancelled?
Maybe, but they'll have to petition their lender
What are the two primary types of deductions that a homeowner is permitted to take on their primary residence?
Mortgage interest Property taxes
Sandra is a single woman fresh out of college. She hopes to qualify for an FHA loan. Her lender calculates her housing ratio as 31% and her total debt obligation as 43%. Her credit score is 480. Does she qualify under FHA underwriting guidelines?
No, she doesn't meet the credit score requirement.
One common predatory lending practice is to charge fees for unnecessary or ______ loan products or services.
Non-existent
Upfront MIP
Paid at closing Percentage of the original loan amount
Annual MIP
Paid over lifetime of the loan Recalculated each year Paid each month Percentage based on loan amount, LTVR, and loan duration.
When would an investor who is involved in a 1031 exchange consider entering into a 1031 reverse exchange?
The investor closes on the replacement property before selling the original property.
Which of the following is a reason a seller might consider selling his property through an installment contract rather than a traditional sale?
The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.
How long does the borrower have to pay private mortgage insurance?
Until the borrower reaches a 22% equity position
Britney is selling her bungalow via an installment contract. The buyer made payments dutifully for five years, but has not made any payments for more than a year. Which of the following is true?
Britney can keep all of the proceeds received and repossess the property.
A loan where the payments gradually adjust (usually upward) based on a pre-determined schedule and amount is known as a _________________ loan.
Graduated payment
Which of these programs is aimed at first-time homebuyers?
Homeownership Voucher Assistance
Which four of these activities are the responsibility of a qualified intermediary (QI)?
Place proceeds of the first sale with escrow, with instructions. Handle transactional paperwork with escrow. Provide transfer documents for the exchange. Submit a 1099 to the taxpayer and to the IRS for any gross proceeds paid out.
Which of the following are characteristics of the Home Ownership and Equity Protection Act (HOEPA)?
Restricts fees Requires pre-loan counseling for consumers
Which of the following statements is true about government loans?
They're insured or guaranteed by a government agency.
Gina owns a townhome that she purchased with an FHA loan. Rates have gone down and she'd like to take advantage of the new lower rates, but she currently owes more than her home is worth. What options should Gina consider?
Ask her current lender to give her an FHA Streamline Refinance
Danielle was in the Air Force on active duty for many years, though she is now retired. What will she need to qualify for a VA home loan? Select all that apply.
Certificate of Eligibility Sufficient income Sufficient credit
When a buyer obtains an FHA loan, the seller may ______.
Contribute up to 6% of the sales price (or appraisal, if that's lower) to the buyer's closing costs
Piggyback financing is a legal way to avoid having to purchase private mortgage insurance. Which of the following statements are true about this type of financing and the concepts that make it work? Select all that apply.
Conventional loans require PMI if the loan-to-value ratio is over 80%. The first mortgage in a piggyback loan must be 80% or less of the property's value. The second mortgage amount in a piggyback loan is the difference between the remaining balance owed and the amount of the down payment.
What does PITI stand for?
Principal, interest, taxes, insurance
Do you recall what Keira learned about Fannie Mae and Freddie Mac? Which three of these are true?
They buy mortgages, package them, and resell them as mortgage-backed securities. They act as a link between banks, the government, and Wall Street. They're publicly traded.
Read through each of the following pieces of information about buyers' debt obligations and determine which one will qualify for an FHA loan based on the qualifying ratios.
Housing ratio of 31%, total debt obligations 40%
Programs for Native Americans
Mortgage insurance for Native Americans to construct, acquire, refinance, or rehabilitate single-family housing located on tribal land
