Finance

Sam has a mortgage payment that includes his property taxes and property insurance. What type of mortgage does Sam have?

Budget Helps borrowers budget their monthly expenses by combining them into one payment

Leonard is offered a loan at 5.75%. Because he plans to be in his home for several years, he chooses to pay points up front to have the rate reduced to 5.25%. What's this an example of?

Buydown

Which of the following would be an acceptable ad based on Regulation Z?

Get a low interest rate of 4.75% (4.925% APR) with as little as 10% down payment and a 30-year fixed rate with no points.

Jeffrey has accepted an offer of $299,000 for his house. The buyer is making a $50,000 down payment, and the buyer's appraisal came in at $300,000. On what number will the buyer's lender base the loan-to-value ratio?

$299,000 Lenders use the lesser of the sales price or appraised value.

Which of the following best describes annual percentage rate (APR)?

A standardized measure for interest rates and other loan costs.

What does the return on investment (ROI) calculation allow investors to do?

Compare the return from either similar or dissimilar investments.

If Acme Bank, a primary lender, wants to sell its loans on the secondary market, it would be easier for it to do so if its loans meet ______.

Fannie Mae and Freddie Mac guidelines

Lawrence is a buyer closing on a home for which he's obtaining financing. Which document will give Lawrence an estimate of the costs he'll likely pay at closing?

Loan estimate

Mick focuses on originating mortgage loans at a company that has in-house loan processors and underwriters. The options he offers consumers are limited to the products his company offers. What's Mick's position?

Mortgage banker

Darrel loves working in the mortgage lending industry. On a daily basis, he works with multiple lenders to find and negotiate the best deals for his customers. What is Darrel's profession?

Mortgage broker

Upon examination of his mortgage document, Jared finds a clause stating he'll owe additional interest if he pays off his loan within one year of the loan origination date. What type of penalty does this describe?

Prepayment The prepayment penalty clause puts the borrower on notice that if the loan is paid off before a specified period of time, the borrower may owe the lender additional interest.

Travis diligently followed his loan terms and has made the final payment on his loan! What must his lender do now in order to acknowledge that the debt has been repaid?

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

Rules and regulations that protect consumers of financial services are now the responsibility of ______, which was created by the Dodd-Frank Act.

The CFPB

A "homes for sale" magazine contains the following ad: "Cozy two-bedroom starter home, neat and clean, ready for move-in. $140,000. Low down payment and easy financing!" Which of these statements is true?

The ad complies with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms.

When Stacy's clients ask her if she can recommend a mortgage broker, she promptly gives them the name of the best mortgage broker she knows, Gary Jones. Later, she always receives a check from Gary as payment for the referral. Would this be legal or illegal under the Real Estate Settlement Procedures Act (RESPA)?

This is illegal under RESPA because it's considered a kickback between settlement service providers.

Related to real estate financing, how much is a point?

1% of loan value

Which of the following statements about the promissory note is true?

A promissory note is a negotiable instrument and can be transferred to a secondary holder who has the right to enforce the note's terms.

Janice is extremely excited to have purchased her first home. She was able to lock in her monthly payment at a very low rate for the first five years. In year six, Janice's payments will become significantly larger based on the going market rates. What type of loan does Janice have?

Adjustable rate mortgage

Esmerelda makes regular monthly payments on her loan. In addition to paying interest, she's slowly paying down the principal of the loan. With each payment she makes, more will go towards the principal and less to interest. What type of loan does she have?

Amortized

How might the lengthy purchase process for a short sale or foreclosure impact a buyer's financing?

An existing interest rate lock may expire before the transaction is ready to close.

Shirley's lender discharged the mortgage lien on Shirley's property after processing her final payment. Which clause requires the lender to take this action?

Defeasance The defeasance clause means the lender may not pursue the borrower for additional funds when the loan balance is paid in full.

Gregory and Dianne are American citizens of Cuban origin, and when they're denied a home loan, they suspect discrimination. Which of the following acts prohibits lender discrimination on the basis of the protected class of national origin?

Equal Credit Opportunity Act

Ted is in foreclosure but has some equity in his property. An investor suggests that Ted enter into a sales contract with him for a substantially higher price than the investor would actually be paying. The investor pockets the cash and allows the house to be foreclosed on. What sort of scheme is this?

Equity skimming Equity skimming occurs when an investor receives title to a property with no intention of making payments on it.

Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance (PMI)?

Her down payment of $50,000 isn't at least 20% of her loan amount. When LTV ratios exceed 80% on a conventional loan, lenders may require PMI.

When the deed of trust is used as the security instrument for a mortgage loan, which of the following is a true statement?

It is much easier for a lender to foreclose on a property.

What does a balloon payment represent at the end of a loan term?

It means that some principal remains at the end of the loan term.

Charles is selling his property to Seth. Charles paid off his own mortgage on the property years ago, so he's in a position to provide 100% financing for Seth's purchase. Seth will make payments to Charles while Charles retains the property title. What's this an example of?

Land contract

A potential investor has inherited $250,000 and wants to use that as a down payment on an investment property. What additional information do you need to calculate ROI for each potential investment?

Projected cash flow

The Hendersons don't have enough money to make the full 20% down payment their lender requires. To close the sale, the seller is willing to finance a loan for the gap between their down payment and the amount the institutional lender is willing to loan. What's this type of financing called?

Purchase money mortgage

The purpose of the Truth in Lending Act (TILA) is to ______.

Require lenders to make disclosures that allow consumers to compare the costs of making a purchase using credit from different lenders, and to compare those with the cost of using cash

The purpose of the Truth in Lending Act (TILA) is to ______.

Require lenders to make disclosures that allow consumers to compare the costs of making a purchase using credit from different lenders, and to compare those with the cost of using cash.

Two large local brokerage firms agreed to lower their commission rates to the same amount, approximately 1% point lower than any other firm in town. After extensive marketing of their new lower rate, these two firms began to see a big increase in the number of listings they received, costing their competitors substantial amounts of money. What about this situation makes it a per se antitrust violation?

The agreement between the two firms.

Why are short sale properties less likely than foreclosed properties to suffer from neglect or intentional damage?

The homeowner still hopes to be able to sell the property.