Finance Exam Review
In a real estate ad for mortgage financing, which statement is permissible if no other information is given?
"Liberal terms available to qualified buyer"
Which is NOT a trigger statement in regard to advertising under the Truth In Lending Act?
"No down payment"
A seller agrees to pay two points on a buyer's loan. The price is $120,000 and the buyer is making a 20% down payment. Two points equal
$1,920
A seller takes back a second mortgage for $12,000 at 10% interest. The note calls for years, then a balloon. What is the first payment amount?
$100
A lender gives Jenny a $15,000 second mortgage at 9.5% interest. Payments are interest-only for 10 years. What balloon payment will be due?
$15,000
The minimum cash payment investment needed for home with an FHA appraised value of $90,000 is
$3,150
If a buyer purchases a $100,000 home and gets an $80,000 mortgage loan at an interest rate of 6%, how much are 4 points?
$3,200
What is the minimum down payment (cash investment) contribution for an FHA loan on a $170,000 home
$5,950
The Goldbergs, who own their house free of any encumbrances, are selling it to the Irwins for $115,000. The Goldbergs are taking back a straight note for $75,000 at 10% interest for 20 years. The first monthly payment will be
$625
Ann makes a 20% down payment on her $85,000 purchase. Her loan amount is
$68,000
What loan will NOT have a balloon payment due at the end of the loan term (the termination date, stop date, or due date)
$90,000 loan at 8% interest amortized over 20 years
The income housing expense and total debt service ratios for traditional 10% and 20% down conventional loans normally are
28% and 36%
Qualifying guidelines on most FHA loans are ___________ housing ratio and _______ total debt ratio
31%; 43%
PMI covers the risk of
A default on the loan repayment
Which clause in a mortgage allows the lender to declare the entire unpaid balance due upon the borrower's default?
Acceleration clause
Funding of a construction loan is usually made
After the time for filing liens has expired
A mortgage clause that prevents someone else from assuming a loan is a(n)
Alienation clause
The government national mortgage association is
Also known as Ginnie Mae
The property value acceptable to the FHA as loan collateral is determined
As the lesser of the appraised value of the purchase price
To be eligible for an FHA loan, one must
Be a U.S. Citizen, permanent resident, or nonpermanent resident with a work visa
A mortgage that covers a number of parcels of real property, and that may provide for the separate sale of each parcel, is known as a(n)
Blanket mortgage
Which is NOT an advantage of an FHA loan?
Borrowers can use secondary financing for the minimum down payment
Conventional loans follow the underwriting guidelines of a. Fannie Mae b. the FHA c. Freddie Mac d. Both A and C
Both A and C
For an FHA loan, a borrower CANNOT
Buy a rental property
When determining whether income is durable and stable and can be used in qualifying a person for a mortgage loan, a factor the underwriter will NOT consider is
Child support payments that will not continue for less that three years
A debtor may redeem property from the foreclosure process up until the _________ takes place
Confirmation of sale
Interest rates are a measure of the
Cost of money
Private mortgage insurance covers the risk of the possibility of
Default in loan repayment
The purpose of an acceleration clause in a mortgage instrument is to
Define that, in the event of default, all future payments become due immediately
The federal national mortgage association is
Designed to increase the availability of money to primary lenders
The interest rate charged by the Federal Reserve for loans to member banks is called the
Discount rate
Which Act prohibits discrimination granting credit?
ECOA
ECOA refers to
Equal Credit Opportunity Act
The interest or value remaining in a property after all liens and other debts are taken into account is known as
Equity
The act of depositing something of value with a disinterested third party creates a(n)
Escrow
For a lower-income buyer with higher debt ratios, the best loan choice would most likely be a(n)
FHA loan
The Federal National Mortgage Association is also known as
Fannie Mae
Three main secondary market sources are
Fannie Mae, Freddie Mac, and Ginnie Mae
The federal government influences money supply with
Fiscal and monetary policy
Which mortgage requires principal and interest payments at regular intervals until the debt is satisfied?
Fully amortized mortgage
The Veterans Administration (VA)
Guarantees lenders against default
The FHA is administered by
HUD
A person may be turned down for a mortgage loan if
He has poor credit and income too low to qualify
A loan that includes a fixed rate period followed by an adjustable rate period is known as a(n)
Hybrid loan
On an ARM, the margin is the difference between the
Index value and the interest rate charged
The Federal Housing Administration (FHA)
Insures mortgage lenders against default
What statement regarding the Federal Reserve is FALSE?
It sets the prime rate
Which is NOT covered by RESPA laws?
Lender may not discriminate based on source of income
A mortgage broker's basic source of income is derived from
Loan origination fees charged to the borrower
Which is NOT a benefit of a VA loan?
Loans are available for homes and business
Which is NOT a way for a buyer to avoid PMI on a conventional loan?
Make a 10% down payment of a house
The one promising to pay the money in a promissory note is known as the
Maker
An agent should NOT refer a prospective buyer to a lawyer for advice about
Market interest rates
To be eligible for a VA loan, a veteran must
Meet the VA's eligibility requirements
When qualifying for a residential mortgage loan, an applicant's liabilities are most likely to be calculated as
Minimum monthly payment amounts
In real estate finance, disintermediation means
Money flows out of saving institutions into higher return investments
Which is a voluntary lien?
Mortgage
A lender that makes a secured loan for the purchase of real estate is known as the
Mortgagee
In regard to a mortgage loan, the borrower is referred to as the
Mortgagor
An adjustable rate mortgage where the loan balance increases is experiencing
Negative amortization
The term used when a loan balance grows due to deferred interest is
Negative amortization
The Equal Credit Opportunity Act, which is designed to limit discrimination in credit transactions, includes which restriction?
No restrictions can be placed on the source of income received
Which charge is used to increase a lender's yield on real estate loans?
Origination fee
A loan that includes periodic payments of principal and interest followed by a balloon payment is known as a
Partially amortized loan
When assuming a loan, the buyer would
Pay the seller the equity in their property
The main characteristic of a shorter-term loan is the
Payments are higher
Broad forces influencing housing cycles are
Physical, economic, governmental, and social
With a fixed-rate loan,
Principal and interest payments must remain constant
If the borrower obtains a conventional loan and makes a 20% down payment
Private mortgage insurance is not required
The Real Estate Settlement Procedures Act does NOT require
Prohibiting agents from owning shares in lending companies
The secondary market for mortgage loans can be best described as the
Purchase and/or sale of mortgage loans after origination
Funds for making FHA loans are provided by
Qualified lending institutions
Which is NOT a method used by the Federal Reserve to control monetary policy?
Raise or lower the prime rate
RESPA applies to all
Real estate credit transactions for one-to-four dwelling units
Regulation Z applies to
Real estate credit transactions for personal use
In a foreclosure, the debtor can get the house back through
Redemption
The federal Truth in Lending law
Regulates advertising with references to a mortgage interest rate
The Closing Disclosure is NOT required in the settlement of a transaction of a(n)
Retail store building
In which market can lenders sell mortgages?
Secondary market
In a purchase transaction, a major source of second mortgages could be
Sellers
With a VA loan, a veteran has the option of
Selling the home to a non-veteran, who may then assume the balance of the loan
Which is NOT included in a borrower's income analysis?
Sporadic overtime and commissions
When the interest rate is much lower initially in order to get a buyer to use a particular loan program, then jumps to a higher rate at the end of a specified period, this is said to be a
Teaser rate
Which information can be found in a note?
Terms and repayment provisions
On a VA loan, who makes the final decision of the approval or denial of a loan?
The VA and the underwriter
RESPA does NOT prohibit and/or place limits on
The amount paid for origination fees
Which statement regarding a VA loan is TRUE?
The funding fee can be financed
The interest rates charged for FHA and VA loans are established by
The market
The VA guarantee program provides eligible veterans with
The opportunity to buy a home with little or no down payment
On an adjustable rate loan,
The rate is tied to a specific index
The annual percentage rate (APR), as required to be disclosed on a Loan Estimate, is
The relationship between total cost of borrowing and the actual amount borrowed
What is the minimum down payment for a VA loan on a $75,000 home?
There is no minimum requirement for qualified, eligible veterans
Gloria qualifies for an FHA loan. She should make her loan application
Through any FHA-approved lender
When a mortgage loan is paid off over a shorter term, the major advantage is a reduction in the
Total interest costs
For a conventional mortgage loan, who makes the final decision on approval or denial?
Underwriter
An FHA buyer may currently
Use a gift for his entire down payment
Which statement regarding VA loans is FALSE?
VA loans are available for investors who are veterans
The maximum allowable mortgage for an FHA loan
Varies by county
The law that prohibits discrimination in the lending process is
the ECOA
The best loan for a buyer to obtain for a single-family home in need of repairs is
the FHA Streamlined 203(k) loan
