Real Estate Finance 2

The Ropers are purchasing a home using VA financing. The sales price of the home is $210,000. The CRV comes in at $215,000. On what number will the VA's loan guarantee be based?

$210,000, the sales price

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

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 (3.5%)

If the annual taxes on a property are $1,000, how much is paid monthly?

$83.33

You have a client who wants to obtain a VA loan. You refer them to ______.

A VA-approved lender

Which of the following is true about a home equity line of credit?

A borrower can use the funds as needed, repay them, and borrow them again.

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

With a VA loan, the borrower must receive a certificate of eligibility. What must the property receive?

A certificate of reasonable value

What is another name for an installment sale contract?

A land contract

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

In a deed of trust, who is the trustee?

A neutral third party

Which of these statements about a buydown is true?

A permanent buydown will cost more than a temporary buydown.

A foreclosure occurs January 1, 2016. Of the following, which lien takes priority?

A property tax lien filed January 1, 2014

What type of professional must an investor use to conduct a tax-deferred exchange?

A qualified intermediary

Jose is an investor who found and closed on an investment property, then decided to sell a property other than the one originally marked for the exchange. What is this an example of?

A reverse tax-deferred exchange

In which of the following situations is a lender prohibited from enforcing an alienation clause?

A transfer between parent and child

Suzy has lost her job and wasn't able to make last month's mortgage payment. How is her lender most likely to help Suzy stay in her home?

Agreeing to modify her loan

Fannie Mae's multi-state note includes a due-on-sale clause, also known as a(n) ______ clause.

Alienation

Albert wants to sell his house to his cousin, who's willing to assume his FHA loan. What clause in Albert's mortgage requires him to obtain the lender's permission to do this?

Alienation clause

What feature do most adjustable rate mortgages have?

Allows borrowers to convert to a fixed-rate during a specific period of the mortgage

Which of the following individuals would qualify to purchase a home under the Good Neighbor Program?

An emergency medical technician

Marsha made an offer of $325,000 on a home listed for $350,000. The seller accepted her offer. What service will her lender order to determine the home's actual value?

Appraisal by an appraiser

When a borrower is completing a loan application, items of value the borrower owns are listed in the ______ section.

Assets

Renee loves her photography hobby. When she is planning her personal budget, she finds that her anticipated income will just meet her necessary expenses, with a little left over if she's lucky. She still plans on budgeting some money for her hobby, though. Why?

Because she values her hobby and it will motivate her to follow her financial plan

Who's the mortgagor in a mortgage?

Borrower

Which of the following situations would make a borrower ineligible for a loan modification?

Borrower has filed for bankruptcy

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

Katrina wants to find a way to curb her spending. She has decided to take a look at her variable expenses. Which of the following is a variable expense?

Clothing

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

If you have a specific health issue, which of the following is most critical for you to thoroughly investigate when selecting health insurance?

Covered events

Payment history, age of accounts, inquiries, and types of accounts are factors considered in calculating a credit score. What's another item that's considered?

Credit usage

In an amortized loan, the interest portion of the mortgage payment generally ______ over the life of the loan.

Decreases

Andy is selling his home to Erika and Doug, who are using an FHA loan for the purchase. To facilitate the purchase, Andy can agree to pay ______.

Discount points to buy down Erika and Doug's interest rate

Your clients, the Nguyens, have signed a contract for deed to purchase a property. What rights do the Nguyens receive?

Equitable title and possession of the property

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

Equity

Johnston was thrilled that he could cash in on the ______ in his home by refinancing, and using it to purchase a camper he had his eyes on for months.

Equity

Jonathan has come up with a plan. He's going to offer to buy property belonging to his neighbor, who's struggling financially, collect rent from his neighbor, and not make the mortgage payments. He'll rake in the rent until the bank forecloses. Which type of mortgage fraud scheme is this an example of?

Equity skimming

If your client's attorney contacts you, saying you were negligent in providing your client with service, which insurance coverage do you desperately hope you have?

Errors and omissions

The ______ clause protects the borrower's assets that aren't part of the voluntary lien from a deficiency judgment in case of foreclosure.

Exculpatory

When borrowers miss scheduled mortgage payments, allow their property to go into disrepair, or ______, they could face loan default.

Fail to pay property taxes

Which process temporarily stalls foreclosure?

Filing for Chapter 7 bankruptcy

Chad had some major medical expenses that he didn't plan for, and he wants to slash his budget in order to pay off the debt quickly. He considers selling his home and renting an apartment, which will make a big difference in his _________ expenses.

Fixed, essential

Jean is a high school English teacher. With the Good Neighbor Next Door program, she's able to buy a foreclosed FHA-insured property ______, though she does have to agree to live on the property for three years.

For a 50% discount off list price and a down payment of only $100

Which action can be taken if you don't pay a lien against your property?

Foreclosure

Stephanie was having trouble making her mortgage payments. Now her payments are lower than they were, and she's able to pay them each month. This is because her lender ______.

Gave her a loan modification

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%.

How and when does a contractor performing work associated with a 203(k) loan receive funds from the lender?

Half is received up front and the other half after the work is completed and approved

Scott has plenty of money saved and is ready to make a down payment on his $14 million dream home. One problem: Scott doesn't want to end up with a jumbo loan because he goes over the conforming loan limit. What option does Scott have?

He can take out a piggyback loan.

Jarod has obtained an FHA loan for which he pays an annual mortgage insurance premium. How will he likely make this payment?

He will pay 1/12 of it monthly with his mortgage payment.

A seller buydown can ______.

Help a borrower meet lender qualification standards

Appraiser Jamie is looking past how a property is being used to determine a higher value. What is Jamie determining?

Highest and best use

Bindy received a loan based on the amount of equity she had in her house. She used this lump sum to fund her daughter's college education. What type of loan did she get?

Home equity

Which of the following specifies a requirement of pre-loan counseling for consumers?

Homeowner and Equity Protection Act

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%

Which of the following is the cost of replacing a building in the case of total loss?

Insured value

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

To whom would a 1031 tax exchange usually appeal?

Investors

What's the purpose of a typical subordination agreement?

It allows a junior mortgage to move into first lien position.

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 does an alienation clause in a promissory note do?

It causes the entire outstanding loan amount to become due if the property is being sold.

What is the purpose of the Loan Estimate?

It gives buyers an idea of loan costs so they'll be able to make an informed decision about the loan.

Why might self-employed individuals who want to obtain financing for a home purchase, choose not to write off valid expenses on their tax statements?

It increases demonstrated income.

Which of the following best describes the non-judicial foreclosure process?

It may be used if the deed of trust includes a power-of-sale clause.

In a deed of trust, who is the beneficiary?

Lender

The loan applicant, the depository institution, and the _______ all complete parts of the request for verification of deposit form.

Lender

Payment history, age of accounts, credit usage rate, and inquiries are factors considered in calculating a credit score. Which of the following is also considered?

Length of credit history

What does the concept "first in time" refer to when discussing lien priority?

Liens are paid based on date of filing.

Kate is looking over the document that provides the approximate loan-related costs, along with the loan's terms. What is Kate reviewing?

Loan Estimate

The Barbers are looking to purchase a new home for their family of four, but they'll need to be approved for a loan. What document will they need to complete to initiate their loan process?

Loan application

Which of these is an essential component of a sound plan for your personal finances?

Make sure that your spending supports your personal values

What's the price at which a willing buyer and a willing seller would strike a deal given normal market conditions?

Market value

How can liens, such as those created by non-payment of federal income tax, result in mortgage default?

New liens can threaten the lender's position as primary lienholder. Default can occur for this reason.

Ron and Dawn hope to qualify for an FHA mortgage so they can buy a home for their family. Their housing ratio is 28%, their total debt obligation is 45%, and their credit score is 650. Do they qualify under FHA underwriting guidelines?

No, they don't meet the total debt obligation requirement.

What percentage of closing costs can be included in a VA loan?

None

Bobby is completing a residential loan application. On the application, he lists his liabilities. What are liabilities?

Obligations the borrower owes

When a buyer uses an FHA loan, the down payment amount is calculated ______.

On the lesser of the sales price or the appraised value of the property

In which type of partnership is there is more than one mortgagor as owner?

Partnership among mortgagors

Which clause is standard in a deed of trust and affects the foreclosure process that can be used if the borrower defaults?

Power of sale

Ronald marries and wants to start a family. Which of the following would be important in his selection of an insurance carrier?

Premiums and deductibles

What does PITI stand for?

Principal, interest, taxes, insurance

What's the purpose of PMI?

Protect the lender in case of borrower default when the borrower has put down less than 20%

Ally is reviewing the personal information on her credit report. What information is NOT included in the personal information section?

Race and ethnicity

When an investment property is sold, three taxes that apply are transfer tax, capital gains and ______.

Recaptured depreciation

Bob just sold his investment property. Which taxes will apply?

Recaptured depreciation and capital gains

Randolph is a real estate licensee whose fluctuating income wouldn't qualify him for conventional financing. However, he's able to get financing on a 10-plex. How is this possible?

Rent covers the mortgage.

Kristoff got a bit behind on his mortgage and missed several payments. He and his lender devised a schedule that gives Kristoff an opportunity to make up those delinquent payments. What is this an example of?

Repayment plan

______ is the term that the VA uses to describe the amount of net income remaining after deduction of debts, obligations, such as utility and phone bills, and monthly shelter expenses.

Residual income

A RAM is a type of equity financing. What does RAM stand for?

Reverse annuity mortgage

Monty retired 10 years ago and would like to see the world, but his retirement account won't support his desire to travel. Monty heard of a loan that would allow him to take advantage of the equity in his home by getting monthly payments from the bank by using his house as collateral. What is this type of loan called?

Reverse annuity mortgage (RAM)

What type of investment strategy is most similar to a 1031 tax-deferred exchange?

Rolling over funds from one IRA into another

If a cloud on a title is discovered, which party is generally responsible for clearing the cloud?

Seller

Your client, Shelby, a veteran using a VA loan to finance her purchase, just learned that the CRV came in lower than the sales price. But no problem: Shelby's brother is willing to loan her the difference. If the loan is approved, ______.

Shelby must still be under the VA's debt-to-income ratio

Percy is losing his house because he can't make his payments. He owes more than it's worth and just wants to get out from under it. He decides to put it on the market and hope for the best. Percy will likely sell his home through ______.

Short sale

The Federal Housing Administration's mission includes ______ through the establishment of lending standards and by insuring mortgages.

Stabilizing the mortgage market

Melanie is a buyer who has agreed to purchase Stan's property using a contract for deed. Who holds legal title to the property during the term of the loan?

Stan

Borrowers who fall into the ______ category may be faced with paying interest 1% to 5% over the current market rate.

Subprime

______ make homeownership available for many who otherwise could not qualify for a mortgage loan.

Subprime lenders

When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.

That the work meet FHA's basic energy efficiency and structural standards

Tom's CRV came in low and he's decided to make up the difference in cash. What else will be required?

The VA may require Tom to prove the source of his funds.

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.

The upfront MIP on an FHA loan is calculated on ______.

The base loan amount

The signature lines on the multi-state Fannie Mae promissory note are set up for ______ to sign.

The borrower

The FHA EEM program allows modifications such as solar panels as long as ______.

The cost of the modification is within limits based on the value of the home

What's true about the draw period on a home equity line of credit (HELOC)?

The draw period varies.

When a borrower has paid off the loan, how is the release handled if the security instrument is a deed of trust?

The trustee executes and records a deed of reconveyance and the lender returns the note to the borrower.

Chrissy and Jack are purchasing a new condo. When they sign their new mortgage document, to whom are they conveying title to the property until their loan is paid off?

Their 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

How many parties does a deed of trust involve?

Three: borrower, lender, and trustee

FHA offers a program for loan insurance on adjustable-rate mortgages under ______ of the National Housing Act.

Title II

Rachael is purchasing a house from the Browns. After obtaining financing, what does her lender require her to have for her own protection?

Title insurance

Jacob has received a call from his lender that there is a problem with the title on his property. Why would he want to file suit to quiet title?

To remove the clouds on the title

Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?

To roll the cost of rehabilitating the purchased home into the mortgage

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

Until the borrower reaches a 22% equity position

Which veteran loan program in Texas offers qualified veterans help with the purchase of their primary home?

Veterans Housing Assistance Program

Which veteran loan program offers qualified veterans help with the purchase of land in Texas?

Veterans Land Program

The FHA Section 203(h) program assists ______ with an insured mortgage.

Victims of a presidentially declared disaster

Celeste hopes to qualify for an FHA loan. She calculates her housing ratio as 31%, and her total debt obligation as 42%. Her credit score is 580. Does she qualify under FHA underwriting guidelines?

Yes

Sissy is a veteran who used her full entitlement to purchase a home. The loan has since been paid off, and Sissy still owns the home. Now, she'd like to buy a second home using another VA loan. Is Sissy allowed to do this?

Yes, Sissy can apply to have her entitlement restored and can buy a second house using a VA loan.