Unit Exam 11

In 2012, a man purchased a new home at the FHA appraisal amount of $100,000 and financed it with an FHA mortgage loan. To what amount must he reduce the outstanding loan balance before he no longer has to pay the 0.5% annual mortgage insurance premium?

$78,000

A man is shopping for a new loan and has narrowed the field to two choices. One is a 30-year fixed-rate loan that has principal and interest payments of $940 per month. The other is a biweekly mortgage. What is the difference in the annual payments based on this information?

$940

A $127,000, 30-year fixed-rate mortgage with a 5.5% rate has a mortgage payment factor of .0056779. Annual payments for property taxes are $2,400. The annual insurance premium is $600. What will be the monthly PITI payments?

$971.09

The FHA adjustable rate mortgage limits increases on interest rates to

1% annually.

What is the maximum amount of a buyer's closing costs that the seller can pay under conventional lending standards when the borrower is making a 5% down payment?

3% of the purchase price

The MOST common type of real estate mortgage is the

30-year fixed-rate mortgage.

Total interest rate increases on an FHA adjustable-rate loan may NOT exceed what percentage over the life of the loan?

5%

On January 10, the one-year Treasury bill index was 4%. A mortgage company used that index to write a new one-year adjustable-rate with a 2.5% margin. What is the calculated interest rate?

6.5%

A woman is shopping for a new $150,000 mortgage. She expects to live in her new home for about four years. She can get a 30-year, 4.75% fixed-rate mortgage with principal and interest payments of $1,074.62 with no points. She can also get a 4.25% mortgage loan (payments of $1,023.26) with three points. How many months will it take the woman to break even on the points if she takes the lower interest rate loan, using simple arithmetic?

87.6

Popular literature shows dramatic interest savings on a 15-year loan versus a 30-year loan. What is TRUE about most of these analyses?

Amounts saved usually are less because opportunity costs of the additional payments required are not considered.

What is the index measuring the base interest rate paid on deposits between banks in the Eurodollar market that is used in many adjustable-rate mortgages?

LIBOR

Which is TRUE about a loan's effective interest rate?

Origination fees should be added to the points charged in making the calculation.

Of the recognized indexes used on ARM loans, which is MOST volatile?

Prime rate charged by money center banks

Which is FALSE about the annual percentage rate (APR) disclosure?

The effective rate of interest is not affected by the number of years the mortgage loan stays in force.

Disclosure of the annual percentage rate on a mortgage loan is required by the

Truth in Lending Act (TILA).

Disclosure of the annual percentage rate of interest need NOT

be given to a prospective buyer of a single-family home who is paying all cash.

The component of an adjustable-rate mortgage that does NOT usually change is the

margin

The interest rate that major banks charge to MOST favored customers and that is commonly used for home equity loans is the

prime rate.

When compared with a 30-year mortgage, a 15-year mortgage has

slightly lower interest rates.

ARM loans are more popular

when interest rates are high.