FL: Post-Licensing: Real Estate Finance Practice Exam

You're working with a seller whose home was valued at $100,000 a couple of years ago. Through some market research, you've discovered that this area is seeing an appreciation rate of about 2% per year. What is the value after three years?

$106,121

Cheryl bought her home three years ago for $217,000. Assuming her home appreciated at the 3% rate typical of her current market, how much is her home worth now?

$237,121.76

Jeffrey has accepted an offer of $310,000 for his house. The buyer is making a $50,000 down payment, and the buyer's appraisal came in at $300,000. On what number will the buyer's lender base the loan-to-value ratio?

$300,000

A buyer with a $350,000 loan has a monthly principal and interest payment of $2,102.36. If $1,801.23 is interest, what's the new principal balance after the first payment is applied?

$349,698.87

You're working with a buyer who's purchasing a home that appraised at $80,000. The buyer is obtaining a 90% loan, and the lender will charge a one-point origination fee at closing. How much will the loan origination fee be?

$720

A buyer with a 30-year, $750,000 loan at a 5.75% interest rate has a monthly principal and interest payment totaling $4,376.80. If $3,593.75 is interest, how much is applied to principal?

$783.05

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

$83.33

A three-unit income-producing property has a sales price of $600,000. Monthly gross rent is estimated at $6,000. What's the gross rent multiplier?

100x

Over how many years is a residential income-producing property depreciated?

27.5 years

Which percentage reflects the top debt-to-income ratio limit for qualified mortgages?

43%

What is an encumbrance?

A defect on a title that can be monetary or physical

The Farm Credit System is ______.

A government-sponsored enterprise

Which statement describes a conforming loan?

A loan that meets certain criteria that are accepted by Fannie Mae and Freddie Mac

Which of the following statements regarding loan pre-qualification is true?

A pre-qualification is an estimate and isn't binding upon the lender.

Which project would a life insurance company be most likely to finance?

A shopping mall

Which of the following provides a summary of the title history?

Abstract of title

Regional State Bank has made a lot of loans to consumers in the community and is running low on funds. It seeks a loan from the Federal Home Loan Bank. This loan is called a(n) ______.

Advance

An example where a lender might place a property in default due to poor property management includes ______.

Allowing moisture intrusion

What's the definition of appreciation?

An increase in property value

For which of these properties would using the gross income multiplier be appropriate?

Apartment building with 50 units

Prior to signing the closing documents, what should the parties have already done?

Assured themselves that the conditions and contingencies of the purchase agreement have been met.

Chapo's property was foreclosed on and he is facing a deficiency judgment so the lender can recover losses incurred from the foreclosure process. What type of lien may the lender levy against Chapo until the losses are paid?

Blanket lien

How does the Federal Housing Administration fund its mortgage insurance program?

By charging borrowers a mortgage insurance premium

Which of these assets would be considered the most liquid, according to financial analysts?

Cash on hand

According to RESPA, what must the lender give to the borrower in the days immediately prior to settlement?

Closing Disclosure

Private loan companies may charge higher interest, larger fees, and could require ______ to secure a loan.

Collateral

When obtaining a mortgage to purchase a home, for what does the borrower use the property?

Collateral

Victor is a buyer reviewing the Closing Disclosure he received from his lender. On the last page of the form, he sees a signature line. By signing the form, Victor has ______.

Confirmed receipt of the Closing Disclosure

Joe's applying for a mortgage that meets all of the Fannie Mae/Freddie Mac criteria. Based on this, how would we classify this loan?

Conforming

Cassie is helping her buyer client, Gus. As they discuss preparations for closing, she cautions Gus, "Make sure you review the Closing Disclosure as soon as you receive it and ______."

Contact your lender immediately if you find errors or have any questions

Which real estate finance instrument includes the promise to repay and the security instrument within the same document?

Contract for deed

Which of the following items directly increases the supply of real estate properties on the market?

Conversion of properties

What document does the underwriter examine when determining the borrower's financial "character"?

Credit report

As foreclosures increased in 2007, what was the response from lenders?

Decrease lending activity

The U.S. ______ is the federal agency with the mission to create strong, sustainable, inclusive communities and quality affordable homes for all.

Department of Housing and Urban Development

Norma, a real estate licensee, is working with the buyers in a transaction. She suspects mortgage fraud. What should she do?

Discuss the situation with her broker.

How does the Community Development Block Grant program assist in supporting HUD's mission?

Distributes grant funding to help meet community needs as determined by state and local governments

Which of the following is part of the Consumer Financial Protection Bureau's mission of consumer protection?

Enforce consumer financial protection laws.

If you were a farmer who obtained a loan for your business, it's most likely that your lender will sell your loan to which of the following entities?

Farmer Mac

Which of the following resources will give you reports and statistics including house price index, foreclosures, and refinancing?

Federal Housing Finance Agency

Which process temporarily stalls foreclosure?

Filing for Chapter 7 bankruptcy

HUD's strategic plan outlines the ______ that support its mission.

Four goals

Which of these HUD programs allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market?

Ginnie Mae

Mike has had some financial problems and is considering borrowing from his retirement plan. Which of the following is a true statement?

He should consult with a financial expert before doing so.

Though not a loan, buyers may be able to enlist the help of ______, who can give them a tax-free gift to help them with their purchase.

Individuals, such as family members

Mark and Nancy purchased a municipal bond to help with the funding of a new school gymnasium. In exchange for their investment, what will they receive?

Interest

Which of the following is a true statement about deducting interest on mortgages taken out in tax years between 2018 and 2025?

Interest on the first $750,000 of mortgage debt is deductible for married couples filing jointly or $375,000 for married couples filing separately.

To find a factor on an amortization chart, you need to know the length of the loan and the ______.

Interest rate

Which of the following best describes a blanket lien?

It gives lenders the ability to recover losses due to a foreclosure sale from any current or future property the borrower owns.

Which of the following characteristics applies to a partnership between mortgagors?

It involves more than one mortgagor as owner, sharing responsibility for payment of a single mortgage.

What happens if an application that's going through automated underwriting doesn't meet lender requirements?

It's marked with red flags and sent to a human underwriter for review.

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

Items of value the borrower owns

What type of provision is standard with either the mortgage or the deed of trust, but is included in the promissory note rather than the security instrument?

Late charge

According to RESPA, what must the lender give to the borrower at either the time of loan application or within three days following application?

Loan Estimate

Which of the following items directly influences real estate demand?

Loan availability

Natalie and Sam are reviewing the Loan Estimate form to ensure the date, their names, the property address, and sales price is listed accurately. Additionally, the information provided about their loan term, purpose, product, type, and rate lock should ______.

Match what the lender discussed with both of them

Which of the following is an example of an involuntary, specific, statutory lien?

Materialman's lien

What HMDA data is available about loans?

Mortgage applications, loan amount, type of loan, and loan purpose

Life insurance companies participate in real estate in the ______ arena.

Mortgage blocks from secondary mortgage market

A local town has been growing and needs a new elementary school. What kind of bond instrument will the town use to finance this project?

Municipal bond

Both the Housing and Economic Recovery Act and the American Recovery and Reinvestment Act funded a program called the ______ program, which provided emergency assistance grants to states to purchase and redevelop foreclosed and abandoned homes and residential properties.

Neighborhood Stabilization

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.

Mary is a licensed real estate professional. She only performs licensed real estate activities and does not receive any compensation from lenders, mortgage brokers, or other mortgage-related parties. Does she need an MLO endorsement?

No, she does not need an MLO endorsement if she only performs real estate activities and does not receive compensation from mortgage-related parties.

An intermediate-term security issued by the Treasury that has a maturity term of between two and 10 years is called a Treasury ______.

Note

Which of the following statements best describes a foreclosure by advertisement?

Notification of pending auction, public auction, notice of eviction

The buying and selling of government securities as a way to influence the money supply and balance economic growth describes ______.

Open-market operations

When it comes to loan underwriting, what does a suspension do?

Pauses the underwriting process

Which type of lenders take on higher risk borrowers that most other types of lenders won't?

Private lenders

What's the purpose of PMI?

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

HUD's second goal in support of its mission is to meet the need for ______ homes.

Quality affordable rental

How common are interest-only loans today?

Rare

The CFPB promotes consumer protection in the credit market through a number of strategies, including ______.

Responding to and investigating consumer complaints regarding financial services

The three-business-day period following the latter of either the date that the transaction is consummated or the date the disclosure is made, during which a borrower can cancel their loan, is called the ______.

Right of rescission

Zack and April are purchasing a home. They apply to three different lenders and review the Loan Estimates they receive. Each form includes a field identifying the National Mortgage Licensing System ID number for the lender. What is the act that requires this licensing identification to be available to consumers?

SAFE Act

What is the formula for net to seller?

Sales price x (100% - commission rate)

Sara's mortgage lender has denied her loan. What happens now?

Sara can apply with a different lender to see if she qualifies.

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

Ray is in a bit of a predicament. He owes more on his mortgage than his property is worth, but can no longer afford the payments. He receives permission from his lender to sell the property for less than what he owes. What is this an example of?

Short sale

A major component of the Housing and Economic Recovery Act was the HOPE for Homeowners program, which aimed to ______ by helping subprime borrowers refinance into more affordable fixed-rate mortgages.

Stabilize the housing market

Borrowers with B, C, and D credit ratings are ______ borrowers.

Subprime

Which of the following best describes a buyer's market?

Supply is greater than demand

What does the "T" in PITI stand for?

Taxes

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

The borrower

Who should review the settlement statement before closing?

The buyer and the seller

What's a closing in its simplest form?

The buyer receives title to the property, and the seller receives consideration for it.

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

The draw period varies.

What is the most likely effect when the Fed sells securities on the open market?

The economy may slow down due to a decreased money supply.

With an interest-only loan, what happens after the specific period of time that interest-only payments are made is over?

The full principal of the loan is due.

Janie and Sam are newly married and are looking for their first home. They're fortunate that Janie's mom set aside some money to help with this purchase. Janie's mom says it's a loan, though, and they will have to pay her back. What's wrong with this?

The loan will go against their debt load.

What do sellers who agree to carry part of a loan for a buyer need to understand?

The risks involved

Which of the following best describes the loan processing step of financing?

The step that determines whether or not applicants will get the loan they're requesting

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.

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

Title II

Jeff has filed a quiet title suit against Roger. What's the purpose of this suit?

To clear up a cloud on title

What program allowed the U.S. Treasury to spend hundreds of billions of dollars to stabilize our financial system, boost credit markets, help families avoid foreclosure, and promote economic growth?

Troubled Asset Relief Program

What takes place during the application and review process of loan processing?

Verification of the borrower's financial situation

What's the most common way that a seller can help a buyer come up with the funds to complete a real estate transaction?

With a contract for deed

The American Recovery and Reinvestment Act provided mortgage assistance to ______.

Wounded servicemen and servicewomen

Sissy is a veteran who used her full entitlement to purchase a home. The loan has since been paid off, and Sissy wants to sell that home and buy another using another VA loan. Is Sissy allowed to do this?

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

Greg is selling his home to a veteran who's using a VA loan. When the transaction starts to stall, Greg tries to motivate the buyer by including his giant flat screen TV, valued at $1,200, as a gift. Is Greg allowed to do this?

Yes, this is considered an allowable seller concession