Real Estate Finance Practice Test
Which of the following represents a potential concern when borrowing funds from a pension or retirement plan?
Borrowing without consulting a financial expert can result in unintended consequences, such as income tax liability and loss of retirement income.
What is the 95% rule as it relates to tax-deferred exchanges?
The total value of the property (or properties) being exchanged is at least 95% of the value of the property being sold.
Which of the following are ways a private loan company insulates themselves from the risk of lending funds to a borrower who has had problems securing them elsewhere?
They may charge higher interest, higher fees, and require the borrower provide collateral to secure the loan.
The title is acceptable, and Kathy's attorney Amy has provided a certificate of title opinion. Which of the following will be issued?
title insurance policy
It's possible for the adjustment period on an adjustable rate mortgage (ARM) to have ranges, such as three or ______ years apart.
10 years
Which percentage reflects the top debt-to-income ratio limit for qualified mortgages?
43%
Interest rates that are more than ______ over the current market rate are considered predatory lending.
5%
John uses the VA home loan to purchase property. His mortgage is $200,000. Then, two years later, John defaults on his loan. How much will the VA reimburse the lender?
50,000
secured bond
A bond issued with some form of collateral (i.e. real estate).
corporate bond
A bond that a corporation issues to raise money to expand its business
What is a government-sponsored enterprise?
A private company the U.S. Congress created to make certain borrowing easier and cheaper
Wendy is buying a house from Tom. Tom helps Wendy out by paying for a 2-1 buydown. The lender has given Wendy an interest rate of 5%. Which of the following describes what the buydown will do to Wendy's interest rate?
Her rate will be 3% for the first year, 4% the second year, and 5% after that.
Which of the following best describes the function of a deficiency judgment in the case of a foreclosure?
It allows the lender to recover losses incurred in the foreclosure process.
What does an alienation clause in a promissory note do?
It causes the entire outstanding loan amount to become due if the property is being sold.
When considering the liquidity of financial assets, which category is the least liquid?
M3 the lower numbers are the most liquid
Which organization manages and charters credit unions?
NCUA
NCUA
National Credit Union Administration
Residential property owners don't often default on property taxes. Why not?
Property taxes are usually paid with the monthly mortgage payment.
The FHA has helped to significantly improve the mortgage market through ______.
The introduction of the long-term amortized loan
Direct farm ownership loans from the ______ may be used to buy farmland, construct and repair buildings, and make farm improvements.
USDA farm service agency
municipal bond
a bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks, and schools
revenue bond
a bond that is repaid from the income generated by the project it is designed to finance
Who distributes the trust assets of a person who died?
a successor trustee
Because the buyer traditionally pays for this, page three of the Loan Estimate includes information about a consumer's right to receive a copy of the ______ from the lender.
appraisal
Memoryjet, Inc has developed a new technology for high-volume jump drives. In order to manufacture their new devices they will need to gear up a new production line, which will cost about $85 million. What kind of bond instrument could they use to help secure the funds they need for their new line?
corporate bond
Norma, a real estate licensee, is working with the buyers in a transaction. She suspects mortgage fraud. What should she do?
discuss with her broker
What's a participation certificate?
freddie mac
With a straight mortgage, what type of payments are made up until the end of the loan term?
interest
Which of the following best describes the non-judicial foreclosure process?
it may be used if a deed of trust with a power of sale clause
Your client, Ray, wants to purchase a home listed for $200,000. The home is in a revitalization area, and Ray can purchase it under the Good Neighbor Program. How much will he have to pay for the home?
$200,000, less 50%, plus $100
Shelly's real estate investment strategy is to look for smaller multi-family properties, fix them up, and rent them out. Her investment strategy most closely matches which of the following?
buy and hold
Mutual savings banks have limitations on their lending activities, as specified in their ______.
charter
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 lender immediately
A vendor and vendee are the parties involved when the finance instrument is a ______.
contract for deed
Payment history, age of accounts, credit usage rate, and inquiries are factors considered in calculating a credit score. Which of the following is also considered?
length of credit history
The interest rate on an FHA Section 251 loan is adjusted based on ______.
market indices approved by the FHA
Which term describes a lender temporarily agreeing to suspend payments to help the borrower get caught up?
moratorium (or forbearance)
An industrial development bond is a variety of ______ bond.
municipal bond
A mortgage with a clause that prohibits the lender from suing the borrower for unpaid amounts if foreclosure occurs is called a ______ mortgage.
non-recourse
What percentage of closing costs can be included in a VA loan?
none
Violet purchased a house from Nick, and assumed the existing loan. Nick wants to make sure he isn't liable if Violet ever defaults. What can he do to remove his name from the loan agreement?
request a novation
Which section of a commitment identifies exceptions to title insurance coverage?
section b2
Which of the following statements is true about the annual MIP on an FHA mortgage?
it will decrease each as year as the loan paid down
Which of the following describes a mechanic's lien?
its a specific involuntary lien
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
Borrower Max is reviewing his Closing Disclosure to check the amount of prepaid mortgage insurance, taxes, and interest. In addition to itemizing what his borrower-paid closing costs are, the prepaid section includes ______ for each item.
the applicable time period
Who must provide the buyer and seller with a copy of the closing disclosure?
the buyers lender
What agency receives paper currency prior to its distribution but after it's printed?
the federal reserve
Larry obtained a mortgage from State Bank. Larry owns the property, controls it, and has all the rights that come along with real property ownership. State Bank has an interest in the property and one other right. What is that?
the right to foreclosure of the borrower defaults
Which of the following is true about mortgage brokers?
they dont service the loan beyond placement
The Addams family has an FHA-insured loan. The family's mortgage payment has a fixed interest rate, but after the first five years, the rate will adjust annually. Which FHA loan insurance program are they using?
section 251
There are fewer properties available in the market than there are interested buyers. What type of market does this describe?
sellers market
vPercy is losing his house because he can't make his payments. He owes more than it's worth and just wants to get out from under it. He decides to put it on the market and hope for the best. Percy will likely sell his home through ______.
short sale
