Section 4 Chapter 2
The correct answer is: Seller financing of the purchase of a property.
A "purchase money mortgage" involves: Select one: a. Any mortgage used to finance the purchase of a property. b. A mortgage with an LTV above 80%. c. Seller financing of the purchase of a property. d. A mortgage loan not made by a depository institution, but rather by a private third party.
The correct answer is: Wraparound mortgage.
A buyer locates a seller who will remain responsible for the existing loan. The buyer gives the seller a new increased loan at a higher interest rate. This new loan is called a: Select one: a. Wraparound mortgage. b. Blanket mortgage. c. Combination mortgage. d. Balloon mortgage.
The correct answer is: None of the above.
A conventional loan can be described as: Select one: a. One insured by the Federal Housing Administration. b. One guaranteed by the Veterans Administration. c. One obtained from the Department of Housing and Urban Development (HUD). d. None of the above.
Junior Mortgage
A junior mortgage refers to any mortgage or deed of trust that is subordinate in lien priority. Junior mortgages usually carry a higher interest rate since they also entail greater risk.
The correct answer is: True
A lender can share in the profit of a business venture by entering into a Shared Appreciation Mortgage (SAM). Select one: a. True b. False
The correct answer is: Points and the loan origination fee paid by the buyer.
A lender offers new home financing at an interest rate of 7.95%. When asked to sign the Truth-in-Lending disclosure statement the borrower notices that the APR is shown as 8-1/4%. The APR can be higher than the quoted rate because of: Select one: a. Points paid by the seller. b. Attorney fees. c. Points and the loan origination fee paid by the buyer. d. Assessments charged by the Homeowners Association.
The correct answer is: Partially amortized loan
A loan in which the final payment on principal is exactly equal to the amount of the original loan is known as any of the following EXCEPT: Select one: a. Straight loan b. Partially amortized loan c. Interest only loan d. Term loan
Blanket Mortgage
A loan that covers more than one parcel of real estate is a blanket mortgage. Such mortgages usually contain a partial release clause that allows for the release of a parcel once a certain amount of the loan has been repaid. This type of mortgage is commonly used by builder-developers.
The correct answer is: Balloon mortgage.
A loan where the final payment is larger than any of the previous payments is referred to as a: Select one: a. Blanket mortgage. b. Wraparound mortgage. c. Purchase money mortgage. d. Balloon mortgage.
Graduated Payment Mortgage (GPM)
A mortgage in which the early payments are lower and then gradually increase over the life of the loan is a graduated payment mortgage.
Balloon Mortgage
A mortgage in which the final payment is larger than any previous payment is a balloon mortgage. The payment amount "balloons" on the last installment.
The correct answer is: Adjustable rate mortgage.
A mortgage loan that allows for increases or decreases in the interest rate at specified periods of time, is known as: Select one: a. FHA graduated payment mortgage. b. Adjustable rate mortgage. c. Reversible loan mortgage. d. Roll-over-loan.
Package Mortgage
A mortgage that includes personal as well as real property is a package mortgage. For instance, if a home loan included the washer, dryer, and refrigerator as collateral, then it would be a package mortgage.
The correct answer is: Package mortgage.
A mortgage which includes both real and personal property would be referred to as a: Select one: a. Blanket mortgage. b. Open mortgage. c. Chattel mortgage. d. Package mortgage.
Wraparound Mortgage
A new mortgage that includes the new balance borrowed and the balance owed on an older already existing mortgage is known as a wraparound mortgage.
The correct answer is: seller and buyer jointly.
A seller sells her home to a buyer who assumes her existing loan. If the buyer defaults, who is liable for the balance of the debt? Select one: a. Seller only. b. Buyer only. c. seller and buyer jointly. d. The title insurance company.
Bridge Loan
A short-term loan sometimes used by home-buyers to "bridge the gap" between selling their existing home and buying a new home.
Straight Mortgage
A straight mortgage is one in which interest only is paid during the life of the loan.
Amortized Mortgage
A systematic method of repaying a loan by making regular, equal repayments (usually monthly) so that the loan itself, and all interest on the loan, is reduced to zero by the loan's maturity date is an amortized mortgage
Mortgage Guaranty Insurance Corporation (MGIC)
An independent corporation that insures (guarantees) the top 12 to 30% of the principal on loans made by approved lenders to qualified borrowers.
The correct answer is: Negative amortization.
Bill takes out an adjustable rate mortgage which has a payment cap whereby he can make a specified minimum payment which does not pay all of the interest due that month. If Bill uses that option, which of the following is the result: Select one: a. Negative amortization. b. Default. c. A reduced interest rate for that month. d. An extension of the maturity date of the loan.
The correct answer is: Clint can pay more than the appraised price, if the difference is paid from his personal funds.
Clint is a qualified veteran and is getting a loan to buy a house for $110,000. The CRV (appraisal) comes back at $105,000. Which of the following statements is true? Select one: a. Clint can get a VA loan for the full amount because the appraised price is within 10% of the selling price. b. Clint can obtain a 2nd mortgage to finance the $5,000 difference. c. Clint can pay more than the appraised price, if the difference is paid from his personal funds. d. Clint can borrow the $5,000 for the difference from a relative, as long as he does not pledge the property as collateral.
The correct answer is: An insurance company.
FHA is comparable to which of the following? Select one: a. An insurance company. b. A savings and loan association. c. A secondary mortgage market warehouse. d. A mortgage banker.
The correct answer is: Balloon.
Helen Ann obtained a loan from the ABC Mortgage Company. The monthly payments were set at a rate to fully amortize the loan over a 25 year period. In the note that Helen Ann signed, it specified that the entire balance was due at the end of 120 payments (10 years). What type of mortgage does this describe? Select one: a. Open end. b. Purchase money. c. Balloon. d. Participation.
Commercial Banks
Historically, commercial banks did not make residential mortgage loans. They would make a variety of relatively short-term loans, often to businesses.
The correct answer is: Wraparound mortgage.
Mike has sold his home to Phil under the following conditions. Mike will remain responsible for his existing 6%, $15,000 loan. Phil will give Mike a note for the total purchase price of $95,000 at 10%. The mortgage created could be defined as: Select one: a. Blanket mortgage. b. Combination mortgage. c. Open-end mortgage. d. Wraparound mortgage.
Negative Amortization
Negative amortization occurs when the loan payments are not sufficient to repay the interest. The loan balance therefore increases over the life of the loan rather than decreases.
The correct answer is: All of these choice
The Equal Credit Opportunity Act makes it unlawful to refuse to grant credit to qualified applicants on the basis of: Select one: a. Age. b. Marital status. c. Religion. d. All of these choices.
interest
The cost of borrowing money is
The correct answer is: Established on a regional basis.
The maximum amount of an FHA insured loan is: Select one: a. Determined by individual lender policy. b. Nationally uniform, set by HUD. c. Established on a regional basis. d. Set by each state.
The correct answer is: The lender.
The points to be paid on a loan are established by: Select one: a. The buyer. b. VA or FHA. c. The lender. d. HUD.
The correct answer is: False
The three-day right of rescission mandated by Regulation Z applies to residential purchase money, first mortgage, and first deed of trust loans. Select one: a. True b. False
The correct answer is: Loan points paid in return for a lower interest rate.
What are discount points? Select one: a. Adverse factors considered when qualifying an applicant for a loan. b. Loan points paid in return for a lower interest rate. c. The ratio between the purchase price of a home and the loan amount. d. None of these choices.
The correct answer is: Both reduced total interest costs and paying off the loan sooner are advantages.
What is the advantage to a borrower if he chooses to make bi-weekly mortgage payments instead of monthly payments? Select one: a. Reduction of property taxes. b. Reduction of the amount of interest paid over the life of the loan. c. The loan is paid off sooner. d. Both reduced total interest costs and paying off the loan sooner are advantages.
The difference between the index and the note rate.
What is the margin of an ARM? Select one: a. The difference between the current rate and the future rate. b. The difference between the index and the note rate. c. The difference between the cap rate and the current rate. d. The lenders increase in yield.
The correct answer is: An interest-only loan.
What type of loan is a straight mortgage? Select one: a. A conventional loan. b. A loan with equal monthly payments. c. A loan whose interest rate does not change. d. An interest-only loan.
The correct answer is: Conventional.
What type of loan would probably have an 80% LTV ratio? Select one: a. Conventional. b. VA. c. FHA. d. Conventional guaranteed.
The correct answer is: The property passed FHA inspection.
When a buyer wishes to finance a home purchased with an FHA insured loan, which of the following assurances does FHA provide? Select one: a. The property passed FHA inspection. b. The property cannot be condemned in the future. c. The area is not segregated. d. All of the above.
The correct answer is: Lending institution regulations.
Which of the following is established or set by Federal regulations as opposed to State or municipal governments? Select one: a. Real estate license laws. b. Lending institution regulations. c. Zoning ordinances. d. Real estate tax rates.
The correct answer is: An agricultural loan for $30,000.
Which of the following loans would be exempt from the Truth in Lending Act? Select one: a. A loan to purchase 4 residential units -- one of which will be occupied by the owner. b. An agricultural loan for $30,000. c. A loan with 10 installments. d. A personal loan for $20,000.
The correct answer is: Open end.
Which of the following mortgages provides for funds to be available at a later date, but also limits the total amount to be advanced? Select one: a. Open end. b. Open. c. Package. d. Blanket.
The correct answer is: The borrower must be married.
Which of the following statements about a VA guaranteed loan is INCORRECT? Select one: a. The borrower must be a qualified veteran. b. The borrower must sign a statement that he or she intends to live in the property being financed. c. The borrower must be married. d. The buyer may pay some or all of the discount points required by the lender making the loan.
The correct answer is: Mortgage broker.
Who is an intermediary between a lender and a borrower: Select one: a. Insurance company. b. Mortgage broker. c. Federal Reserve Board. d. FDIC.
Pre-approval and pre-qualification
for a loan involves supplying the lender with documentation of your income, plus revealing all your current debt obligations.
Federal Reserve Board
is a central banking system that has 12 districts, each served by a Federal Reserve Bank.
reduction certificate
is a document that sets forth the status of a loan. It states the amount of the loan that is still to be paid, the interest rate of the loan, and the date of maturity.
Usury
is charging a rate of interest in excess of that which is permitted by law. Most states have enacted some sort of ceiling on interest rates. Some are set rates while others float with an economic indicator.
Liquidity
is the ability to sell an asset and convert it into cash. Liquid assets can be converted readily and easily into cash.
Equity
is the interest or cash value remaining after all debts have been deducted. An owner's equity in a piece of property is usually considered to be the monetary interest the owner retains over and above the mortgage indebtedness.
Intermediation
is the process by which individuals place their money with financial institutions in savings accounts and time accounts. Th
finance charge
is the total of all costs the borrower must pay for obtaining credit.
secondary mortgage
market is a market for the purchase and sale of already existing mortgages. Two different but complementing forces led to the creation of this market.
Hypothecation
means that the borrower retains the right to possess and use the property while the property serves as security for a loan.
Disintermediation
occurs when private individuals decide to invest their own money rather than deposit it in banks (intermediaries) and allow the banks to invest it for them.
Leverage
refers to the use of borrowed funds to purchase property. Borrowed funds are almost always involved in the purchase of real property.