Real Estate Part 4
The purchase price of the home Leroy is buying is $300,000. He's putting $100,000 down and is paying three discount points. How much will this cost?
$6,000
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
Related to real estate financing, how much is a point?
1% of loan value
John and Amy purchased a builder's home warranty when they bought their home. They have found structural damage that could be a detriment to their home. On average, how many years does a home warranty cover structural damage?
10 years
A 20-unit apartment building sells for $5 million. The property can bring in $400,000 in annual gross income. What is the gross income multiplier (GIM)?
12.5
What's the rate of capitalization of a property generating net property income of $25,000 per year that's valued at $312,500?
8%
Which of the following is Fannie Mae most likely to purchase?
A conventional fixed-rate mortgage issued by a commercial bank
If Freddie Mac didn't exist, which of the following would be a likely effect?
A decrease in the amount of credit available to loan originators
Freddie Mac is ______.
A government-sponsored enterprise
April's mother is getting older, lives alone, and needs care. April's house is too small for both of them. She has a solid amount of equity in the home but isn't in a position to move. Instead, she decides to take out a loan to build an 800-square-foot addition onto the existing home for her mom. What type of loan might April likely consider to finance the addition?
A home equity loan
Lamar closes on his new home next week. It's a 37-year-old split level, so his agent asked if he's interested in purchasing a home warranty. "Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues?" What's the agent's best response to Lamar's question?
A home warranty covers things the inspection didn't address, like appliances, as well as structural issues that occur.
Charles is selling his property to Seth. Charles is financing part of the transaction for Seth, who will make payments to Charles while Charles retains the property title. What is this an example of?
A land contract
What's a participation certificate?
A mortgage-backed security issued by Freddie Mac
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?
A non-conforming loan
Which of the following describes a Ginnie Mae investment?
A safe investment
According to ANSI standards, which of the following would be included in finished square footage?
A stairwell leading from finished space to finished space
In which of the following situations is a lender prohibited from enforcing an alienation clause?
A transfer between parent and child
o which of the following borrowers might a lender be most likely to recommend an FHA loan?
A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores
Which type of loan's interest rate fluctuates with the economic index to which it's tied?
Adjustable rate
Your buyer client is paying cash and wants to know when and whether to purchase property insurance. How do you advise your client?
Advise your client that insurance is there to protect him, and it should be purchased upon transfer of ownership.
Which of the following is considered an ineligible property type for a Fannie Mae-purchased loan?
Agricultural property
Which of the following is a true statement about FHA financing?
An FHA loan is usually more attractive to borrowers who have lower credit scores and down payments.
When a buyer takes over the seller's original loan with the lender's permission, this is called ______.
An assumption
Mary is assuming Tom's loan. She wants to be sure she has an accurate loan payoff amount. What document will the lender prepare for her?
An estoppel certificate
The Appraiser Qualifications Board has set a minimum of 75 hours of appraiser education for which category of appraisers?
Appraiser trainee
What type of value is of interest to taxing authorities?
Assessed value
Margot is looking for a 10-year loan with regular affordable monthly payments. In eight years, she'll inherit a good chunk of money from her grandmother and be able to pay off the remaining loan amount. What kind of loan might be best for Margot?
Balloon loan
What kind of mortgage involves two or more properties pledged as security for repayment of a loan?
Blanket
A ______ is often used in commercial applications when two or more properties are pledged as security for repayment of the loan.
Blanket mortgage
Monica received a promotion at work that requires her to relocate. Because of the timing of her promotion, she'll need to buy a new house in her new city before her current one is sold. So, she won't have any equity from her current home to make a down payment on the new house. What loan option would allow her to make the purchase before selling the old house?
Bridge loan
Which loan is a type of gap financing that is used temporarily until the consumer can obtain permanent financing?
Bridge loan
After switching careers, Alice just graduated from culinary school and is looking to purchase a house. Until she gets her feet wet with her new job, she knows the cost of living with her mortgage is going to be tight. Which mortgage might help her manage her expenses each month?
Budget
Sam has a mortgage payment that includes his property taxes and property insurance. What type of mortgage does Sam have?
Budget
Which of the following is an action borrowers take to temporarily lower the interest rate on their mortgage loan?
Buydown
Becky's client asked, "Who contributes to the escrow account to maintain the proper funds for insurance payment?" How should she respond?
Buyer
Gloria is an insurance underwriter who is researching a policy for a homeowner. Among the tools she uses to determine eligibility and premium rates is the _______ report.
CLUE
The Appraiser Qualifications Board has set a minimum of 300 hours of appraiser education for which category of qualified appraiser?
Certified general real property appraiser
The Appraiser Qualifications Board has set a minimum of 200 hours of appraiser education for which category of qualified appraiser?
Certified residential real property appraiser
Which of these items is a demand deposit?
Checking account
What type of loan meets certain criteria that are accepted by Fannie Mae and Freddie Mac?
Conforming loan
Commercial banks offer interim financing in the form of ______ loans.
Construction
Jimmy owns a vacant piece of land. He plans to build a home on the land and then sell it. What type of loan is he most likely to acquire to finance this project?
Construction
A local company wants to build a new office building. What type of loan will it most likely be seeking from its commercial bank?
Construction loan
What acronym can be used to remember factors that influence real property value?
DUST
Which factor influences property value and addresses questions such as, "What's the market like?" and "Are there more buyers than sellers, or vice versa?"
Demand
What's the primary source of funds for commercial banks?
Demand deposits
Bethany has agreed to purchase Derrick's property using a land contract. Who holds legal title to the property during the term of the loan?
Derrick
The ______ method converts a single year's expected income (or an annual average) into a market value.
Direct capitalization
Which of the following analyzes net operating income (NOI) for a single year, and is used when the property's income isn't expected to vary much over time?
Direct capitalization
A home equity line of credit (HELOC) is based on the homeowner's available ______.
Equity
Insurance monthly premiums are taken from which account?
Escrow
Lydia put the minimum 3.5% down on her $210,000 home. She'll have to pay an MIP. What type of loan does Lydia have?
FHA
Which of the following acronyms is used to represent Fannie Mae?
FNMA
Of the institutions listed, which of these is viewed only as a secondary mortgage market player?
Fannie Mae
Which institution was created as the Federal National Mortgage Association in 1938?
Fannie Mae
Conventional loans may be conforming or nonconforming, depending on whether they meet ______ guidelines.
Fannie Mae and Freddie Mac
Which of the following is the best example of investment leverage?
Financing most of an investment and putting very little cash in
To make valid computations of adjustments for the sales comparison approach to value, elements of comparison must be applied in a specific order. Which element is applied first?
Financing terms and cash equivalency
Rico is an appraiser who is performing a valuation on a property. What's another term for what Rico is doing?
Formal appraisal
In terms of function and purpose, which of the following is most similar to Fannie Mae?
Freddie Mac
Homes in a new home development have been built with a floor plan that doesn't appeal to today's buyers. In a cost approach valuation of the houses, what sort of depreciation will the appraiser apply?
Functional obsolescence
What two types of data does an appraiser gather?
General and specific
The Government National Mortgage Corporation was created in 1968 under the Department of Housing and Urban Development (HUD) and is more commonly known as ______.
Ginnie Mae
Which institution guarantees mortgage-backed securities with the full faith and credit of the United States?
Ginnie Mae
Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?
Her down payment of $50,000 isn't at least 20% of the purchase price.
Identifying the purpose of the appraisal leads the appraiser to do what next?
Identify data needed.
Ginnie Mae only guarantees mortgage-backed securities that contain loans ______.
Insured or guaranteed by U.S. government agencies
With a straight mortgage, what type of payments are made up until the end of the loan term?
Interest
How does Ginnie Mae function differently than Fannie Mae and Freddie Mac?
It doesn't buy loans or issue mortgage-backed securities.
Which of the following statements about Freddie Mac is correct?
It sells participation certificates to investors to raise funds to purchase additional loans from lenders.
What's the purpose of a personal insurance score?
It's a way for insurance companies to rate the likelihood of an applicant filing an insurance claim.
What's another name for a nonconforming loan?
Jumbo loan
What could be a consequence if there were no secondary mortgage market?
Lenders might not have funds available to make new loans to the public.
The ______ category of appraiser licensure requires a minimum of 1,000 hours of applicable experience.
Licensed residential real property appraiser
Freddie Mac's mission is to provide ______, stability, and affordability in the U.S. housing market.
Liquidity
Which outcome would be likely if the secondary mortgage market didn't exist?
Loan originators would have fewer funds available for lending.
Which of the following loan types can be packaged into a mortgage-backed security eligible for guarantee by Ginnie Mae?
Loans insured or guaranteed by U.S. government agencies
What attracts borrowers to adjustable rate mortgages?
Lower initial interest rate
Which type of payment is made at the end of the term for a balloon mortgage?
Lump sum
John is considering purchasing an office building and is trying to determine whether or not it's a good investment. The methods of income approach he may use when estimating the value are all of the following EXCEPT for which?
Market or sales comparison
What's the price at which a willing buyer and a willing seller would strike a deal given normal market conditions?
Market value
Most often, what's the first course of action for disputed home warranty claims?
Mediation
Who originates their own loans?
Mortgage bankers
What is the borrower charged for all FHA loans?
Mortgage insurance premium
Which of the following is the price a lender believes the property will bring at a foreclosure sale?
Mortgage value
Private loan companies may be found in many places. There are ______, regional, and local lenders, and even individual entrepreneurs who loan money.
National
What entity insures credit union national deposits?
National Credit Union Share Insurance Fund
You're about to take a listing that has a safe room: 600 square feet of attic space that's completely finished, has a permanent heat source, and is accessed via a pull-down stairway. Can you add this to the total livable square feet?
No, because it lacks direct access from the main living area.
While Fannie Mae considers total and housing debt-to-income ratios in its underwriting process, Freddie Mac considers ______.
Only total debt-to-income
For 25 years, Isadora loved being her own boss, but now she's getting tired of the day in, day out tedium of running her business. She's ready to retire and move to a tropical island. She decides to sell her entire business in one fell swoop: the property together with all the equipment and furnishings. What type of loan would the buyer need to obtain?
Package
Several actions take place on the secondary mortgage market. Which of these is a common activity?
Packaging loans into mortgage-backed securities
Joe works for a life insurance company that funds commercial investment projects and often insures these projects by insisting on an equity position. What type of financing does this describe?
Participation
Life insurance companies sometimes like to insure their investment in commercial projects by insisting on an equity position. This is known as ______ financing.
Participation
The fewer properties on the market, the greater the scarcity. What's the effect on prices?
Prices are pushed upward.
What are the types of institutions that issue loans directly to consumers commonly called?
Primary market players
What does PITI stand for?
Principal, interest, taxes, insurance
Sophie only has 15% to put down on her new home. What might the lender require in order for Sophie to obtain conventional financing?
Private mortgage insurance
What may the lender require if the borrower is unable to put at least 20% down on a conventional loan?
Private mortgage insurance
Which of the following is one of the desired outcomes of Freddie Mac's activities?
Provide stability in the U.S. housing market
The Hendersons don't have enough money to make the full 20% down payment their institutional lender requires. To close the sale, the seller is willing to finance a loan for the amount between the home's list price and what the institutional lender is willing to loan. What's this type of financing called?
Purchase money mortgage
What type of arrangement allows the buyer to retain title to the property, but places a security interest in the property on behalf of the seller?
Purchase money mortgage
What factors directly affect an adjustable rate mortgage?
Rate, index, and margin
What does a home warranty provide?
Repair or replacement of system components and appliances that fail due to age, standard wear and tear, or defects (both minor and major)
Which of the following is a significant drawback to an FHA loan as compared to conventional financing?
Required mortgage insurance must remain in place for the life of the loan.
Institutions that purchase loans, package them into mortgage-backed securities, then sell these to investors may commonly be referred to as ______.
Secondary market players
With a land contract, who retains the title to the property?
Seller
Pam is taking out a mortgage for her home purchase. Which of the following is a true statement?
She will be working with lenders in the primary mortgage market.
In which section of the Uniform Residential Appraisal Report would you find data on the subject property's size, shape, zoning, and access to utilities?
Site
What's the first step an appraiser will perform when conducting an appraisal?
State the problem.
Which of the following best defines capitalization rate?
The expected rate of return on investment
The capitalization process uses a capitalization rate, which is based on what?
The performance of comparable properties
The secondary mortgage market serves a very important role in real estate finance. Which of these statements best describes that role?
The secondary market purchases loans from primary lenders and helps keep credit available to loan originators.
If there is some kind of defect on a property's title, what effect does this level of transferability have on the property's value?
The value falls.
Which of the following statements is true of investment properties?
They can be leveraged.
Which of the following is a true statement about credit unions?
They have nonprofit status.
What's the intended use of the Uniform Residential Appraisal Report?
To evaluate the subject property for a mortgage finance transaction
Which of the following best describes a home equity line of credit?
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
Which factor that influences value considers the property's function?
Utility
Sgt. Johnson is an active member of the Marines. He's been serving for 10 years. He wants to buy a home with no money down. What loan option seems like the best fit?
VA
Which of the following is considered an ineligible property type for which a loan to purchase or refinance wouldn't be purchased by Fannie Mae?
Vacant lot
Which of the following terms means the price a property is worth to its owner as currently enjoyed?
Value in use
When is an elevation certificate required?
When attempting to obtain flood insurance in some areas
Manuel is selling his home to Selena. He has an existing loan that he'll continue to make payments on, and he's extending credit to Selena for the balance of the purchase price. She will make monthly payments to him. What type of financing are the parties using in this transaction?
Wrap-around loan
Victor bought a property from Yolanda for $200,000. Under the terms of a land contract, Victor agreed to pay Yolanda in monthly installments of $4,000 over the course of 50 months. Until Victor pays Yolanda the $200,000, who retains the title?
Yolanda
When would a lender require a mortgage insurance premium?
he borrower has an FHA mortgage.