Mortgage Loan Origination Activities 25%
While underwriting a borrower's loan file, you calculate this formula: Housing plus long-term debt divided by income. What have you just determined? A.) Total debt to income ratio B.) Loan to value ratio C.) Housing expense ratio D.) Stable monthly income ratio
A.) Total debt to income ratio ID: 3018
The acquisition cost of a property is $100,000 (sale price is $95,000 and the closing costs are $5,000) and the loan amount is $85,000. The seller is paying $2,000 of the closing costs. What is the total amount the borrower will need to bring to closing if the earnest money is $500 and being credited on the Closing Disclosure at closing? A.) $15,000 B.) $13,000 C.) $12,500 D.) $10,000
C.) $12,500 $100,000 - $85,000 - $2,000 - $500 = $12,500. ID: 2947
Gavin has a FICO score of 572. What is the minimum cash investment required in order for him to obtain an FHA loan? A.) 3.5% B.) 5% C.) 10% D.) 2.5%
C.) 10% The minimum investment for an FHA loan when the FICO score is between 500 and 579 is 10%. ID: 2985
What is NOT part of a mortgage loan application? A.) Declarations B.) Residence History C.) Income raises that are expected D.) $144,000
C.) Income raises that are expected ID: 2979
All of this financial information may be included in a borrower's income analysis EXCEPT A.) Regular earnings and overtime B.) Revealed alimony and child support C.) Sporadic overtime and bonuses D.) Pensions, interest, and dividends.
C.) Sporadic overtime and bonuses ID: 2904
Of these, who is responsible for the accurate accounting of all monies due to and from the parties in a real estate sale? A.) Real estate agent B.) Broker C.) Title agent D.) Lender
C.) Title agent ID: 2936
In a loan closing, hypothecation occurs. This is described as A.) Assigning the mortgage from the broker to the lender B.) The transfer of title through the deed C.) Using the property as collateral without surrendering use or possession of it D.) The seller transferring appliance warranties to the buyer
C.) Using the property as collateral without surrendering use or possession of it ID: 2925
For the purposes of a VA loan, what is NOT subtracted to determine residual income? A.) Housing expenses B.) Taxes C.) W-2 income D.) Recurring debt
C.) W-2 income Residual income is the amount of income remaining after subtracting taxes, housing expenses, and all recurring debts and obligations from W-2 income. ID: 2921
Bruce is purchasing a duplex for $275,000. He has given $2,000 in earnest money and the closing costs are $3,750. The lender has agreed to a 75% LTV. The seller has agreed to pay $2,000 in closing costs. How much does Bruce need to bring to closing? A.) $68,750 B.) $72,500 C.) $3,750 D.) $68,500
D.) $68,500 Oh okay Earnest money is given to him First, calculate the down payment: $275,000 x 25% = $68,750. He has $3,750 in closing costs, so: $68,750 + $3750 = 72,500 total needed for closing. However, credited to Bruce is $4,000 (earnest money and seller paid closing): $72,500 - $4,000 = $68,500 total amount Bruce needs to bring to closing. ID: 2913
The acceptable debt ratios for a conforming loan are A.) 31/43 B.) 29/41 C.) 25/35 D.) 28/36
D.) 28/36 ID: 2946
What terms do VA loan programs offer? A.) 1 year B.) 2 yea C.) 40 years D.) 30 years
D.) 30 years The VA loan programs include terms of 10, 15, 20, 25, or 30 years. ID: 2995
To calculate the housing expense ratio for an FHA-insured loan, you take stable monthly income and multiply by A.) 36% B.) 28% C.) 43% D.) 31%
D.) 31% ID: 2970
The lender usually does not allow the source of a borrower's down payment to be A.) A gift from a relative B.) Proceeds from the sale of a house C.) Savings D.) Borrowed funds
D.) Borrowed funds ID: 2957
What is required only of a borrower applying for a VA loan in order to complete the loan application? A.) Credit bureau report B.) RESPA guidelines C.) Purchase sale agreement D.) Certification of eligibility and discharge papers
D.) Certification of eligibility and discharge papers A potential borrower who is applying for a VA loan will need a certificate of eligibility and discharge papers to complete the loan application. ACE is an automated system used by lenders to obtain an online certificate of eligibility. The DD214 is needed to obtain the COE. ID: 2980
The instrument conveying real property ownership from grantor to grantee is a A.) Settlement statement B.) Note C.) Mortgage D.) Deed
D.) Deed ID: 2956
The appraisal approach that is most appropriate for commercial real estate is the A.) Cost approach B.) Market value approach C.) Sales comparison approach D.) Income approach
D.) Income approach The income approach arrives at an opinion of value by evaluating the money-making potential of the property, which is important for commercial property. ID: 2905
In the closing of a purchase on June 10 of a year that is not a leap year, and taxes of $3,650 a year ($1,850 per half), payable January 1st and July 1st each year, how much would the seller owe in taxes for the current year on the Closing Disclosure, assuming taxes are paid in arrears? A.) $1,610 B.) $2,010 C.) $1,825 D.) $3,650
A.) $1,610 If taxes are paid in arrears, the seller is responsible for the taxes from the day the taxes were last paid through the day of closing. The formula to figure this is the amount of taxes divided by 365 (days in a year) times the number of days: $3,650 / 365 x 161 = $1,610. ID: 2928
Larry has been on his job for one year. He currently makes $12.00 an hour at his retail job. Prior to this, he worked at a shopper's club, making $11.00 an hour. He currently works five hours of OT a week, making time and a half for all overtime. His current pay stub dated 4/15 has a YTD gross of $8,645. What is the monthly income you can use to qualify Larry? A.) $2,080.00 B.) $1,933.33 C.) $2,470.00 D.) $1,906.67
A.) $2,080.00 Larry has been on his job for less than two years, so overtime cannot be counted - you can only count his base income. Remember to always calculate income to the year and divide by twelve. Here is the calculation: $12 an hour x 40 hours a week x 52 weeks a year / 12 months = $2,080 a month. ID: 2931
What is the maximum seller concession for a VA loan? A.) 2% and no discount points B.) 4% and reasonable (2) discount points C.) Sellers cannot pay any of the buyers closing costs for a VA loan D.) 3% and 2 discount points
B.) 4% and reasonable (2) discount points The Veterans Administration allows the seller to pay 4% of the closing costs plus reasonable discount points (2%). ID: 2984
Chapter ____ bankruptcy is also known as a liquidation proceeding. A.) 13 B.) 7 C.) 11 D.) 5
B.) 7 ID: 2991
What is the loan-to-value if the loan amount is $118,000, the appraised value is $131,000 and the sales price is $135,000? A.) 88% B.) 90% C.) 100% D.) 95%
B.) 90% To determine the loan-to-value ratio, you need to divide 118,000 by 131,000 (the lowest of the sales price or appraised value) to get an LTV of 90%. ID: 2982
What is the primary purpose of a VA Streamline loan? A.) Provide cash-out for eligible veterans B.) Allow veterans to refinance a mortgage at more favorable terms C.) Shorten the loan process for returning combat veterans D.) Allow eligible veterans to assume an existing VA loan
B.) Allow veterans to refinance a mortgage at more favorable terms ID: 2990
The document issued by the federal government certifying a veteran's eligibility for a VA mortgage is known as a A.) Eligibility Certificate B.) Certificate of Eligibility C.) Eligibility of Benefits D.) Certificate of Benefits
B.) Certificate of Eligibility ID: 2952
During the closing, the transfer of title or interest from the seller to the buyer through a written instrument, such as a deed, is known as a A.) Dower B.) Conveyance C.) Quit claim D.) Deed transfer
B.) Conveyance ID: 2916
When evaluating monthly debt, which is NOT considered? A.) Car lease with two months remaining B.) Credit union loan with seven payments remaining C.) Revolving credit card D.) Child support
B.) Credit union loan with seven payments remaining Generally, the lender will not consider installment loan debt with less than ten payments remaining, except for leases, which always count regardless of how few payments remain. ID: 3003
Which would the FHA NOT allow for a purchase price addition? A.) Solar energy systems B.) Hot tubs C.) Financeable repairs D.) Energy related weatherization items
B.) Hot tubs Some FHA loan programs allow financing of energy efficient renovations or repairs. A hot tub would not be an allowable price addition. ID: 3017
To determine net worth, subtract ________ from ________ . A.) Assets/ debt B.) Liabilities / total assets C.) Reserves/ Liabilities D.) Total Assets / Reserves
B.) Liabilities / total assets ID: 2993
When a lender requested title insurance on the subject property at the time of the closing, the title company would issue what type of protection? A.) Hazard Insurance policy B.) Mortgage title policy C.) Fraud policy D.) Owner Policy
B.) Mortgage title policy ID: 3000
Market value can best be defined as a property's A.) Appraised value for property tax purposes B.) Most probable selling price C.) Most recent selling price D.) Listing Price
B.) Most probable selling price ID: 2935
What is the biggest component of a credit score? A.) Types of credit in use B.) Payment history C.) Length of credit history D.) Amounts owned
B.) Payment history 35% of a FICO score is based on payment history. ID: 3025
When can the real estate taxes be disregarded for the purpose of determining debt ratios? A.) When the borrower will be paying these taxes directly without escrow B.) Real estate taxes can never be disregarded when determining debt ratios C.) When the borrower pays an escrow waiver fee D.) When the LTV is below 80%
B.) Real estate taxes can never be disregarded when determining debt ratios ID: 3002
The appraiser indicates that a comparable property has a deck; the subject property does not have a deck. Through matched pair analysis, the appraiser has determined that a deck in that neighborhood is worth $3,000. What is the appropriate way to apply this information when performing the sales comparison approach? A.) Add $3,000 to the subject base B.) Subtract $3,000 from the comps value C.) Subtract $3,000 from the subject base D.) Add $3,000 to the comps value
B.) Subtract $3,000 from the comps value When making adjustments, an appraiser must subtract the value of an additional feature from the comp's value. The subject property is never adjusted. ID: 2948
What is the minimum number of comps required by most secondary lenders to ensure an accurate estimate of value when performing the sales comparison approach? A.) Four B.) Three C.) Two D.) Five
B.) Three A minimum of three comparables is required by most secondary market lenders to ensure an accurate appraisal from sufficient data. ID: 2987
The maximum allowable mortgage for an FHA loan A.) Depends on the interest rate B.) Varies by the county or region the home is in C.) Is set by the lender D.) Can never exceed $417,000
B.) Varies by the county or region the home is in The FHA limits the maximum loan amount it will insure in a given community. ID: 2959
Lois is looking at a house with a sale price of $180,000 and an appraised value of $175,000. What is the most the lender will finance on a conventional 80% loan for this property? A.) $115,200 B.) $144,000 C.) $140,000 D.) $180,000
C.) $140,000 The loan-to-value ratio is based on the lower of the appraised value or the sale price: 80% of $175,000 is $140,000. ID: 2933
Cami is a salaried employee and her bi-weekly pay stub shows $2,200. What is the gross monthly income you can use to qualify Cami? A.) $9,533.33 B.) $4,400.00 C.) $4,766.66 D.) $9,526.00
C.) $4,766.66 $2,200 x 26 / 12 = $4,766.66. ID: 2914
Using ratios of 28/36, a borrower with $635 in monthly consumer debt payments and $39,000 in annual income will qualify for a maximum housing payment of what amount? A.) $1,170 B.) $910 C.) $535 D.) $275
C.) $535 To determine the maximum housing payment, take the annual income and divide by 12 months. The gross monthly income is $3,250. The maximum monthly housing payment is $910 and the maximum combined housing and consumer debt payment is $1,170. Now subtract the $635 monthly consumer debt from the maximum combined debt and this amount is $535. Since the consumer debt combined with the maximum housing payment exceeds the allowable combined ratio, the $535 figure is accurate. ID: 2972
A borrower's stable monthly income is $3,000. He has three monthly debts: $350 car payment, $50 personal loan payment, and $50 credit card payment. What is the maximum monthly mortgage payment he would qualify for using the total debt to income ratio of 36% for a conventional loan? A.) $1,080 B.) $390 C.) $630 D.) $840
C.) $630 Total debt service ratio is calculated as: $3,000 (income) multiplied by (x) 0.36, which equals $1,080. From the $1,080, you must subtract his monthly debts ($350 +$50+ $50), which totals $630. ID: 2883
What is the monthly mortgage insurance payment on an $180,000 loan using a multiplier of 0.65%? A.) $9.75 B.) $65.00 C.) $97.50 D.) $180.00
C.) $97.50 Multiply the loan amount by 0.65% ($180,000 x 0.0065 = $1,170) and remember to divide by the 12 monthly payments ($1,170 / 12 = $97.50). ID: 2988
The loan amount (principal) is $50,000 and the annual interest paid is $5,500. What is the annual interest rate? A.) 9% B.) 10% C.) 11% D.) 12%
C.) 11% To calculate the interest rate, you take the annual interest amount paid ($5,500) and divide by the loan amount ($50,000). ID: 2958
When filling out the loan application, a borrower that has ownership interest in the business that employs her should be marked as self employed when that interest reaches what percentage? A.) 50% B.) 20% C.) 25% D.) 1%
C.) 25% A borrower is considered to be self employed once the ownership interest in the employer reaches 25%. ID: 3004
What is the document that may be used by the VA to determine the maximum mortgage amount? A.) County assessment B.) Recent tax record C.) Certification of reasonable value D.) Sales contract
C.) Certification of reasonable value The CRV, which is issued by the VA, states the value of the subject property based on an approved appraisal. The CRV (or the sale price, whichever is less) may be used to establish the maximum mortgage amount that a veteran may have on a VA-guaranteed loan for that property. ID: 2953
If an appraiser discovers damage to the property that lowers its value, and it is necessary to make the repairs prior to selling the house for the listed value, the appraiser identifies the problems with the amount it would cost to repair the property. This is called A.) Repair costs B.) Depreciation value C.) Cost to cure D.) Estimated value
C.) Cost to cure ID: 2923
An example of functional obsolescence is when the subject property A.) Was the site of a murder B.) Is located next to a gas station C.) Has a single bathroom that can be accessed only through a bedroom D.) Is found to have inadequate insulation
C.) Has a single bathroom that can be accessed only through a bedroom The functional ability of the house is inadequate if the entrance to the only bathroom in the house is through a bedroom and may make the property less marketable. ID: 2907
What appraisal method would NOT be used to determine the fair market value of real estate? A.) Income approach B.) Cost approach C.) Market value approach D.) Sales comparison approach
C.) Market value approach There is no appraisal approach called the market value approach. The other methods can be used to determine fair market value, but each utilizes different data. ID: 2974
Which of these would NOT be considered a recurring debt? A.) Car payment B.) Child Support C.) Monthly cable payment D.) Student loan
C.) Monthly cable payment Utilities are not considered debts because they can be cancelled. ID: 2951
Mortgage Insurance Premium (MIP) may/will A.) Be cancelled for FHA loans when the loan has been paid down to less than 80% of the property's original value B.) Be cancelled for FHA loans when interest rates are low C.) Remain in place throughout the life of the loan if the beginning loan balance is higher than 90% of its appraised value D.) Be cancelled for FHA loans when interest rates are high
C.) Remain in place throughout the life of the loan if the beginning loan balance is higher than 90% of its appraised value Starting 6/3/13, you may no longer remove the MIP throughout the life of the loan if the beginning loan balance is higher than 90% of its appraised value. ID: 2939
During the loan application process, the initial application may be inaccurate or incomplete. Once accurate information has been obtained, the original application A.) Can be discarded once accurate information is received B.) Should be discarded only once the revised application is signed C.) Should always remain in the file with the corrected application D.) Can be discarded even before the revised application is signed
C.) Should always remain in the file with the corrected application The original application should always be maintained in the file, since it contains original dates and signatures. Do NOT have the borrower sign a back-dated revised application. ID: 2917
Section 502 loans are a program of which government entity? A.) Federal Housing Administration B.) Housing and Urban Development C.) USDA Rural Development D.) Veterans Administration
C.) USDA Rural Development The USDA Section 502 loan program either guarantees loans made by approved private lenders or makes direct loans. Also known as the Section 502 Direct Loan Program, this program assists low- and very-low-income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant's repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income. ID: 2943
What type of appraisal has a value based upon what the property value would be when the listed repairs are finished? A.) "As is" appraisal B.) Current Appraisal C.) "Drive By" Appraisal D.) "Subject to" Appraisal
D.) "Subject to" Appraisal Most lenders will not accept a "subject to" appraisal. The repairs need to be finished before an acceptable appraisal is made. ID: 2998
A buyer of a house with a sales price of $100,000 is paying a $10,000 down payment and 2 discount points on the $90,000 loan. What is the total cost of the discount points? A.) $1,000 B.) $2,000 C.) $3,800 D.) $1,800
D.) $1,800 The discount points are figured as 1% of the total loan amount ($90,000) not the sales price. Each discount point costs the borrower $900. Two discounts points cost the borrower $900 x 2 for a total of $1,800. ID: 2884
Jill has a property that appraises for $189,000. Her first mortgage rate is 4.75% and her second mortgage rate is 15%. She has decided that she wants to leave her $53,000 first mortgage alone and just refinance the second. She qualifies for an 85% CLTV. Her second mortgage is for $25,000 but she wants cash to finish her basement. She has $81,150 available as cash. What is her new second mortgage loan amount if the closing costs are $1,500? A.) $160,650 B.) $106,150 C.) $136,000 D.) $107,650
D.) $107,650 First, find the maximum loan amount if the LTV is 85%: $189,000 x 85% = $160,650. Then subtract the amount of her first mortgage to maintain that 85% LTV: $160,650 - $53,000 = $107,650 ID: 2929
Sally's earns $17.20 per hour and typically works 40 hours per week. What is her gross monthly income? A.) $2,752.00 B.) $2,979.04 C.) $2,867.73 D.) $2,981.33
D.) $2,981.33 To find the monthly income for an hourly worker, multiply the hourly rate by 40 to find the weekly rate; multiply that by 52 weeks per year then divide by 12 months: $17.20 x 40 = 688 x 52 = $35,776 / 12 = $2,981.33 ID: 2941
What dollar amount would be paid if the transaction charges 3 points, the loan amount being $700,000, and the sale price being $750,000? A.) $22,000 B.) $20,000 C.) $22,500 D.) $21,000
D.) $21,000 Points are charges on the loan amount and a point equals 1%, so 3% of $700,000 is $21,000. ID: 2975
The sales contract in Joe's file states the agreed purchase price is $227,000. The closing costs are $5,200. The seller is paying $1,000 in closing costs on a $175,000 loan amount. What is the acquisition cost? A.) $180,200 B.) $179,200 C.) $232,200 D.) $231,200
D.) $231,200 The acquisition cost includes the sale price plus the buyer's closing costs. From that, you can subtract any of the closing costs the seller will pick up: $227,000 + $5,200 - $1,000 = $231,200 ID: 2962
Susan is purchasing a house for $200,000. It was appraised for $220,000. In order to avoid paying PMI on this conventional loan, how much should Susan put down on this house? A.) $22,000 B.) $20,000 C.) $7,700 D.) $40,000
D.) $40,000 She needs a down payment of 20% for an LTV of 80% to avoid paying PMI. This is based on the lesser of the appraised value or the purchase price. ID: 2966
Sara has been on her job for 10 years. She has a pay stub dated 9/30 with year-to-date income totaling $46,637.50. She received a raise on June 30th, and she always works 40 hours a week. The bi-weekly gross pay on her current pay stub was $2,625.00. What is the monthly income derived from the most aggressive approach that the underwriter may accept? A.) $4,929.17 B.) $2,080.00 C.) $5,181.94 D.) $5,687.50
D.) $5,687.50 The only variable that reflects the raise and the current income after the raise is the current bi-weekly pay stub of $2,625. Figure the annual income based on this figure and divide by 12 ($2,625 x 26 (bi-weekly payments in a year) / 12 = $5687.50). ID: 2942
Lucy has just signed a sale contract on a purchase for $180,000. She has $27,000 cash to provide at closing. Her closing costs are $3,200 and the seller is paying $1,000 of the closing costs. She qualifies for a 90% LTV mortgage. How much money does she have left over, or how much is she short, for closing? A.) $5,800 short B.) $5,800 left over C.) $6,800 short D.) $6,800 left over
D.) $6,800 left over To calculate the money Lucy needs for closing, remember she qualifies for a 90% LTV, so she needs to bring 10% of the sale price to closing ($180,000 x 10% = $18,000). The closing costs are $3,200 and the seller is paying $1,000 of it, so: $3,200 - $1,000 = $2,200. Therefore, Lucy needs to bring a total of ($18,000 + $2,200) $20,200 to closing. Lucy has $27,000 in available funds, so: $27,000 - $20,200 = $6,800 left over. ID: 2934
A borrower's stable monthly income is $2,500. What is the maximum monthly total housing payment he would qualify for using the conventional housing expense ratio of 28%? A.) $1,025 B.) $725 C.) $900 D.) $700
D.) $700 The housing expense ratio is calculated as: $2,500 (income) multiplied by (x) 0.28, which equals $700. ID: 2882
To calculate the housing expense ratio for a conventional loan, you take stable monthly income and multiply by A.) 36% (0.36) B.) 29% (0.29) C.) 41% (0.41) D.) 28% (0.28)
D.) 28% (0.28) ID: 2969
To be eligible for an FHA loan, one must be A.) A low-income borrower B.) Purchasing a home in a designated target area C.) A first-time homebuyer D.) A U.S. citizen and permanent resident, or non-permanent resident with a working visa
D.) A U.S. citizen and permanent resident, or non-permanent resident with a working visa ID: 2968
Which statement concerning homeowners association fees and the 1003 loan application is FALSE? A.) Association fees must be included on the 1003 when they are to be paid directly by the borrower monthly B.) Association fees must be included on the 1003 when they are to be paid directly by the borrower annually C.) Association fees must be included on the 1003 when they are to escrowed D.) Association fees are never required to be included on the 1003
D.) Association fees are never required to be included on the 1003 ID: 3015
What is NOT one of the factors underwriters consider in the decision whether to grant the mortgage loan? A.) Character B.) Capacity C.) Credit D.) Cause
D.) Cause Among the factors that underwriters generally consider when deciding whether or not to grant the loan are: Capacity, Collateral, Credit, Character, and Conditions. The underwriter does not consider cause. ID: 2978
What is the name of the document issued by the federal government to verify that a veteran meets the necessary qualifications for a VA mortgage? A.) Qualification Verification B.) Benefits Certificate C.) Discharge Certificate D.) Certificate of Eligibility
D.) Certificate of Eligibility ID: 2989
The Uniform Residential Appraisal Report is used for all of these properties EXCEPT A.) Single-family new construction B.) Single-family homes C.) Individual units in a PUD D.) Condominiums
D.) Condominiums The URAR is used for single-family homes, individual units in a planned unit development (PUD), or other one-family properties. This form is not designed for appraising condominiums, cooperative units, or multi-family investment properties. ID: 2965
The UFMIP is charged on what type of mortgage loans? A.) VA loans B.) Subprime loans sold to FNMA C.) Conforming loans sold to GNMA D.) FHA Loans
D.) FHA Loans ID: 2964
The correct calculation used to determine gross monthly income, for a borrower paid by the hour, is A.) Hourly rate x hours worked weekly x 4.33 B.) Hourly rate x hours worked weekly x 4 x52 /12 C.) Hourly rate x hours worked weekly x 4 D.) Hourly rate x hours worked weekly x52 /12
D.) Hourly rate x hours worked weekly x52 /12 The correct calculation is hourly rate x number of hours worked weekly x 52 (weeks in a year) / 12 (number of months). Always calculate the income to the year and divide by 12. This will allow for the months that have more or less than exactly 4 weeks. Any other calculation will not give you the correct amount. ID: 2950
Which is the correct formula to calculate an hourly wage when determining the borrower's gross monthly income? A.) Hourly rate x weekly hours worked x 4.33 B.) Hourly rate x weekly hours worked x 4 C.) Hourly rate x weekly hours worked x 4.33 /12 D.) Hourly rate x weekly hours worked x 52 / 12
D.) Hourly rate x weekly hours worked x 52 / 12 To convert a person's hourly wages to monthly earnings: Multiply the hourly wage by 40 (hours in a work week), then multiply by 52 (weeks in a year), finally divide by 12 (months in a year). ID: 3014
In reference to a loan closing, per diem interest is A.) The seller concessions the lender allows the seller to pay for the buyer on a purchase transaction B.) An amount of money the lender pays at the closing, crediting one month of mortgage payments back to the buyer C.) The allowance an employer pays to allow the buyer to miss work to attend the loan closing D.) Interest from the day of closing to the end of the month
D.) Interest from the day of closing to the end of the month The per diem is the prorated amount of interest that the borrower pays to the lender for borrowing the money from the closing to the end of the month. ID: 2927
The maximum amount guaranteed for a VA loan A.) Cannot exceed $144,000 B.) Depends on the interest rate C.) Is set by the lender D.) Varies by the amount of the entitlement an eligible veteran has
D.) Varies by the amount of the entitlement an eligible veteran has The VA sets a maximum guarantee amount, known as the entitlement, which determines how much guarantee assistance a veteran can get on a VA loan. ID: 2960
States in which title is conveyed to the mortgagee are referred to as A.) Title theory states B.) Equitable theory state C.) Lien theory state D.) Intermediary theory states
A.) Title theory states In title theory states, title is conveyed to the mortgagee until the debt is repaid in full. ID: 2945
Area median income is a consideration for which type of loan? A.) USDA Rural Development B.) Conforming C.) FHA D.) VA
A.) USDA Rural Development ID: 2911
Which type of loan does NOT require mortgage insurance of any kind when the LTV is greater than 80%? A.) USDA Rural Development B.) Subprime C.) Conforming D.) FHA
A.) USDA Rural Development USDA Rural Development loans do not require mortgage insurance of any kind, even with loans above 80% LTV. ID: 3016
Generally speaking, a borrower who gets an FHA loan is expected to make the property his or her primary residence for at least A.) 6 months B.) 12 months C.) 24 months D.) Until the loan is paid down to 80% LTV
B.) 12 months FHA loans require that borrowers occupy the property as their principal residence for at least 12 months, although there are some exceptions, for example if the borrower is transferred for work. ID: 2961
The value of an improvement is equal to A.) What it actually contributes in value to that piece of real estate B.) Only what the owner spent on materials necessary to make the improvement C.) The amount the owner adds to the selling price of the home when the improvement is made D.) What it actually cost to mane the improvement in both materials and labor
A.) What it actually contributes in value to that piece of real estate A particular item or feature of a property is only worth what it actually contributes in value to that piece of real estate. ID: 2967
Jim's gross monthly income is $4,500 per month and his wife Jan's is $3,700. They have a car payment for $320 a month and $175 a month in credit card debt. They also have a 401K loan repayment of $475 with eight months remaining. What is the maximum monthly house payment they qualify for, including PITI, with a conforming loan and acceptable ratios of 28/36? A.) $2,296 B.) $1,801 C.) $2,457 D.) $1,326
A.) $2,296 First, add their gross monthly incomes together: $4,500 + $3,700 = $8,200. The lender allows a 28% housing ratio: $8,200 x 28% = $2,296. Now, the lender allows a 36% debt service ratio: $8,200 x 36% = $2,952. Let's subtract the debt (do not include the 401K payment since 401k loans are not included in the debt ratio): $2,952 - $320 - $175 = $2,457. They must qualify under both ratios, so the lower figure is the maximum they can qualify for. Jim and his wife qualify for a maximum monthly mortgage payment of $2,296. ID: 2930
Cory has been on his job for one year. He typically works 42 hours a week making $16 an hour and time and a half for overtime. What is the gross monthly income used to qualify Cory? A.) $2,773.33 B.) $2,981.33 C.) $2,912.00 D.) $2,793.00
A.) $2,773.33 Overtime cannot be considered unless the applicant has been on his job for at least two years, so Cory's overtime cannot be counted but can be used as a compensating factor. To figure his base pay, use this formula: $16 an hour x 40 hours per week x 52 weeks a year / 12 months = $2773.33 gross monthly pay. ID: 2915
Stan makes an offer of $105,000 on a house that was appraised for $112,000. If the seller accepts his offer, how much will Stan have to pay down on an FHA loan (assuming he has a FICO score above 580)? A.) $3,675 B.) $10,500 C.) $5,250 D.) $3,920
A.) $3,675 An FHA loan requires at least a down payment of 3.5% of the home's purchase price or appraised value, whichever is less. If his FICO score was between 500 and 579, he would need a 10% down payment. ID: 2944
In a month with 30 days and a purchase closing on the 15th day of the month, how many days of interest would the title agent be required to collect? A.) 16 B.) 30 C.) 15 D.) None
A.) 16 Since interest is paid in arrears and no payment is made the first of the following month, interest must be collected for the number of days left in the month (including the day the loan was funded). ID: 2926
Qualifying guidelines on an FHA loan are A.) 31% housing ratio and 43% total debt to income ratio B.) 29% housing ratio and 41% total income ratio C.) 28% housing ratio and 36% total debt to income ratio D.) 36% hosing ratio and 41% total debt to income ratio
A.) 31% housing ratio and 43% total debt to income ratio FHA loans require income ratios of 31% for housing expenses and 43% for debt to income ratio but can be exceeded with compensating factors. ID: 2940
What is the LTV on a refinance with a loan amount of $135,000 and an appraised value of $200,000? A.) 67.50% B.) 68% C.) 65% D.) 65.70%
A.) 67.50% $135,000 / $200,000 = 67.5%. ID: 2983
If the appraised value of a property is $250,000, the sales price is $235,000, and the loan amount is $200,000, what is the LTV? A.) 85% B.) 90% C.) 80% D.) 75%
A.) 85% 200,000 / 235,000 (the lower of the appraised value and the sale price) = 85%. ID: 2924
What is an advantage of a VA loan? A.) A down payment is not required B.) Interest rates are lower than with conventional loans C.) PMI is required only for loans exceeding 95% LTV D.) An appraisal is not required
A.) A down payment is not required ID: 2977
When applying for a VA loan, an inactive veteran needs to supply the DD-214 as proof of A.) Discharge B.) Eligibility C.) Appraised Value D.) Financial Stability
A.) Discharge ID: 2996
What may have a negative impact on the value during an appraisal? A.) Excessive seller concessions for borrower closing costs B.) A second mortgage from a traditional lending institution C.) The amount of down payment the borrower is contributing D.) Date of closing
A.) Excessive seller concessions for borrower closing costs The seller concession, which in many cases can be a very large sum of money provided to the buyer, is considered to be figured into the sale price. Unusually large concessions may be deducted from the value of the property if they are not common for an area. ID: 2994
Your borrower has just graduated college and has always lived with his parents. He has a good job, but has no established reporting credit, but has paid his miscellaneous bills on time. Though he has no down payment, his parents are giving him $5,000 so he can buy a house. The best type of loan he should apply for is a(n) A.) FHA loan B.) VA Loan C.) Conforming Loan D.) Subprime Loan
A.) FHA loan He should apply for an FHA loan, as they will accept alternative credit and have programs for down payment assistance. ID: 3020
What entity created the Uniform Residential Loan Application, form 1003? A.) Fannie Mae B.) Freddie Mac C.) HUD D.) Individual broker create their own
A.) Fannie Mae ID: 2976
A borrower wants to purchase a house that happens to be in a designated special flood hazard area. Her lender will most likely require her to have flood insurance A.) For the life of the loan B.) Until her LTV is 80% C.) Until her LTV is 78% D.) Flood insurance is not required if she has homeowner's insurance
A.) For the life of the loan When a home is in such a designated flood zone, the lender will require some form of flood insurance for the life of the loan. ID: 2922
The title insurance protects a title and the process of the closing against risk of defects, forgeries, and errors that occur during what time period? A.) From the time the land was first registered to the time of closing B.) Three months before the closing and three months after C.) From the time of closing till the next transfer of title D.) Ten years before the closing to ten years after
A.) From the time the land was first registered to the time of closing ID: 2963
The calculation for figuring a loan-to-value ratio is A.) Loan amount divided by appraised value B.) Loan amount multiplied by appraised value C.) Appraised value multiplied by loan amount D.) Appraised value divided loan amount
A.) Loan amount divided by appraised value ID: 2949
What is the required down payment on a USDA Rural Development loan? A.) No down payment is required B.) 3.50% C.) 10% D.) 5%
A.) No down payment is required ID: 2992
What type of appraisal has a value based upon the property as it stands, with no completed repairs calculated into the value? A.) "Subject to" Appraisal B.) "As is" appraisal C.) Current Appraisal D.) "Drive By" Appraisal
B.) "As is" appraisal ID: 2997
Lawrence's stable monthly income is $7,200 and he has the following monthly bills: credit card, $150; car payment, $325; and child support, $500. How much can he afford for a house payment (including PITI), if debt ratios are 28/36? A.) $2,241 B.) $1,617 C.) $1,743 D.) $2,016
B.) $1,617 Using the payment-to-income ratio of 28%, we get $2,016. But using the total debt service ratio of 36% for this loan, we find: $7,200 (income) multiplied by 0.36, which equals $2,592. From that, you subtract monthly debts (150 + 325 + 500) which leaves $1,617. You must choose the lesser of the two. ID: 2932
Susan has a FICO score of 620. What is the minimum down payment (cash investment) contribution for her to get an FHA loan on a $75,000 home? A.) $1,500 B.) $2,625 C.) $2,250 D.) $750
B.) $2,625 The minimum down payment required on an FHA loan is 3.5% when the borrower's FICO score is 580 or above. ID: 2986
What is the basic entitlement available to veterans for a VA loan? A.) $78,000 B.) $36,000 C.) $144,000 D.) $55,000
B.) $36,000 All eligible veterans receive $36,000 of basic entitlement, or maximum guarantee amount. 2981
Ellen calls to ask what an interest only payment would be with a loan amount of $575,000, an interest rate of 8.625% for 30 years. What payment would you give her? A.) $4,472.29 B.) $4,132.81 C.) $4,070.35 D.) $3,972.57
B.) $4,132.81 To find the interest payment, multiply the loan amount by the rate to find the annual interest, then divide by 12 to find the monthly interest amount: 575,000 x .08625 / 12 = 4132.81 ID: 2918
The down payment requirement for a USDA loan can be as little as A.) 5% B.) 0% C.) 3.5% D.) 10%
B.) 0% ID: 2954
When qualifying a borrower, an installment debt does NOT need to be included in the debt ratio when the balance of the term of repayment is less than how many months? A.) 5 B.) 10 C.) 15 D.) 20
B.) 10 Consumer debts that have less than 10 months of payments remaining do not need to be included for the purpose of calculating debt ratios. However, an installment debt with fewer monthly payments remaining also should be considered as a recurring monthly debt obligation if it significantly affects the borrower's ability to meet his or her credit obligations ID: 3006
VA loans allow for a maximum LTV of what percent? A.) 95% B.) 100% C.) 90% D.) 97%
B.) 100% VA loans allow 100% financing (no down payment), and also allow the seller to pay the borrower's closing costs. ID: 2973
When refinancing in year four of a five-year loan, with a prepayment penalty of 1%, how much is the penalty on a $150,000 loan? A.) $1,200 B.) $300 C.) $1,500 D.) $900
ID: 3007 The prepayment penalty is the full 1% if paid at any point during the penalty term. In this case, $150,000 x 1% (0.01) = $1,500. ID: 3007
