Financing and Settlement Exam

A trustee will hold title until the loan is paid.

Elaina and Allen just purchased a home using a deed of trust. Which of the following is most likely true about their home loan?

1% to 3%

Generally, what's the common range for loan origination fees?

Discount Point

Gerard has been offered a 4% interest rate on a $300,000 mortgage. His monthly mortgage payment would run about $950 per month. He plans to pay $2,000 up front to drop his interest rate to 3.75% and his payment to $920 per month. What is this upfront charge called?

75%

Glenn is purchasing a home for $400,000. The property appraised at $415,000 and Glenn is financing $300,000. What's the loan-to-value ratio?

Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including equity lines of credit.

Gus has applied for a home equity line of credit from his federally insured bank so that he can make some renovations to his kitchen. The same bank is his lender for his home mortgage. Will this loan be subject to Real Estate Settlement Procedures Act requirements?

Appraisal

How does the lender determine whether the property is worth the sales price?

The entire loan balance may be due at once, and Tim won't be able to assume it

Janice is selling her property, and Tim wants to assume her loan. If a due-on-sale clause exists in Janice's mortgage, ______.

$300,000

Jeffrey has accepted an offer of $310,000 for his house. The buyer is making a $50,000 down payment, and the buyer's appraisal came in at $300,000. On what number will the buyer's lender base the loan-to-value ratio?

Get a low 4.925% APR

Jerome is developing an ad for three properties he has listed in an upscale community. He wants to keep it short and simple. Which of these would NOT trigger full disclosure under TILA?

254,200

Joaquin sold his house for $327,600. He bought it several years ago for $139,900 with a $100,000 loan. The loan balance when he sold it was $73,400. What was Joaquin's equity?

Insurance

Mortgage, homeowners, and flood ______ may be included the mortgage payment.

TILA-RESPA Integrated Disclosures

What is TRID?

The ad complies with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms.

A "homes for sale" magazine contains the following ad: "Cozy two-bedroom starter home, neat and clean, ready for move-in. $140,000. Low down payment and easy financing!" Which of these statements is true?

The ad is in compliance with TILA because providing the APR doesn't trigger the required disclosure of all credit terms.

A "homes for sale" magazine contains the following ad: "One-bedroom condo. Corner unit with beautiful ocean views. Financing available, 5.25% APR." Which of these statements is true?

Deed of trust

A trustee is holding the title to Cassandra's house until the loan is paid in full. Which type of security instrument was used?

Nothing

Bo's real estate ad states: "Custom homes for sale with scenic mountain views. Easy financing and low down payments." What else must be included in the ad in order for it to comply with TILA?

Department of Veterans Affairs

Callum is working with Darby, who received an honorable discharge from the Air Force. Callum is preparing to discuss options for down payment assistance with Darby. Which of the following would be Callum's best resource for information for this specific client?

Her down payment of $50,000 isn't at least 20% of the purchase price.

Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?

A land contract

Charles is selling his property to Seth. Charles is financing part of the transaction for Seth, who will make payments to Charles while Charles retains the property title. What is this an example of?

Rural development loan

Chris is in the process of purchasing a property with 20 acres of farmland in a rural area of the state. Assuming his income meets the criteria of the program, what type of loan may Chris find the most desirable?

He owes more on his home than its value

Christopher is in a negative equity situation. What does this mean?

Primary

Commercial lenders operate in the _____mortgage market, making loans directly to consumers.

Working with the lender, she'll prepare the settlement statement, which details the costs the buyer and seller will have at closing.

Corinne, an escrow agent, is preparing for the Thomas/Trenton closing in four days. Which of these documents will Corinne prepare?

Farm Security Agency

Farm families financing the purchase of properties in rural areas may be able to obtain financing through this government agency if they meet certain criteria, such as income requirements.

Until the borrower reaches a 22% equity position

How long does the borrower have to pay private mortgage insurance?

The consumer's lender

In a residential real estate sale involving a federally related loan, what entity is required to provide Real Estate Settlement Procedures Act disclosures to the consumer?

Decreases

In an amortized mortgage, the monthly payment is the same each month. The part used to pay the principal increases each month, while the amount going toward interest ______.

"Subject to" is an agreement between the seller and the buyer.

Monique wants to take over Travis's mortgage loan. Which of these statements is true?

A VA loan, which requires no down payment.

Recently retired Admiral Bongo and his wife, Lucy, contact you. They want you to help them purchase their dream house now that he's retired, but one that has the necessary accommodations for the admiral's disability. They also confide in you that they don't have a lot of money saved up for a down payment. Which type of financing may work best for them?

The taxes are a prepaid expense, and will appear as a buyer debit and a seller credit.

Seller Jamison is closing on his property with buyer Conrad. Jamison paid the current year's property taxes already. Is this a prepaid or accrued expense, and how will it be represented on the settlement statement?

VA

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?

Defeasance

Shirley's lender discharged the mortgage lien on Shirley's property after processing her final payment. Which clause requires the lender to take this action?

They should have a loan-to-value ratio of 80% or less.

Sophia and Antonio are expecting twins. They want to sell their old house and buy a larger home using a conventional loan. In order to be sure they'll get the PMI waived, what will they need to have?

ACME Bank

The Adams family is financing their loan through Acme Bank and their agent negotiated a great sales price on their new home. Smith Title Company processed the loan documents. The Adamses must purchase mortgage insurance. Who does the insurance protect?

Mortgage payment

The acronym PITI is a reference to what real estate-related concept?

A title insurance company buys you dinner to thank you for referring a client.

Under RESPA's Section 8, which of the following would be considered a kickback?

The rebate is not required for referral of business.

Under RESPA, a rebate of a licensee's commission may be offered to a transaction party, provided which of the following is true?

$3,200

A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a 1% loan origination fee. How much is the loan origination fee?

Loan-to-Value Ratio

A calculation that describes the amount being borrowed compared to the value of a property is called ______ ratio.

Pay the existing loan off

A closing agent has several duties to perform both before and after the closing. Which of the following is a task the closing agent must complete after the closing?

Equity

A home equity line of credit (HELOC) is based on the homeowner's available ______.

76,000

A homeowner has $80,000 of principal left to pay on her mortgage. Her home was recently appraised at $156,000, which is $13,000 more than what she purchased it for. How much equity does she have in her home?

Lender

A mortgage is a legally binding document that creates a lien on a piece of property and gives the lender the right to foreclose on the property if the borrower defaults. Who or what entity is considered the mortgagee?

Foreclosure

After he missed several payments, Eli's lender sent him a delinquency notice. He tried to make the payments, but continued to miss additional payments. His lender sent him a notice of default, and eventually seized and sold his property after he failed to repay them. What process did Eli experience?

A home equity loan

April's mother is getting older, lives alone, and needs care. April's house is too small for both of them. She has a solid amount of equity in the home but isn't in a position to move. Instead, she decides to take out a loan to build an 800-square-foot addition onto the existing home for her mom. What type of loan might April likely consider to finance the addition?

Derrick

Bethany has agreed to purchase Derrick's property using a land contract. Who holds legal title to the property during the term of the loan?

This is an accrued expense, and will appear as a seller debit and a buyer credit.

Danette hasn't paid the first quarter water bill on her property. It was due on April 1. She's closing with the buyer, Jason, on April 1. What type of expense is this and how will it appear on the settlement statement?

FHA

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?

Three: borrower, lender, and trustee

How many parties does a deed of trust involve?

Fannie Mae and Freddie Mac guidelines

If Acme Bank, a primary lender, wants to sell its loans on the secondary market, it would be easier for it to do so if its loans meet ______.

The smaller number

Jacqueline found a ready, willing, and able buyer for her client's condo, with a sales price of $20,000 more than the asking price. However, the appraisal came in just under the asking price. Which number will the lender use to calculate the loan-to-value ratio?

Whether he will incur a prepayment penalty

Jason purchased his dream home six months ago. After Jason received an inheritance from his uncle, he decided to pay off his mortgage. What should he consider before doing this?

A prepayment penalty

Jim decided to refinance his three-year-old mortgage that has a balance of $300,000. He has to pay a fee of 5% of the loan amount to the original lender for paying off the mortgage early. What is this fee called?

construction

Jimmy owns a vacant piece of land. He plans to build a home on the land and then sell it. What type of loan is he most likely to acquire to finance this project?

Discount pointss

Leonard is offered a loan at 5.75%. Because he plans to be in his home for several years, he chooses to pay points up front to have the rate reduced to 5.25%. What's this an example of?

Bridge loan

Monica received a promotion at work that requires her to relocate. Because of the timing of her promotion, she'll need to buy a new house in her new city before her current one is sold. So, she won't have any equity from her current home to make a down payment on the new house. What loan option would allow her to make the purchase before selling the old house?

The lender tells the trustee to release the title to Olivia.

Olivia took out a 15-year loan secured with a deed of trust. She worked two jobs in order to pay the loan back and finally made her last payment this month. What happens now?

1% of loan value

Related to real estate financing, how much is a point?

A non-conforming loan

Robin has great credit and was able to secure a loan for her ocean-side dream home. Her 30-year, fixed-rate loan is for an amount that's above conventional loan limits. What type of loan does Robin have?

A mortgage

Rochelle, a buyer, signs all the required mortgage documentation, promising to make all payments to her lender. Unfortunately, Rochelle falls on hard times and misses multiple payments, and the bank has indicated that it is going to foreclose on her. The foreclosure proceedings are more difficult for the lender because Rochelle holds the title to the land. Which security instrument was likely used and recorded to secure Rochelle's loan?

$0

Sandra retired from a career in the Navy and is ready to buy her first home, a small bungalow in a quiet neighborhood, for $169,900. Her military service gives her the benefit of Veterans Affairs (VA) loan. What's her required down payment?

A commercial bank

Shelly's flower business is blooming and it's time for her business to grow. She plans to take out a business loan to open two more shops on the north side of town. Which lending institution would she most likely go to for the loan?

Acceleration

Stacy has gone into default on her mortgage. Her lender is demanding that the entire loan balance be paid in full. Which mortgage clause permits her lender to do this?

Discount points

The Amarals are purchasing the house of their dreams and have plans to stay in it for at least the next three decades while they pay back their conventional 30-year loan. Their primary focus, over the life of the loan, is to reduce their payments as much as possible. What is something that could help them achieve this?

conventional

The Baxters are looking at a $425,000 home. They have $90,000 in savings to use as a down payment. What loan type(s) would likely be the best option for them?

Disclosures

The Truth in Lending Act requires lenders to make certain ______ to consumers.

A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores

To which of the following borrowers might a lender be most likely to recommend an FHA loan?

Lower initial interest rate

What attracts borrowers to adjustable rate mortgages?

Lenders might not have funds available to make new loans to the public.

What could be a consequence if there were no secondary mortgage market?

It means that some principal remains at the end of the loan term.

What does a balloon payment represent at the end of a loan term?

Fannie Mae, Ginnie Mae, Freddie Mac, Farmer Mac, and lending institutions that buy loans from other lenders

What entities make up the secondary mortgage market?

Purchase money mortgage

What type of arrangement allows the buyer to retain title to the property, but places a security interest in the property on behalf of the seller?

Conventional

What type of loan is neither guaranteed nor insured by government agencies?

It is usually purchased separately or bundled with a homeowners policy, but it's not standard.

What's a typical prepaid item that goes into a seller's credit column and a buyer's debit column on a closing statement?

It's generally much easier for a lender to foreclose on a property.

When a deed of trust used as the security instrument for a mortgage loan, which of the following is a true statement?

Defeasance

Which mortgage clause requires the lender to discharge the mortgage lien once the borrower has paid in full?

A standardized measure for interest rates and other loan costs

Which of the following best describes annual percentage rate (APR)?

An FHA loan is usually more attractive to borrowers who have lower credit scores and down payments.

Which of the following is a true statement about FHA financing?

Originators usually package and sell the loans on the secondary market.

Which of the following statements is true about conventional loans?

Savings and loan

Which type of lender specializes in taking in savings deposits and then lending money out to consumers through mortgages and other loans?

80%

For conventional loans in which the loan-to-value ratio is in excess of a certain percentage, lenders generally require private mortgage insurance. What's this percentage?

Defaults on the loan

Private mortgage insurance protects the lender in case the borrower takes which of the following actions?

Acceleration

After getting into a fender bender, Parker had to buy a new car. To make the down payment on the car, he had to skip a couple of his mortgage payments. He received a notice from his lender indicating the remaining amount of his loan is due immediately and in full. What clause in his mortgage stipulates this?

Mortgage broker

Darrel loves working in the mortgage lending industry. On a daily basis, he works with multiple lenders to find and negotiate the best deals for his customers. What is Darrel's profession?

Guaranteed loans

Fred is an agricultural lender who helps the ranchers and farmers in his community by providing credit for purchasing land, making repairs to their buildings, and improving their agricultural property. He's able to do this in part because of the ______ offered by the USDA Farm Service Agency.

Loan Estimate

Lawrence is a buyer closing on a home for which he's obtaining financing. Which document will give Lawrence an estimate of the costs he'll likely pay at closing?

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?

Wrap-around loan

Manuel is selling his home to Selena. He has an existing loan that he'll continue to make payments on, and he's extending credit to Selena for the balance of the purchase price. She will make monthly payments to him. What type of financing are the parties using in this transaction?

Mortgage banker

Mick focuses on originating mortgage loans at a company that has in-house loan processors and underwriters. The options he offers consumers are limited to the products his company offers. What's Mick's position?

Defeasance

Prudence just finished paying off the debt on her loan, so the lender released the property's title to her. What clause in her mortgage stipulates this?

A minimum down payment of 3.5% is required.

Rhonda and her husband filed for bankruptcy five years ago. They want to purchase a new house but don't have the best credit score. They've decided to buy the home using an FHA loan. Which of these is a true statement?

Budget

Sam has a mortgage payment that includes his property taxes and property insurance. What type of mortgage does Sam have?

Maybe, but they'll have to petition their lender

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?

Purchase money mortgage

The Hendersons don't have enough money to make the full 20% down payment their institutional lender requires. To close the sale, the seller is willing to finance a loan for the amount between the home's list price and what the institutional lender is willing to loan. What's this type of financing called?

The underwriter

The Shores are in the process of buying a beautiful 3,000-square-foot home from the Bishops. They've completed all the required paperwork on their loan application. Mary's analyzing the package to determine their ability to repay the loan. She examines the property's value, the property type, and the loan-to-value ratio, among other things. Her recommendation is that the Shores' loan application be approved. What is Mary's role?

USDA Farm Service Agency

The ______ can offer direct loans to farmers and ranchers. The loans are funded by congressional appropriation.

6,000

The purchase price of the home Leroy is buying is $300,000. He's putting $100,000 down and is paying three discount points. How much will this cost?

Require lenders to make disclosures that allow consumers to compare the costs of making a purchase using credit from different lenders, and to compare those with the cost of using cash

The purpose of the Truth in Lending Act (TILA) is to ______.

Ensure funds are available to borrowers

The secondary mortgage market buys loans from the primary market. How does this aid the lending market?

The secondary market purchases loans from primary lenders and helps keep credit available to loan originators.

The secondary mortgage market serves a very important role in real estate finance. Which of these statements best describes that role?

25% to 28% for housing; 33% to 36% for total debt

Traditionally, lenders' qualifying mortgage rules use a range of percentages to qualify for both the housing debt-to-income ratio and the total debt-to-income ratio. What are those ratio ranges?

Property taxes

What's a typical prepaid item that goes into a seller's credit column and a buyer's debit column on a closing statement?

Discount Point

What's an up front charge to make up for the difference between the interest rate the borrower is paying and the rate the lender normally requires?

Lenders issue the Loan Estimate within three days of receiving an application, and Closing Disclosure figures should be similar to the Loan Estimate.

What's the relationship between the Loan Estimate and the Closing Disclosure?

The closing agent

Which individual is responsible for ordering, preparing, and reviewing closing-related documents, such as the title policy and settlement statement?

Thee closing agent

Which individual is responsible for ordering, preparing, and reviewing closing-related documents, such as the title policy and settlement statement?

Loan A is more affordable.

Which loan is more affordable: Loan A with an interest rate of 7%, $75 in fees, and an APR of 7.5%; or loan B with an interest rate of 7.5%, $100 in fees, and an APR of 8%?

interest

Which of the following describes the amount a lender charges a borrower for using money?

Promisorry note

Which of the following is a promise from the borrower to repay a certain sum of money to another party (the lender or holder of the note) under specified terms?

Unpaid real estate taxes

Which of the following is a typical accrued adjustment?

A sale in the area may prompt a reassessment, impacting new buyers.

Which of the following is a way in which property taxes could impact your clients?

Get a low interest rate of 4.75% (4.925% APR) with as little as 10% down payment and a 30-year fixed rate with no points.

Which of the following is an acceptable ad based on Regulation Z?

Buydown

Which of the following is an action borrowers take to temporarily lower the interest rate on their mortgage loan?

CitiBank

Which of these is a member of the primary mortgage market?

The payments change over the term of the loan, generally with higher payments at the beginning of the loan term.

Which statement best describes a straight loan?

A loan with a rate that fluctuates based on the economic index to which it is tied

Which statement best describes an adjustable rate mortgage?

Straight term

Which type of mortgage requires the borrower to pay interest for a set term then pay off the loan in a lump sum or through another loan?

The buyer and lender

Whose interests are protected by homeowners insurance?

Interest

With a straight mortgage, what type of payments are made up until the end of the loan term?

$720

You're working with a buyer who's purchasing a home that appraised at $80,000. The buyer is obtaining a 90% loan, and the lender will charge a one-point origination fee at closing. How much will the loan origination fee be?