Finance Questions

Backyard Bank charges a 2% loan origination fee. Mavis is buying a home for $500,000 and financing $400,000 of it. How much will Mavis pay as a loan origination fee? Topic: FinancingSubtopic: General Concepts A. $1,000 B. $2,000 C. $5,000 D. $8,000

$8,000; 4,000x2

A buyer with a 15-year, $250,000 loan at a fixed 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan? Topic: FinancingSubtopic: General Concepts A. $117,687.80 B.$250,000.00 C.$367,687.80 D.$735,375.60

A. $117,687.80; total interest=(monthly payments X number of payments) - the loan amount

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? Topic: FinancingSubtopic: Types of Loan Originators A. A commercial bank B.A credit union C.An investment group D. A savings and loan

A. A commercial bank;Commercial banks, like Chase, offer consumer and business loans.

Chuck is selling his property to Kyle. Chuck has agreed to finance the transaction for Kyle, who will make payments to Chuck while Chuck retains the legal title to the property. What's this an example of? A. A land contract B. A straight-term loan C. A wrap-around mortgage D. A subprime loan

A. A land contract; This is a form of seller financing called a land contract, also known as a contract for deed. It doesn't describe a wrap-around mortgage, which would involve Chuck retaining his current mortgage while using payments from Kyle to cover his own monthly payments to the lender

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? Topic: FinancingSubtopic: Financing/Credit Laws A.The ad complies with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms. B.The ad complies with TILA because the sales price is below the minimum that triggers full disclosure. C.The ad does not comply with TILA because financing terms must be provided on any residential real estate ad. D.The ad does not comply with TILA because it mentions financing without including all of the terms of the financing.

A. The ad complies with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms -Regulation Z requires all financing terms to be included in an ad only if certain trigger terms are present, but "low down payment and easy financing" are not triggers.

Borrowers obtaining a VA loan aren't required to have a down payment. However, they are required to pay _______. Topic: FinancingSubtopic: Government Programs A.A funding fee B.Guarantee Insurance C.Mortgage Insurance D.VA tax

A.A funding fee

Fatima is using a VA loan to purchase a home from Sue. Sue agrees to pay Fatima's closing costs. Which of the following statements is true? Topic: FinancingSubtopic: Government Programs A.Closing costs aren't considered a seller concession. B.Sue can increase the sale price of the property by the same amount she is paying for Fatima in closing costs. C.Sue is allowed to pay no more than 50% of Fatima's closing costs. D.This would be a seller concession, and would be included within a 4% limit on seller concessions..

A.Closing costs aren't considered a seller concession. -If the seller pays the buyer's closing costs, other than prepaid items or the funding fee, it isn't counted as seller concessions

Farmer Mac is an entity that ______ for agricultural property loans, rural utility loans, and certain loans guaranteed by the U. S. Department of Agriculture. Topic: FinancingSubtopic: Government Programs A.Creates a secondary market B.Provides grants to lending institutions C.Provides insurance D.Reduces taxes

A.Creates a secondary market

Which of the following is an example of a government-sponsored enterprise (GSE)? Topic: FinancingSubtopic: Sources of Financing A.Fannie Mae B.Federal Housing Finance Agency C.Federal Reserve D.Ginnie Mae

A.Fannie Mae

How is a loan assumption documented? Topic: FinancingSubtopic: Types of Loans A.The buyer and seller both sign an assumption agreement. B.The buyer must add his or her signature to the existing promissory note and security instrument, which must be recorded. C.The lender must return the promissory note to the original maker and attach a new note to the security instrument. D.The loan is refinanced with a new loan agreement.

A.The buyer and seller both sign an assumption agreement -If the lender agrees to let the buyer assume the loan, an assumption agreement between buyer and seller documents the change.

In a title theory state, which of the following is a true statement? Topic: FinancingSubtopic: Mortgages/Deeds of Trust/Notes A.A promissory note creates a lien against the property used as security for the loan. B.It's generally much easier for a lender to foreclose on a property. C.The lien makes non-judicial foreclosure typical. D.The mortgage creates a lien against the property used as security for the loan.

B. It's generally much easier for a lender to foreclose on a property. In a title theory state, the lender holds the legal title to the property (usually through a third-party trustee) until the loan is paid off. This makes it easier for the lender to foreclose.

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? A. Real estate investor B. Mortgage banker C. Mortgage servicer D. Mortgage broker

B. Mortgage banker -Mortgage bankers work for institutions that have in-house processors and underwriters, allowing them to lend money fairly quickly, but their lending options are generally limited to their own suite of products. A mortgage broker, on the other hand, works with multiple lenders to negotiate the best deal for the customer. Both of these entities are required to be licensed or registered with the Nationwide Mortgage Licensing System and Registry.

Danica and Rae purchased a home using a conventional fixed-rate loan that was 90% of the purchase price, since they could only afford a 10% down payment. Their monthly payment will include ______, but only for a portion of the loan term. A. PITI B. PMI C. MIP D. ARM

B. PMI Their loan payment will include private mortgage insurance (PMI), which protects the lender during the period when their loan remains higher than 80% of the home's value. Since they don't have an FHA-insured loan, they're not paying a mortgage insurance premium (MIP). Their payments will include principal, interest, taxes, and homeowners insurance (PITI) for the full life of the loan

With a VA loan, the borrower must receive a certificate of eligibility. What must the property receive? Topic: FinancingSubtopic: Government Programs A.A certificate of occupancy B.A certificate of reasonable value C.A certificate of resale value D.A low appraisal

B.A certificate of reasonable value

Erica is a California real estate licensee with an MLO endorsement. Which of the following properties falls under the definition of 'dwelling' and would therefore allow her to act as an MLO in a transaction? Topic: FinancingSubtopic: Loan Brokerage A.A commercial office space B.A mobile home C.A piece of property that will be used for hunting D.A trailer used for vacations and camping

B.A mobile home Under the law regulating MLO activities for real estate licensees, dwelling means a residential structure that contains one to four units, and includes a condominium unit, cooperative unit, mobile home, or trailer, if it is used as a residence.

Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used? Topic: FinancingSubtopic: Mortgages/Deeds of Trust/Notes A.A third-party trustee B.Bill C.Bill's lender D. The seller

B.Bill

Which entity insures government loans? Topic: FinancingSubtopic: Types of Loans A.FDIC B.FHA C.USDA D.VA

B.FHA

California real estate licensee Carmen has an MLO endorsement on her license. Which of these actions is she required to take? Topic: FinancingSubtopic: Loan Brokerage A.Include her MLO unique identification number on any "for sale" signs she puts up. B.Include her MLO unique identification number on her business cards. C.Offer competitive terms on any loans she negotiates for her clients. D.Renew her endorsement biennially

B.Include her MLO unique identification number on her business cards.

Tom, the seller, is helping the buyer with financing. Tom will give this mortgage to the buyer, and the money will go toward the down payment. What kind of mortgage is this? Topic: FinancingSubtopic: Sources of Financing A.Package mortgage B.Purchase money mortgage C.Reverse mortgage D.Wraparound mortgage

B.Purchase money mortgage

Because of the funding fee required for a VA loan, a borrower with no down payment funds saved should ______. Topic: FinancingSubtopic: Government Programs A.Borrow the funds to pay the funding fee B.Roll the funding fee into the loan C.Take out two loans D.Wait until sufficient funds have been saved

B.Roll the funding fee into the loan The funding fee is often rolled into the loan.

According to the PMI Act of 1998, at what percentage of equity position does personal mortgage insurance automatically cancel for homeowners? Topic: FinancingSubtopic: Types of Loans A.20% B.21% C.22% D.25%

C. 22% -The automatic cancellation is 22%, but homeowners can petition for removal once their equity position reaches 20%

A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What's the total amount the borrower will pay back over the life of the loan? Topic: FinancingSubtopic: General Concepts A. $250,000.00 B. $30,640.65 C. $367,687.80 D. $735,375.60

C.$367,687.80; 2,042.71 x 12, x15

Jarod has obtained an FHA loan for which he pays an annual mortgage insurance premium. How will he likely make this payment? Topic: FinancingSubtopic: Government Programs A.He will make a separate annual lump sum payment. B.He will pay 1/12 of it monthly, separate from his mortgage payment. C.He will pay 1/12 of it monthly with his mortgage payment. D.He will roll it into the cost of his loan.

C.He will pay 1/12 of it monthly with his mortgage payment. -Annual premiums will decrease as the loan balance is paid off; 1/12 of the annual premium will be added to the monthly mortgage payment.

Which of these names is also known as the California Real Property Loan Law? Topic: FinancingSubtopic: Loan Brokerage A.California Finance Lenders Law B.California Residential Mortgage Loan Act C.Mortgage Loan Broker Law D.Mortgage Loan Origination Law

C.Mortgage Loan Broker Law The California Real Property Loan Law is also known as the Mortgage Loan Broker Law, the Necessitous Borrower Act, and Article VII of the Real Estate Law

Which is one of the benefits of the USDA loan program? Topic: FinancingSubtopic: Government Programs A.Farmers don't pay interest rates. B.It provides rural home financing for low-income borrowers. C.No down payment is required. D.There's no limit to the loan amount.

C.No down payment is required. The USDA loan program doesn't require a down payment for the loan.

What type of foreclosure is commonly used when a deed of trust is the security instrument? Topic: FinancingSubtopic: Mortgages/Deeds of Trust/Notes A.Eviction B.Judicial C.Non-judicial D. Strict

C.Non-judicial

When a buyer takes over payments on a loan without telling the lender, this is called a purchase ______. Topic: FinancingSubtopic: Types of Loans A.According to existing agreements B.On behalf of lender C.Subject to existing financing D.Upon assumption

C.Subject to existing financing; only protected under federal law for transfers between a parent and a child

Which of the following is a true statement about U.S. Department of Veterans Affairs loans? Topic: FinancingSubtopic: Government Programs A.All properties are eligible. B.All veterans are eligible. C.The VA will guarantee a loan based on the sales price or the certificate of reasonable value (CRV). D.VA loans can be used for investment properties

C.The VA will guarantee a loan based on the sales price or the certificate of reasonable value (CRV).

Acme Bank, a primary lender, sells its loans on the secondary market, so it makes sure that all its loans meet ______ requirements. A. FDIC B. FHA C. VA D. Fannie Mae and Freddie Mac

D. Fannie Mae and Freddie Mac Lenders who want to sell their loans easily to the secondary market make sure the loans meet requirements Fannie Mae and Freddie Mac have set. These are the entities that define conforming loans and that purchase those loans to package and sell to investors

Which of these is a reason that the deed of trust is the standard security instrument used in California real estate transactions? A. California is a lien theory state. B. California is a title theory state. C. The deed of trust doesn't allow judicial foreclosure. D. Foreclosing judicially gives the borrower a statutory right of redemption of up to one year in California.

D. Foreclosing judicially gives the borrower a statutory right of redemption of up to one year in California. -California's foreclosure laws make the deed of trust the preferred instrument because it gives the lender the right to use a non-judicial foreclosure. The borrower has no statutory right of redemption when the foreclosure is non-judicial. A judicial foreclosure gives the borrower up to one year to redeem the property after foreclosure.

Which type of lender specializes in taking in savings deposits and then lending money out to consumers through mortgages and other loans? Topic: FinancingSubtopic: Types of Loan Originators A.Credit union B.Mortgage banker C.Mortgage broker D. Savings and loan

D. Savings and loan -Thrifts, or savings and loan associations, specialize in taking in savings deposits and then lending out to consumers through mortgages and other loans.

Which of the following statements is true about national lending intuitions? Topic: FinancingSubtopic: Sources of Financing A.Mortgage-backed securities are offered by credit unions. B.They control the flow of the local money supply. C.They fund loans to borrowers. D. They sell packaged loans to investors.

D. They sell packaged loans to investors.

Which of the following is a borrower eligibility requirement for CalHFA? Topic: FinancingSubtopic: .Government Programs A.California veteran B.Doesn't intend to reside in the home for the length of the loan C.Owned a home before D. U.S. citizen, permanent resident, or qualified alien

D. U.S. citizen, permanent resident, or qualified alien The borrower must be a U.S. citizen, permanent resident, or qualified alien. The borrower must live in the home being purchased for the duration of the loan term (or until the home is refinanced or sold).

Which of the following best describes a home equity line of credit? A.A loan in which the lender makes payments to the homeowner for a specified period of time and gains equivalent ownership B.A temporary (usually 90-day) loan that provides funds in addition to an existing loan until permanent financing can be obtained C.Funds received in one lump sum and frequently used for home renovations, to fund a college education, or for other major purchases D. Used as an open-end account similar to the revolving credit of a credit card from which borrowers can take advances, repay money, and even borrow money again

D. Used as an open-end account similar to the revolving credit of a credit card from which borrowers can take advances, repay money, and even borrow money again A HELOC is similar to a home equity loan because the borrower uses the home's equity to secure a credit line. A HELOC isn't a lump-sum loan; it's a line of credit that continues as the borrower makes regular payments.

Millie and Jerry are purchasing a home using their VA loan benefit. The sales price is $320,000, with 100% financing. Assuming that Jerry has a typical level of entitlement, how much of their loan does the VA guarantee? Topic: FinancingSubtopic: Government Programs A. $104,250 B. $320,000 C. $36,000 D.$80,000

D.$80,000 The VA guarantees up to a quarter of the total loan amount, up to $104,250, so Millie and Jerry's loan is guaranteed for one-fourth of $320,000, which is $80,000.

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? Topic: FinancingSubtopic: Types of Loans A.A conforming Freddie Mac loan B.A government loan C.An FHA loan D.A non-conforming loan

D.A non-conforming loan

Seller Jerome found financing that would include his current mortgage inside the buyer's mortgage. What type of mortgage is this? Topic: FinancingSubtopic: Sources of Financing A.A blanket mortgage B.A construction mortgage C.A package mortgage D.A wrap-around mortgage

D.A wrap-around mortgage With a wrap-around mortgage, the seller finds financing that wraps the new buyer's mortgage around the seller's existing mortgage

Maggie has a neighbor, Jim, who is facing foreclosure. She likes Jim and wants to help him out, so they agree to do a "subject to" purchase. What does this mean? Topic: FinancingSubtopic: Types of Loans A.Maggie will co-sign a second mortgage with Jim so that he'll have the funds to pay off the first mortgage. B.Maggie will purchase the home at the foreclosure auction and rent it to Jim at a reduced rate. C.Maggie will sign an agreement with the lender to assume liability for Jim's loan. D.Maggie will take over Jim's loan payments without telling his lender she's doing so.

D.Maggie will take over Jim's loan payments without telling his lender she's doing so. When the new buyer makes the payments on a loan as if nothing has changed, this is called a "subject to" purchase

What is a wrap-around mortgage? Topic: FinancingSubtopic: Types of Loans A.One that involves more than one property B.One that involves personal property in addition to real property C.One that involves unqualified borrowers D.One that may involve seller financing

D.One that may involve seller financing A wrap-around mortgage is one where the buyer's new loan wraps around the seller's existing financing. The seller uses a portion of the buyer's payments to the seller to pay on the original loan.

Connie and John Fink, a married couple ages 69 and 72 respectively, want to stay in their home. The type of mortgage they're considering will allow the lender to make payments to the Finks for a certain period of time, while the lender gains corresponding ownership. Which type of mortgage are they considering? A.HELOC B.Home equity C.PMM D.RAM

D.RAM

Rachel loves convenience. As you can imagine, she was thrilled when she was able to finance her mortgage through the same institution where she deposits her payroll checks. Which of these most likely financed Rachel's mortgage? Topic: FinancingSubtopic: Types of Loan Originators A.Insurance company B.Investment group C.Mortgage broker D.Savings and loan

D.Savings and loan

Lawrence is a buyer closing on a home purchase for which he's obtaining financing. He receives a Loan Estimate from his lender. What's one purpose of this document? Topic: FinancingSubtopic: Financing/Credit Laws A.To detail the amount Lawrence needs to bring to closing B.To disclose the interest rates available on this lender's various loan programs C.To disclose the lender's source of loan funds D.To provide the estimated closing costs for Lawrence's loan

D.To provide the estimated closing costs for Lawrence's loan