Chapter 8
A veteran used $43,000 of his entitlement when purchasing his first home. If he has a guarantee of $106,025, what loan amount can he obtain without making a down payment?
The answer is $252,100. $106,025 - $43,000 = $63,025 × 4 = $252,100.
A couple wants to use the husband's VA eligibility to obtain a VA loan in order to purchase a $250,000 house with no money down. The lender will use qualifying ratios of
The answer is 41 only.
What is the loan-to-value amount based on FHA loans requiring a minimum down payment of 3.5%?
The answer is 96.5%. 100% - 3.5% = 96.5% loan to value.
A veteran is willing to allow his VA loan to be assumed, but wishes to regain his ability to obtain another VA loan. He must ask the borrower to provide him with
The answer is a substitution of entitlement.
In order for the borrower to refinance a loan using the FHA streamline program, the mortgage must
The answer is already be FHA insured.
A novation of a VA loan would indicate that the veteran
The answer is has been relieved from all obligations on the loan.
A veteran is no longer liable for a VA loan in any of the following situations EXCEPT
The answer is the veteran is active duty.
What is the PITI on an FHA loan with a price of $170,000 and an interest of 5.5% for a 30-year term, monthly taxes of $166, and a monthly hazard insurance premium of $60?
The answer is $1,290.31. $170,000 × 96.5% = $164,050 × 1.75% = 2,870.88 + $164,050 = $166,920.88 final loan amount. Annual MIP paid monthly: $164,050 × 0.85% = $1,394.43 ÷ 12 = $116.20; P&I: $166,920.88 × 5.68 = 948,110.60 ÷ 1,000 = $948.11. Final step is to add everything together to get the PITI amount: $948.11 + $116.20 + $166 + $60 = $1,290.31.
What is the PITI on an FHA loan with a price of $160,000 and interest of 6.5% for a 30-year term, annual taxes of $2,000, and an annual hazard insurance premium of $900?
The answer is $1,345.50. $160,000 × 96.5% = $154,400 x 1.75% = $2,702 + $154,400 = 157,102 final loan amount. Convert annual taxes to monthly: $2,000 ÷ 12 = $166.67; monthly hazard insurance: $900 ÷ 12 = $75; monthly MIP: $154,400 × 0.85% = $1,312.40 ÷ 12 = $109.37; calculate P&I: $157,102 × 6.33 = 994,455.66 ÷ 1,000 = $994.46. Final step is to add everything together to get the PITI amount: $994.46 P&I + $109.37 MIP + $166.67 taxes + $75 hazard insurance = $1,345.50.
What is the PITI on an FHA loan with a price of $189,000 and an interest rate of 5.5% for a 30-year term, annual taxes of $2,300, and annual hazard insurance premium of $750?
The answer is $1,437.44. $189,000 × 96.5% = $182,385 x 1.75% = $3,191.74 + 182,385 = 185,576.74 final loan amount. Calculate monthly MIP: $182,385 × 0.85% = $1,550.27 ÷ 12 = $129.19; monthly taxes: $2,300 ÷ 12 = $191.67; monthly hazard insurance: $750 ÷ 12 = $62.50; P&I: $185,576.74 × 5.68 = 1,054,075.88 ÷ 1,000 = $1,054.08. Final step is to add everything together to get the PITI amount: $1,054.08 + $129.19 + $191.67 + $62.50 = $1,437.44.
What is the annual MIP paid monthly on an FHA loan with a contract price of $150,000?
The answer is $102.53. $150,000 × 96.5% = $144,750 × 0.85% = $1,230.38 ÷ 12 = $102.53.
A veteran has entitlement of $106,025, and is purchasing a home for $480,000 in a county with a loan limit of $424,100. What is the required down payment to meet investor requirements?
The answer is $13,975. With the entitlement of $106,025, he can borrow $424,100. Subtract that from the $480,000 = $55,900. He will need to pay 25% of that as a down payment—$13,975.
A borrower purchasing a home using FHA financing is making the minimum investment of 3.5% to purchase a home priced at $150,000. What is the amount of the up-front MIP premium based on 1.75%?
The answer is $2,533.13. $150,000 × 96.5% = 144,750 × 1.75% = $2,533.13.
A veteran is retiring and wants to purchase a home using a VA loan. She used a previous entitlement of $46,000 in 1989 when purchasing her first home. Based on a guarantee of $106,025, she was able to use her remaining eligibility to obtain a VA loan with no money down in the amount of
The answer is $240,100. $106,025 - 46,000 = $60,025 × 4 = $240,100.
What would be the maximum loan amount to maintain a zero down payment for a veteran who has used $39,250 of entitlement with a county loan limit of $424,100 and current entitlement of $106,025?
The answer is $267,100. $106,025 - $39,250 = $66,775 × 4 = $267,100 maximum loan amount.
What would be the maximum loan amount to maintain a zero down payment for a veteran who has used $36,000 of entitlement with a county loan limit of $417,000 and current entitlement of $104,250?
The answer is $273,000. $104,250 - $36,000 = $68,250 × 4 = $273,000.
When using the FHA 203(k) program, the minimum amount for the rehab costs must be at LEAST
The answer is $5,000. This amount makes it cost-effective for lenders participating in this program because an escrow account is set up and administered after closing.
A borrower is purchasing a home using FHA financing with a contract price of $180,000. The appraisal reflects a value of $175,000. What will be the required minimum down payment amount to meet FHA guidelines?
The answer is $6,125. This is 3.5% of the appraised value of $175,000. FHA down payment requirements are based on the loan amount from the contract or the appraised value, whichever is less.
A buyer is purchasing a town house for $180,000 and wants to use an FHA loan. How much money must the borrower have for a down payment?
The answer is $6,300. FHA mortgage loans require a minimum down payment of 3.5% of the sales price. $180,000 × 0.035 = $6,300.
The borrower has an accepted contract with a $190,000 sales price and a $3,000 seller contribution. What will be the borrower's minimum required investment to meet FHA guidelines?
The answer is $6,650. The seller contribution does not apply to the down payment requirement of 3.5% from the borrower, so $190,000 × 3.5% = $6,650.
With a loan guarantee of $104,250, a veteran wishing to purchase a home in Alaska would be eligible for a mortgage loan of
The answer is $625,500. Alaska is categorized as a high-cost area, so an additional 50% is added to the loan limit. 4 × $104,250 = $417,000 × 50% = $208,500 + 417,000 = $625,500.
If a veteran's total monthly housing expense plus other long-term debts is $2,400, approximately how much annual income will be needed to qualify for a VA loan?
The answer is $70,243.90. The veteran's monthly payments cannot exceed 41% of the month's total gross income. $2,400 ÷ 41% = $5,853.66 × 12 = $70,243.90 (round up to $70,234).
All FHA mortgage loans require a minimum down payment of
The answer is 3.5% of the sales price.
FHA loans require a minimum down payment of
The answer is 3.5%. This is the minimum amount required as part of the borrower's investment as set by current FHA guidelines.
A couple wants to use the husband's VA eligibility to obtain a VA loan in order to purchase a $250,000 house with no money down. The lender will use qualifying ratios of
The answer is 41 only. To qualify for a VA loan, the veteran's monthly payments, including PITI, utilities, maintenance, repairs, and other monthly obligations, cannot exceed 41% of the month's total gross income with an amount set aside as residual income.
The mainstay of the FHA single-family insurance program that allows the borrower to invest only 3.5% as a down payment and requires any appraisal-required repairs to be completed before closing is the
The answer is FHA 203(b) program. The 203(b) and 203(k) programs require only 3.5% down, but if the 203(b) appraisal indicates needed repairs, they have to be completed before closing. The FHA 203(b) program is the most common Title II program for purchasing single-family homes.
A borrower is purchasing a home using FHA financing. Because the home requires repairs and the seller is not willing to fix the home before closing, the borrower should apply for an
The answer is FHA 203(k). This program allows the purchaser to complete repairs after closing, based on bids and appraisal requirements.
The category of loans insured by HUD to private lenders for the purchase of homes and multifamily properties is identified as
The answer is Title II loans.
Before a VA loan will be approved, there must be a formal estimate of the value of the property, which is called
The answer is a certificate of reasonable value.
VA loans do not require mortgage insurance, but there is a funding fee charged to cover the VA expenses in case of borrower default. The current fee is 2.15% for a zero-down-payment loan for a first-time user. The fee is higher for all of the following EXCEPT
The answer is a veteran receiving compensation for a service-connected disability.
When a property is awarded to a veteran's spouse as a result of a divorce, entitlement can be restored if the ex-spouse is a veteran who substitutes her entitlement or the
The answer is ex-spouse who was awarded the house refinances. The veteran is still liable for the property.
FHA was created to
The answer is insure lenders against default.
Lenders are willing to make low-down-payment FHA loans because the FHA
The answer is insures the entire loan amount. FHA insures 100% of the loan amount, which eliminates the lender's risk.
The VA funding fee may be added to the loan amount but must not exceed the
The answer is maximum loan based on the loan guarantee.
In order for a veteran to receive a release of liability from a purchaser using the novation technique, the new purchaser must
The answer is meet the credit requirements of the originating lender. The lender wants to make sure the new purchaser will be able to make the payments.
On an FHA loan, the seller can contribute up to 6% of allowable closing costs such as any of the following EXCEPT
The answer is moving expenses.
New provisions added to the FHA Home Equity Conversion Mortgage (HECM) include all of the following EXCEPT
The answer is no initial disbursement is allowed.
If a veteran is approved for a novation, the entitlement will
The answer is not be restored until the loan is repaid.
A purchaser assumes a VA loan and agrees to provide a full release of liability for the veteran in case of default on the loan that is accepted by the lender. This is called a
The answer is novation. Novation means starting over with new parties on the loan.
Under the direct endorsement program, an FHA-approved lender will be required to
The answer is qualify the borrower and underwrite the loan.
A widow of a veteran may NOT be eligible to use the deceased veteran's entitlement if the widow
The answer is remarries. A widow who remarries is not eligible for the deceased veteran's entitlement to purchase a home.
General requirements for the restoration of entitlement requires the veteran to
The answer is sell the property and pay the loan in full.
The FHA Good Neighbor Next Door sales program has been expanded to include all of the following EXCEPT
The answer is senior citizens. Senior citizens can take advantage of the HECM program for reverse mortgages. Firefighters are also eligible for the Good Neighbor program.
The FHA has many variations of the basic Section 203 one- to four-family home loan program. The one that may be of help to victims of a natural disaster is
The answer is the 203(h). This program has 100% financing available; it must be filed within one year after presidential declaration of a disaster. The Energy Efficient Mortgage (EEM) can also be used along with the 203(h).
In which scenario can a veteran's entitlement be restored if the loan has been repaid but the property is still owned by the veteran?
The answer is the veteran uses the one-time-only provision.
All of the following statements regarding FHA mortgage insurance are true EXCEPT
The answer is there is no up-front mortgage insurance premium for condominiums.
The direct endorsement program allows a lender to
The answer is underwrite FHA loans without sending them to FHA.
What is the PITI on an FHA loan with a price of $165,450 and an interest rate of 5% for a 30-year term, annual taxes of $1,900, and an annual hazard insurance premium of $850?
The answer is $1,214.62. $165,450 × 96.5% = $159,659 x 1.75% = $2,794.04 + $159,659 = $162,453.04 final loan amount. Calculate monthly MIP: $159,659 × 0.85% = $1,357.10 ÷ 12 = $113.09; convert taxes to monthly: $1,900 ÷ 12 = $158.33; monthly hazard insurance: $850 ÷ 12 = $70.83; P&I: $162,453.04 × 5.37 = 872,372.82 ÷ 1,000 = $872.37. Final step is to add everything together to get the PITI amount: $872.37 + $113.09 + $158.33 + $70.83 = $1,214.62.
What is the PITI on an FHA loan with a price of $175,999 and an interest rate of 5% for a 30-year term, annual taxes of $1,800, and an annual hazard insurance premium of $800?
The answer is $1,264.97. $175,999 × 96.5% = 169,839 × 1.75% = $2,972.18 UFMIP + $169,839 = 172,811.18 final loan amount. Calculate monthly MIP: $169,839 × 0.85% = $1,443.63 ÷ 12 = $120.30; monthly taxes: $1800 ÷ 12 = $150; monthly hazard insurance = $800 ÷ 12 = 66.67; P&I = $172,811.18 × 5.37 = 927,996.04 ÷ 1,000 = $928. Final step is to add everything together to get the PITI amount: $928 + $120.30 + $150 + $66.67 = $1,264.97.