Test

All lenders have different underwriting standards, but traditionally, the housing debt-to-income ratio has been ______%, with a total debt-to-income ratio of ______ %.

25 to 28; 33 to 36

BPO

A broker price opinion (BPO) is generally a fee-for-service drive-by estimate of value done by real estate professionals for a lending institution. In some states it is illegal for real estate professionals to provide BPOs.

what is cap rate

A cap rate is an annual rate of return from an income-producing property. It's often used by investors to determine value of a property or to compare one investment against another.

what is a jumbo loan

A nonconforming loan, also called a jumbo loan, is one that exceeds the conforming loan limit. They usually come with higher interest rates than do conforming mortgage loans.

what does a promissory note do

A promissory note attached to a security instrument describes the loan amount and terms, and references the security instrument.

what is a short sale?

A short sale is a property that sells for less than the balance remaining on its mortgage.

subprime loan

A subprime loan is a type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans.

what do amortization charts determine?

Amortization charts may be used to determine the principal and interest portion of a monthly mortgage payment, based on the interest rate and loan term.

AVM

An automated valuation model (AVM) is a quick mathematical determination of value frequently used by lending institutions at the beginning of a valuation process.

When should you provide the agency disclosure?

At the first substantive contact

What's the primary purpose of a BPO?

BPOs are used mostly to assist lenders who have loans on homes in short sale, pre-foreclosure, or foreclosure status. Banks and investors also use BPOs to value real estate portfolios.

When does a Loan estimate come out?

Borrowers must receive the Loan Estimate from their lender within three business days of the lender receiving their loan application.

Your buyer client, Ahmad, asks which costs he'll have to pay outside of closing. One of the items you mention is ______.

Buyers pay for home inspections outside of closing.

Which of the following is exempt from E&O insurance coverage?

Criminal activity isn't covered by E&O insurance. Alleged negligence or errors related to past services are typically covered.

debt coverage ratio

Debt coverage ratio is calculated by dividing NOI by annual debt service. Annual debt service is the total of all interest and principal paid for all loans on the property for one year.

what do FHA 203K do?

FHA 203(k) loans can be used to purchase foreclosures.

why do foreclosures occur?

Foreclosures occur when homeowners are unable to pay their mortgages.

what debt ratio does freddie mac use?

Freddie Mac uses a total debt ratio of up to 45%, depending on the borrower's credit score and loan type, and doesn't use a housing debt ratio for loan qualification.

GRM

Gross rent multiplier is found by dividing the sales price of comparable properties by the gross monthly rent. The resulting figure is the multiplier that can be applied to the subject property's gross rent to find value.

All Georgia buyer representation agreements must be in writing and:

Have a definite termination date Clearly state compensation details, including any retainer fee and commission information State the services the licensee is going to provide to the client State the limits to the licensee's authority Include any other terms of the buyer representation relationship that the client and licensee have agreed upon For buyer agency agreements entered into when the client agrees to dual representation, the applicable disclosures must be included

For which of the following reasons occurring at the time of purchase do buyers file the most lawsuits?

Home purchasers file more lawsuits because of property conditions at the time of purchase than for any other reason.

what are hybrid loans?

Hybrid loan types include combo/piggyback loans and mortgage buydowns.

what happens if home doesn't sell at auction

If a foreclosed home doesn't sell at auction, it becomes an REO.

antitrust violations in real estate

In addition to price fixing, antitrust violations include tie-in arrangements, market allocation agreements, and group boycotting.

Discussing lender, brokerage commission and appropriate sales price would be ________ at a pre-listing appointment.

It would be premature to discuss these at a pre-listing appointment.

what is FHA

It's important to recognize that the FHA is not a lender. Instead, it insures loans. FHA loans appeal to low- to moderate-income home buyers.

DSCR

NOI/Debt Service

what does PMI do?

PMI, which doesn't apply to government or public loans (such as VA and FHA loans), helps borrowers secure a loan with a low down payment by providing lenders with some protection.

when is PMI required?

Private mortgage insurance (PMI) often is required by lenders when borrowers put down less than 20% of a home's appraised value or sales price.

net to seller equation

Sales price x (100% - commission %) - mortgage payoff amount = net to seller.

net to seller

Seller net (aka net to seller) is the amount of money a seller will receive from the proceeds of a sale after all expenses of the sale, plus the loan balance, are paid off.

what are specialty loan types

Specialty loan types include bridge/swing loans, home equity loans, and reverse mortgages.

Your clients are purchasing a home that was built before 1978. Among the lead-based paint disclosure requirements, the sales contract must include an EPA-approved disclosure form that is signed ________.

The EPA-approved disclosure form must be signed by all parties to the transaction.

va loan

The VA guarantees 25% of the home loan amount. No down payment is required, but there is a funding fee for those who don't have a down payment. The VA will loan on 100% of the CRV or sales price, whichever is less.

what debt ratio does va use?

The VA uses a 41% total debt ratio and doesn't use a housing debt ratio for loan qualification.

cap rate

The cap rate expresses the income a real estate investment produces as a percentage of its price.

debt coverage ratio

The debt coverage ratio is a benchmark used to determine an income-producing property's ability to cover its monthly debt service (e.g., mortgage payments).

most common loan type

The fixed-rate, 30-year mortgage is a popular choice among borrowers.

monthly payment using amort chart

The formula for calculating a monthly payment using an amortization chart is: (Loan amount / 1,000) x factor = monthly payment.

GIM

The gross income multiplier is found by dividing the sale price of a property by its estimated gross annual income. The resulting figure is a multiplier that can be applied to a subject property's gross annual income to estimate value.

what are the ratios for conventional loans?

The housing and total debt ratios for a conventional loan are 28% and 36%, respectively.

FHA ratios

The housing and total debt ratios for an FHA loan are 31% and 43%, respectively.

housing ratio

The housing ratio for loan qualification focuses on monthly housing payments compared to gross monthly income. Total debt looks at all monthly recurring (or installment) debt, which includes housing.

LTV Ratio

The loan-to-value ratio is the loan amount divided by the sales price or appraised value, whichever is less. The lower the loan-to-value ratio, the greater the security a lender has in case the borrower defaults on the loan (because the loan is a smaller percentage of the property value).

The document that describes the loan amount and the terms for repaying and is attached to a security instrument is called the ______.

The mortgage and the deed of trust are security instruments that are attached to a promissory note.

what are instruments used to finance real estate

The three basic instruments used to finance real estate are the promissory note, the mortgage, and the deed of trust. Instead of a deed of trust, Georgia uses a security deed.

popular types of adjustable loans

There are three popular types of adjustable loans: the 3/1 ARM, 5/1 ARM, and 7/1 ARM.

types of depreciation

Three types of depreciation that must be considered in the cost approach include physical depreciation (both curable and incurable), functional obsolescence and external depreciation (or economic obsolescence).

cap rate

To determine cap rate, divide annual income by value (or sales price) (I/V = R).

how to find monthly interest paid

To find the amount of monthly interest paid, multiply the original loan amount by the interest rate and divide by 12.

where can trust funds be secured

Trust funds must be secured in a federally insured financial institution.

Which of the following duties does the agent owe the buyer under the terms of a buyer representation agreement?

Under a buyer rep agreement, the buyer's duties include authorizing the agent to locate and show properties, while the agent's duties include showing properties, assisting in negotiations, and providing guidance.

VA Loans

VA loans are guaranteed by the Veterans Administration. VA mortgages provide homeownership opportunities for veterans.

ratio calc

When calculating ratios, the lender typically doesn't consider any payments with 10 or fewer payments remaining.

Appraisal fee

Which of the following fees is commonly paid outside of closing?

To resolve a dispute, what option could Juan and Nico select even though it's often the most expensive and can't be appealed?

With arbitration, an arbitrator hears the case and makes a determination that is binding between both parties.

n addition to the Loan Estimate and the Closing Disclosure, lenders must provide consumers with additional disclosures after the loan is consummated. Which of the following is one of those disclosures?

With the mortgage servicing transfer, lenders disclose to borrowers whether they'll service the loan or sell/transfer it to another lender.

what is a conforming loan?

conforming loan is one that adheres to a certain loan limit.

conversion

involves combining multiple beneficiaries' funds, which must be kept separate.

commingling

involves mixing clients' trust funds with non-trust funds, such as the brokerage's operating funds.

net to seller

sales price x (100% - commission rate)

Blockbusting

the practice of persuading owners to sell property cheaply because of the fear of people of another race or class moving into the neighborhood, and thus profiting by reselling at a higher price.

Earnest money deposits, security deposits on client properties, and advance payments for home inspections are all examples of trust funds.

trust funds

Cost Approach

which is the theory that the value of a property can be estimated by summing the land value and the depreciated value of improvements, is one of the most reliable and proven methods for determining real property valuations.