CA RE Sales

The VA loan program offers a basic entitlement amount of ________.

$36,000

Which of the following is a true statement about the use of a promissory note?

A promissory note is a legal instrument that's similar in nature to a contract.

Fatima is using a VA loan to purchase a home from Sue. Sue agrees to pay Fatima's closing costs. Which of the following statements is true?

Closing costs aren't considered a seller concession.

Stan builds new homes. He feels good knowing that he's providing safe and healthy homes for the community and that they are quality structures that will shelter people for many years to come. Which FHA benefit is at work here?

Construction standards

Which agency sets the guidelines for qualified mortgages?

Consumer Financial Protection Bureau

The FHA loan program is designed for borrowers who

Have a minimal down payment and less-than stellar credit

FHA-insured loan programs cover all of the following EXCEPT

Recreational vehicles

A lender qualifies a borrower for a VA loan based on ______.

Residual income and debt-to-income

Which of the following statements is true about government loans?

They're insured or guaranteed by a government agency.

FHA offers a program for loan insurance on adjustable-rate mortgages under ______ of the National Housing Act.

Title II

Nadia uses a VA loan to buy a house for $125,000. She wants to buy the neighboring property, an empty lot, so she can improve the house using the extra land. The lot is for sale for $135,000. Can she use a VA loan for this purchase?

Yes, she should have partial entitlement left.

Greg is selling his home to a veteran who's using a VA loan. When the transaction starts to stall, Greg tries to motivate the buyer by including his giant flat screen TV, valued at $1,200, as a gift. Is Greg allowed to do this?

Yes, this is considered an allowable seller concession

Regional State Bank is a member bank of the Federal Home Loan Bank. In exchange for mortgage collateral, Regional State Bank received a loan from the FHLB so it can make additional loans to consumers. What is the loan called that Regional State Bank received?

an advance

Freddie Mac targets which type of loans to purchase?

conventional

Mortgage, homeowners, and flood ______ may be included the mortgage payment.

insurance

To whom would a 1031 tax exchange usually appeal?

investors

Freddie Mac's mission is to provide ______, stability, and affordability in the U.S. housing market.

liquidity

Sophia's annual property taxes are $1,295, and her annual insurance premium is $942. How much of her monthly mortgage payment goes toward taxes and insurance?

$186.42 Add annual taxes and insurance ($1,295 + $942 = $2,237), and divide this total by 12 to calculate the monthly taxes and insurance payment.

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

Pattie is the widow of Oscar, a member of the Army who was killed in action. When she uses the VA loan to buy her first home, what percentage of her loan amount will be charged as a funding fee?

0%

The minimum down payment for an FHA 203[b) loan is ______.

3.5%

Approximately how many states have predatory lending laws?

36

John wants to do a 1031 tax exchange with a property he just sold. How many calendar days does he have to identify a new property for the exchange?

45

Borrowers should be wary of lenders who offer mortgages at more than ______ over current market interest rates.

5%

The Covered Loan Law limits total fees and points paid by the borrower prior to closing to what amount?

6%

Homeowners over the age of ______ are eligible for the HECM program.

62

Consumers in the range are well above the average credit score and generally have an easy time getting approved for new credit.

800+

What is a collateralized mortgage obligation?

A debt security holder

What is an encumbrance?

A defect on a title that can be monetary or physical

By stabilizing and improving the mortgage market, the FHA helped to build ______.

A global market for mortgage-backed securities

Which of the following describes an encumbrance?

A lien on the property due to an unpaid tax bill

Captain Kirk is a veteran who sells his home to Leonard. Leonard is also a veteran, and they agree to let Leonard assume Captain Kirk's VA loan for the property. They agree to a novation, which is ______.

A new contract with the lender using a substitution of entitlement

What type of professional must an investor use to conduct a tax-deferred exchange?

A qualified intermediary

Jose is an investor who found and closed on an investment property, then decided to sell a property other than the one originally marked for the exchange. What is this an example of?

A reverse tax-deferred exchange

Assuming a CMO uses the sequential pay structure, how is interest passed through from borrowers paid to investors?

All tranches receive interest payments.

The EEM program insured by the FHA requires an energy consultant to provide the lender with a report listing recommended modifications for energy efficiency, an estimate of the cost for each recommendation, and _____

An estimate of the energy savings that would result

What is a reverse exchange?

An investor finds and closes on an investment property and then decides to immediately sell another investment property.

For borrowers who already have an FHA loan, the Streamline Refinance program offers the benefit of

An unlimited loan-to-value ratio

FHA may adjust loan limits for each county ______.

Annually

Which is true about borrower qualification standards for a VA-guaranteed loan?

Applicant must have certiciate of eligibility

Which of the following is NOT required to transfer ownership of a note?

Assignment of the note to the new owner

When a promissory note is sold, what is recorded in county land records?

Assignment of the security instrument the note is attached to

Ava is borrowing money to buy some commercial property for her business. The loan agreement she signs includes a lock-in clause. What does that mean?

Ava will not be allowed to pre-pay the loan prior to the date specific in the loan agreement.

Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used?

Bill The borrower holds legal title to the property that secures the loan when a mortgage instrument is used.

Which of the following statements about liens is true?

Both mechanic's and materialman's liens are junior liens.

Britney is selling her bungalow via an installment contract. The buyer made payments dutifully for five years, but has not made any payments for more than a year. Which of the following is true?

Britney can keep all of the proceeds received and repossess the property.

How does the Federal Housing Administration fund its mortgage insurance program?

By charging borrowers a mortgage insurance premium

When borrowers started missing mortgage payments, how did this affect collateralized mortgage obligations?

CMOs weren't collecting the expected principal and interest payments.

The ______ is provided by a VA-assigned appraiser.

CRV

Chuck needs to make a few repairs and upgrades to his home, but he needs some cash to do it. He decides to tap into the equity in his home, which he purchased using a VA home loan. What VA program can Chuck use to do this?

Cash out refinance

Cathy is hoping to purchase a home using a VA loan. A VA-assigned real estate appraiser is required to provide ______ for the property.

Certificate of Reasonable Value

With a VA loan, the borrower must receive a certificate of eligibility. What must the property receive?

Certificate of Reasonable Value

Cheyenne is selling the family farm via an installment contract. What is one advantage of selling the farm this way?

Cheyenne will pay less in capital gains taxes by receiving the proceeds from the sale over time, rather than in a lump sum.

A vendor and vendee are the parties involved when the finance instrument is a

Contract for deed

Which real estate finance instrument includes the promise to repay and the security instrument within the same document?

Contract for deed

You may see a ______ named as a land contract, real estate contract, contract for sale, agreement for deed, or as articles of agreement.

Contract for deed

Which of the following entities has the authority to place an equitable lien on a property?

Court order by the judge

With a VA loan, the certificate of reasonable value is used to ____.

Determine the value of the loan that the VA will guarantee

A second mortgage on property secured by a VA loan is acceptable under certain conditions, one of which is that the first and second mortgage liens ______.

Don't exceed the CRV

John sells his single-family home and purchases a new home for his family to reside in. Marcus owns a single-family home, but rents it out to a co-worker while he is on an extended two-year military tour overseas. Donald sells an apartment complex and purchases a new complex in a different part of the city. Which of these consumers is most likely to take advantage of a 1031 tax-deferred exchange?

Donald

Which of the following could an investor who sells an apartment house buy using a 1031 exchange?

Duplex, office building, or warehouse

Which of the following is a true statement about tranches?

Each tranche has specific rules for distributing income received from the collateral, and has differing balances, maturities, and risks.

When a promissory note is sold, how is ownership transferred?

Endorsement of the note

The secondary mortgage market buys loans from the primary market. How does this aid the lending market?

Ensure funds are available to borrowers

A homeowner who's preparing to sell can't transfer the property until an encumbrance is removed. Which of the following is an encumbrance that would delay the property sale?

Existing Mortgage

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

On an FHA 203(k) loan, the combined cost of home value and rehab must ______.

Fall within the FHA mortgage limit for the area where the property is located.

Which of the following led to the 2007 financial crisis and negatively impacted investors that purchased properties in the early 2000s?

Falling home prices

Conventional loans from large commercial banks are the primary target for which secondary market player?

Fannie Mae

Which institution was created as the Federal National Mortgage Association in 1938?

Fannie Mae

In 2008, as a response to the 2007 financial crisis, the Federal Housing Finance Agency began acting as conservator over which institutions?

Fannie Mae and Freddie Mac

Jean is a high school English teacher. With the Good Neighbor Next Door program, she's able to buy a foreclosed FHA-insured property ______, though she does have to agree to live on the property for three years.

For a 50% discount off list price and a down payment of only $100

Which of the following statements related to 1031 tax-deferred exchanges is true?

Foreign investors may participate.

The amount of the ______ a veteran must pay depends on factors such as military status, down payment amount, and whether the veteran's entitlement is being used for the first time or a subsequent time.

Funding fee

Which of the following applicants fall within the guidelines for an FHA-insured loan?

Gena is a single mom with three kids. Her credit score is 620, her housing ratio is 29%, and her total debt obligations come to 40%.

Cindy is buying an older home. It's in reasonably good shape, but she figures she can reduce her energy bills by replacing some of the windows. If she applies for the FHA Energy Efficient Mortgage program, what step must she take to receive approval?

Give her lender a report of the cost estimate and energy savings from an energy consultant.

The interest rate on an FHA Section 251 adjustable rate mortgage will ______

Go up or down, but can't change more than a maximum number of points allowed by the FHA over the life of the loan

How and when does a contractor performing work associated with a 203(k) loan receive funds from the lender?

Half is received up front and the other half after the work is completed and approved

Which is a requirement for veterans to use the VA's Specially Adapted Housing grant?

Have permanent and total service-connected disability

Stacy is preparing to sell her home, but learns she can't transfer the property until she removes an encumbrance. Which of these is encumbering her property?

Her existing mortgage

A lender benefits from selling loans to Fannie Mae by

Increasing capital to offer loans with larger sale prices

What's a key feature of the Federal Housing Administration's loan program?

Insures lenders against loss from borrower default

In the early years of a mortgage loan term, which portion of the payment is likely to be the largest?

Interest

For which of the following programs are veterans not required to submit a COE, get a new appraisal, or verify income?

Interest Rate Reduction Refinance

Which of the following is a true statement about deducting interest on mortgages taken out in tax years between 2018 and 2025?

Interest on the first $750,000 of mortgage debt is deductible for married couples filing jointly or $375,000 for married couples filing separately.

Jessica hasn't paid the roofing company that replaced the roof on her home. The contractor placed a mechanic's lien on her property, which is a(n) ______ lien.

Involuntary and specific

Max has a dog that bit his neighbor. The neighbor sued Max, which resulted in a judgment against him. Max refused to pay the neighbor according to the judgment. The neighbor placed a lien against Max. How is this lien classified?

Involuntary general

Lucas would like to be a homeowner, but his low credit score makes lenders unwilling to give him a mortgage. What makes the 203(b) loan a more likely option for Lucas to qualify for a mortgage?

It has less stringent qualifying requirements than a conventional loan.

What are the effects on a property if it includes an encumbrance?

It restricts the owner's use or decreases the value.

Which of the following describes a mechanic's lien?

It's a specific involuntary lien.

What are assets (as they related to the residential mortgage process)?

Items of value a borrower owns

Brian is completing a residential loan application. On the application, he lists his assets. What are assets?

Items of value the borrower owns

What's the name of the clause in a promissory note where this language appears: "If the Note Holder has not received the full amount of any monthly payment by the end of ______ calendar days after the date it is due, I will pay a late charge to the Note Holder"?

Late charge provision

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 Federal Housing Finance Agency established percentage targets and ______ for loans made to low- to moderate-income borrowers.

Limits for conforming loans

What information is listed on the promissory note?

Loan amount and schedule of repayment

The lender, the depository institution, and the _______ all complete parts of the request for verification of deposit form.

Loan applicant

What are advances?

Loans the Federal Home Loan Bank makes to member banks

Which of the following is an example of an involuntary, specific, statutory lien?

Materialman's Lien

FHA county loan limits are based on _____.

Median price for the area and property type

Financing for a real estate transaction can use a note with a ______, a note with a deed of trust

Mortgage

Special mortgage loan programs for ______ include the FHA248 and HUD 184 programs.

Native Americans living on tribal land

Trixie purchased her one-bedroom beach cottage in 1992 with an FHA loan. Now she's selling it, and the buyer wants to assume her loan. The buyer intends to rent the cottage to vacationers. Will the FHA allow this buyer to assume Trixie's loan?

No, investors aren't allowed to assume FHA loans; the property must be owner-occupied

Sandra is a single woman fresh out of college. She hopes to qualify for an FHA loan. Her lender calculates her housing ratio as 31% and her total debt obligation as 43%. Her credit score is 480. Does she qualify under FHA underwriting guidelines?

No, she doesn't meet the credit score requirement.

Chris and Nick hope to qualify for an FHA loan. Their lender calculates their housing ratio as 33% and their total debt obligation as 43%. Their credit score is 620. Do they qualify under FHA underwriting guidelines?

No, they don't meet the housing ratio requirement.

Ron and Dawn hope to qualify for an FHA mortgage so they can buy a home for their family. Their housing ratio is 28%, their total debt obligation is 45%, and their credit score is 650. Do they qualify under FHA underwriting guidelines?

No, they don't meet the total debt obligation requirement.

To qualify for the FHA Streamline Refinance program, a homeowner must

Not be delinquent on mortgage payments

Your client, Yolanda, is a nurse. Does she qualify for the Good Neighbor Program?

Not unless she is also an EMT The Good Neighbor Next Door program offers specific FHA-foreclosed properties to owner-occupied individuals who are law enforcement officers, K-12 teachers, firefighters, or EMTs.

A beneficiary, trustor, and trustee are the parties involved when the finance instrument is a

Note with deed of trust

Where does a veteran have to live to qualify for the Native American Direct Loan?

On federal trust land

What's the definition of a qualified mortgage?

One that meets stringent CFPB guidelines

While Fannie Mae considers total and housing debt-to-income ratios in its underwriting process, Freddie Mac considers ________

Only total debt-to-income

Several actions take place on the secondary mortgage market. Which of these is a common activity?

Packaging loans into mortgage-backed securities

Lenders who ______ can underwrite and approve FHA loans without requiring the FHA to review each borrower's qualifications.

Participate in the direct endorsement program

Rhoda is a first-time homebuyer. She has applied for a VA loan to buy a house from Phyllis. When the CRV values the home at less than the sale price, Phyllis refuses to come down on the sales price, so Rhoda must either ______ or find a different home to buy.

Pay the difference between the CRV and sales price in cash

Which is true regarding closing costs on a VA loan?

Payment of closing costs may be negotiated

Kara is a lender who is working with prospective buyer, Stan. What does Kara ask Sam to provide to show his work history and earning information?

Paystub

Assuming a CMO uses the sequential pay structure, how is principal passed through from borrowers paid to investors?

Principal payments are only made to the first tranche until it retires, then to the second tranche, and so on.

When interest rates increase, what is the impact on mortgage-backed security investors?

Returns on investments increase.

Because of the funding fee required for a VA loan, a borrower with no down payment funds saved should ______.

Roll the funding fee into the loan

Where can a party reviewing a title commitment find basic details about the transaction?

Schedule A

Which commitment section matches the schedule to its description and provides information related to the transaction, including legal description and parties?

Schedule A

Institutions that purchase loans, package them into mortgage-backed securities, then sell these to investors may commonly be referred to as

Secondary market players

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 The FHA insures adjustable rate mortgages under Section 251.

The mortgage and the deed of trust are ______ that pledge property as collateral for a loan.

Security instruments

Marissa is obtaining a VA loan, and she's decided to place 20% down. What's her responsibility for paying the VA loan funding fee?

She won't be required to pay it since she made a large down payment.

Travis made the final payment on his loan according to the loan terms. What must the note holder do to acknowledge that the debt has been repaid?

Sign the note, mark it "paid in full," and return it to Travis.

Krista is obtaining a loan to buy a home. Her loan agreement consists of one document called a note and one called a deed of trust. What's the role of the note?

States who owes money to whom, how much, and how it will be repaid

Samuel and Yoshi have worked at the same firm for a few months and get along well. Samuel mentions he has a credit score in the low 800s. Yoshi, who's just starting out, persuades Samuel to sign for a loan to help Yoshi buy a property, since his credit isn't good enough. Yoshi promises to make the mortgage payments, but two months after the deal closes, Yoshi moves across the country. Samuel's now stuck with a $400,000 mortgage. What type of scheme is this?

Straw Buyer

The FHA ______ program allows a borrower to refinance an FHA loan without verifying income or assets.

Streamline Refinance

When a veteran assumes a VA loan, the ______ agreement can restore the original buyer's level of entitlement as if the loan were repaid in full.

Substitution of entitlement

When a homeowner has repairs made to a home using an FHA 203(k) loan, HUD requires ______.

That the work meet FHA's basic energy efficiency and structural standards

FHA is part of

The Department of Housing and Urban Development

What entity sets conforming loan limits for mortgages?

The Federal Housing Financial

Bart is selling his home and has accepted an offer from a buyer, who's obtaining a VA loan. The sale price is agreed upon and is in the purchase contract. Then Bart receives a call from his agent, explaining that the buyer is hoping that Bart will lower the sale price because ______, and there is a risk the buyer will not be able to get the VA loan as a result.

The VA appraiser completed the CRV and it is less than the sale price

A borrower who has received a certificate of eligibility will qualify for a VA loan under which of the following circumstances?

The borrower also has sufficient credit and income.

Which parties must be identified on the promissory note?

The borrower and the lender (The parties involved in the loan must be identified, but the seller and the third-party trustee are not identified on the note)

Select the choice that best translates this clause into plain English. "Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent monthly installments or change the amount of such installments, unless the Note holder shall otherwise agree in writing.'

The borrower is allowed to prepay the loan without penalty.

Which of the following features is shared by the mortgage and the deed of trust?

The borrower is required to maintain the property and pay property taxes and insurance.

Which statement correctly describes a contract for deed?

The contract for deed is usually used in a seller-financed transaction.

The FHA EEM program allows modifications such as solar panels as long as ______.

The cost of the modification is within limits based on the value of the home

For tax years 2018 to 2025, a borrower can write off the interest on a home equity loan only if

The funds are used to buy, build, or improve the home that secures the loan

The FHA has helped to significantly improve the mortgage market through ______.

The introduction of the long-term amortized loan

Carla and Sven have a previous foreclosure, but now they are a few years away from that. They make good money with their jobs, and have about $30,000 available to use for a down payment and closing costs. Why might they consider an FHA 203(b) loan, even if they have sufficient down payment for a conventional loan?

The lender can consider compensating factors, even if their credit history isn't great.

Which of the following is a true statement about when a promissory note is sold?

The promissory note is endorsed to the new owner of the loan.

In a 1031 exchange, there are rules governed by Section 1031 of the Internal Revenue Code. The rules include _______.

The property in an exchange must be like-kind.

Which of the following is a reason a seller might consider selling his property through an installment contract rather than a traditional sale?

The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.

Which of the following statements about the VA guaranteed home loan program is true?

The service member's length of service, duty status, and character of service determine eligibility.

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.

When a borrower has paid off the loan, how is the release handled if the security instrument is a deed of trust?

The trustee executes and records a deed of reconveyance and the lender returns the note to the borrower.

The funding fee on a VA loan is waived when ______.

The veteran has a 10% or higher VA disability

When does the mortgage insurance requirement end for a borrower with a VA loan?

There is no mortgage insurance requirement for a VA loan.

The house payment Tim and Vickie are considering would give them a housing ratio of 34% and a total debt obligation of 40%. Their credit score is 640. What do they need to change to meet the underwriting requirements for an FHA loan?

They should look for a home in a lower price range.

Which of the following statements is true about buydowns with a VA loan?

They're allowed only on fixed rate loans.

How does the VA fund the mortgage guarantee program so that lenders can be reimbursed for any losses from borrower default?

Through a funding fee charged to most borrowers

Dana and Phil have evaluated their situation, and have decided to purchase a unit in a cooperative housing project. Which FHA loan program might work for them?

Title II, Section 203(b)

Why might a homebuyer use an FHA 203(k) loan instead of the standard 203(b) loan?

To roll the cost of rehabilitating the purchased home into the mortgage

A quitclaim deed does which one of the following?

Transfers without warranty any interest or title the grantor has when conveying it

Which of the following acts created regulations for advertising credit services?

Truth in Lending Act

Which of the following factors carries the least weight when calculating a credit score?

Type of accounts

What type of loan can be obtained with no down payment?

VA

Sylvia is shopping for a mortgage. Because she's a veteran, she compares the VA home loan with the 3.5% down FHA mortgage. If she has only $5,000 available in cash, with all else being equal, which loan will allow her to spend more on a home?

VA loan

Which of the following statements is true about the VA's Native American Direct Loan program?

Veterans who use this program must live on federal trust land.

A lender and a borrower sign a mortgage agreement, placing a(n) _____ lien against the borrower's home.

Volunrary & specific

A mortgage lien is a(n) _____ lien.

Voluntary and specific

Rich wants to add a room to his house, so he takes out a home equity loan. This creates a(n) ______ lien.

Voluntary and specific

Which of the following individuals would qualify to purchase a home under the Good Neighbor Program?

an emergency medical technician

Which of the following net worth examples may a lender view most favorably?

assets exceed liabilities

Dorinda is an investor. She recently purchased shares in a tranche that holds mortgages and mortgage-backed securities. In what did she invest?

collateralized mortgage obligation

Kelly is reviewing Steve's loan application. She wants to verify that he has a solid history of paying obligations on time. What should she request to do this?

credit report

What type of lien is placed on a property as a result of a court order?

equitable

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 acronym PITI is a reference to what real estate-related concept?

mortgage payment

A _____ is a mortgage-backed security issued by Freddie Mac

participation certificate

Who holds the promissory note while it's being repaid?

payee

Jody is concerned about the ______ encumbrance that doesn't allow her to start her gardening greenhouse because it sits next to a nature conservancy.

physical

Which clause is standard in a deed of trust and affects the foreclosure process that can be used if the borrower defaults?

power of sale

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

promissory note

________ is the term that the VA uses to describe the amount of net income remaining after deduction of debts, obligations, such as utility and phone bills, and monthly shelter expenses.

residual income

Section 255 of the Title II FHA-insured loan program covers ______ mortgages for borrowers age 62 or older.

reverse

A developer, Howard, has purchased land with the expectation of constructing an apartment building. He explains to his lender that he'll need a construction loan as well, so the mortgage they sign includes what kind of clause to allow the construction loan's lien position to take priority?

subordination

Which of the following is a requirement to qualify for a VA loan?

sufficient income