Unit 8 - Government Loans (Questions)

A borrower interested in purchasing a home priced at $180,000 is making an offer showing a down payment of the FHA minimum requirement. The loan amount before the MIP would be A) $173,500. B) $173,000. C) $173,700. D) $173,300.

$173,700.

A veteran used $43,000 of his entitlement when purchasing his first home. If he has a guarantee of $106,025, what loan amount can he obtain without making a down payment? A) $172,000 B) $252,100 C) $61,000 D) $350,000

$252,100

A buyer wants to purchase a house listed for sale at $90,000. According to FHA guidelines, the minimum down payment required is A) $3,150. B) $7,500. C) $6,650. D) $5,700.

$3,150.

When using the FHA 203(k) program, the minimum amount for the rehab costs must be at LEAST A) $5,000. B) $3,000. C) $7,500. D) $4,000.

$5,000.

A borrower interested in purchasing a home priced at $150,000 with an FHA-insured mortgage loan would be required to make a down payment of A) $5,250. B) $6,000. C) $4,250. D) $3,250.

$5,250.

If a veteran's total monthly housing expense plus other long-term debts is $2,400, approximately how much annual income will be needed to qualify for a VA loan? A) $70,234 B) $75,790 C) $58,536 D) $80,000

$70,234

The mainstay of the FHA single-family insurance program that allows the borrower to invest only 3.5% as a down payment and requires any appraisal-required repairs to be completed before closing is the A) FHA 203(b) program. B) FHA 251 program. C) FHA 203(k) program. D) FHA 234(c) program.

FHA 203(b) program.

For an FHA loan, under no circumstances may the borrower's total monthly housing expenses exceed 31% of the borrower's total gross monthly income. True False

False

If a veteran is willing to allow his VA loan to be assumed, but wishes to regain his ability to obtain another VA loan, he only needs to ask the borrower to provide him with a release of liability. True False

False

On an approved VA loan assumption, the interest rate will be increased to the market rate. True False

False

One of the advantages of an FHA mortgage is that no mortgage insurance is required. True False

False

Rules and regulations for FHA appraisers require appraisers to guarantee that the property is free of defects. True False

False

The Federal Housing Administration (FHA) was organized in 1934 with the sole purpose of providing direct funding for mortgage loans. True False

False

The interest rate on a VA loan today is set by the Department of Veterans Affairs. True False

False

A husband and wife who are both 65 years old may be interested in an FHA senior housing program called the A) Home Equity Conversion Mortgage program. B) Good Neighbor Next Door Sales Program. C) Energy Efficient Mortgage. D) housing choice voucher program.

Home Equity Conversion Mortgage program.

If the maximum amount for a VA loan is $424,100 and the veteran is borrowing $423,000, will the veteran be able to finance the 2.15% funding fee as part of the loan? A) Yes, the funding fee plus the loan amount is less than $424,100. B) No, the funding fee plus the loan amount exceeds $424,100. C) No, the funding fee must always be paid at closing. D) Yes, the funding fee can always be added to the loan amount.

No, the funding fee plus the loan amount exceeds $424,100.

A borrower wants to buy an older home that needs a great deal of renovation. In order to obtain funds for both the purchase and the renovation, the borrower should apply for the FHA A) Section 203(b). B) Section 251. C) Section 234. D) Section 203(k).

Section 203(k).

What percentage of the sales price can the seller provide for closing costs on an FHA loan? A) Six B) Seven C) Five D) Three

Six

What is the PITI on an FHA loan with a price of $150,000 and interest rate of 6% for a 30-year term, annual taxes of taxes of $1,800, and an annual hazard insurance premium of $700? A) $1,194.56 B) $1,042.03 C) $1,251.00 D) $1,250.00

The answer is $1,194.56. $150,000 × 96.5% = $144,750 × 1.75% = $2,533.13 + $144,750 = $147,283.13 final loan amount. Convert annual taxes to monthly: $1,800 ÷ 12 = $150; monthly hazard insurance: $700 ÷ 12 = $58.33; annual MIP paid monthly: $144,750 × 0.85% =$1,230.38 ÷ 12 = $102.53; calculate P&I: $147,283.13 × 6 = $883,698.78 ÷1000 = $883.70. Final step is to add everything together to get the PITI amount: $883.70 P&I + $102.53 MIP + $150 taxes + $58.33 hazard insurance = $1,194.56.

What is the PITI on an FHA loan with a price of $189,000 and an interest rate of 5.5% for a 30-year term, annual taxes of $2,300, and annual hazard insurance premium of $750? A) $1,290.12 B) $1,308.24 C) $1,437.44 D) $1,054.07

The answer is $1,437.44. $189,000 × 96.5% = $182,385 x 1.75% = $3,191.74 + 182,385 = 185,576.74 final loan amount. Calculate monthly MIP: $182,385 × 0.85% = $1,550.27 ÷ 12 = $129.19; monthly taxes: $2,300 ÷ 12 = $191.67; monthly hazard insurance: $750 ÷ 12 = $62.50; P&I: $185,576.74 × 5.68 = 1,054,075.88 ÷ 1,000 = $1,054.08. Final step is to add everything together to get the PITI amount: $1,054.08 + $129.19 + $191.67 + $62.50 = $1,437.44.

A veteran is retiring and wants to purchase a home using a VA loan. She used a previous entitlement of $46,000 in 1989 when purchasing her first home. Based on a guarantee of $106,025, she was able to use her remaining eligibility to obtain a VA loan with no money down in the amount of A) $58,250. B) $359,650. C) $439,120. D) $240,100.

The answer is $240,100. $106,025 - 46,000 = $60,025 × 4 = $240,100.

What would be the down payment required for a veteran who has used $36,000 of entitlement, has a current entitlement of $106,025, and wants to purchase a home for $300,000? A) $4,975 B) $36,000 C) $68,250 D) $10,000

The answer is $4,975. $106,025 - 36,000 = $70,025 × 4 = $280,100. $300,000 - $280,100 = $19,900 × 25% = $4,975.

With a loan guarantee of $104,250, a veteran wishing to purchase a home in Alaska would be eligible for a mortgage loan of A) $359,650. B) $499,562. C) $89,912. D) $625,500.

The answer is $625,500. Alaska is categorized as a high-cost area, so an additional 50% is added to the loan limit. 4 × $104,250 = $417,000 × 50% = $208,500 + 417,000 = $625,500.

In which scenario can a veteran's entitlement be restored if the loan has been repaid but the property is still owned by the veteran? A) The veteran uses the one-time-only provision. B) The veteran uses the restoration provision. C) The veteran served in the military for at least 10 years. D) The property is not habitable.

The veteran uses the one-time-only provision.

An FHA Section 203(k) loan would provide a loan for the purchase and rehabilitation of a property. True False

True

If a borrower has a gross monthly income of $3,000, he will be allowed $1,290 on an FHA loan for his total obligations, including housing expense and long-term debt. True False

True

If the certificate of reasonable value (CRV) comes in lower than the sales price, the borrower on a VA loan can cancel the transaction. True False

True

The VA funding fee may be added to the loan amount even in excess of the CRV, but must not exceed the maximum allowable loan. True False

True

Before a VA loan will be approved, there must be a formal estimate of the value of the property, which is called A) an entitlement. B) a certificate of eligibility. C) a certificate of reasonable value. D) an appraisal.

a certificate of reasonable value.

When a property is awarded to a veteran's spouse as a result of a divorce, entitlement can be restored if the ex-spouse is a veteran who substitutes her entitlement or the A) veteran waits five years before purchasing another home. B) ex-spouse who was awarded the house refinances. C) ex-spouse who was awarded the house remarries. D) veteran is active duty, so entitlement will be reinstated.

ex-spouse who was awarded the house refinances.

A novation of a VA loan would indicate that the veteran A) remains liable for the loan in case of default. B) has been relieved from all obligations on the loan. C) has regained eligibility. D) has sold the property or paid off the loan.

has been relieved from all obligations on the loan.

Lenders are willing to make low-down-payment FHA loans because the FHA A) guarantees the entire loan amount. B) guarantees the top 25% of the loan. C) insures the entire loan amount. D) insures the top 25% of the loan.

insures the entire loan amount.

The FHA maximum loan limit for a geographic area is determined annually based on a percentage of the A) median house price for the area. B) median house price up to set maximum limits. C) average house price for the area. D) average house price up to set maximum limits.

median house price up to set maximum limits.

If a veteran is approved for a novation, the entitlement will A) be restored after five years. B) be fully restored. C) be partially restored. D) not be restored until the loan is repaid.

not be restored until the loan is repaid.

A purchaser assumes a VA loan and agrees to provide a full release of liability for the veteran in case of default on the loan that is accepted by the lender. This is called a A) substitution of entitlement. B) novation. C) certificate of eligibility. D) certificate of reasonable value.

novation

The FHA Section 251 program provides insurance for A) one-year adjustable-rate loans. B) 30-year fixed-rate loans. C) loans for purchase and rehabilitation. D) graduated-payment loans.

one-year adjustable-rate loans.

Under the direct endorsement program, an FHA-approved lender will be required to A) perform a comparable market analysis. B) securitize the loan with Fannie Mae. C) qualify the borrower and underwrite the loan. D) insure the loan.

qualify the borrower and underwrite the loan.

The FHA Good Neighbor Next Door sales program has been expanded to include all of the following EXCEPT A) law enforcement officers. B) emergency medical technicians. C) pre-kindergarten through 12th-grade teachers. D) senior citizens.

senior citizens.

A veteran is no longer liable for a VA loan in any of the following situations EXCEPT A) the loan is paid in full. B) the veteran receives a release of liability. C) the veteran receives a substitution of entitlement. D) the veteran is active duty.

the veteran is active duty.

All of the following statements regarding FHA mortgage insurance are true EXCEPT A) FHA monthly insurance payments are no longer automatically terminated when an LTV of 78% is reached. B) the mortgage insurance premium varies according to the amount of down payment. C) there is no up-front mortgage insurance premium for condominiums. D) the annual MIP is divided by 12 and included with the PITI payment.

there is no up-front mortgage insurance premium for condominiums.

The direct endorsement program allows a lender to A) obtain mortgage insurance at a premium rate. B) receive FHA insurance in case of default. C) submit loans to FHA. D) underwrite FHA loans without sending them to FHA.

underwrite FHA loans without sending them to FHA.