Finance Exam Review

In a real estate ad for mortgage financing, which statement is permissible if no other information is given?

"Liberal terms available to qualified buyer"

Which is NOT a trigger statement in regard to advertising under the Truth In Lending Act?

"No down payment"

A seller agrees to pay two points on a buyer's loan. The price is $120,000 and the buyer is making a 20% down payment. Two points equal

$1,920

A seller takes back a second mortgage for $12,000 at 10% interest. The note calls for years, then a balloon. What is the first payment amount?

$100

A lender gives Jenny a $15,000 second mortgage at 9.5% interest. Payments are interest-only for 10 years. What balloon payment will be due?

$15,000

The minimum cash payment investment needed for home with an FHA appraised value of $90,000 is

$3,150

If a buyer purchases a $100,000 home and gets an $80,000 mortgage loan at an interest rate of 6%, how much are 4 points?

$3,200

What is the minimum down payment (cash investment) contribution for an FHA loan on a $170,000 home

$5,950

The Goldbergs, who own their house free of any encumbrances, are selling it to the Irwins for $115,000. The Goldbergs are taking back a straight note for $75,000 at 10% interest for 20 years. The first monthly payment will be

$625

Ann makes a 20% down payment on her $85,000 purchase. Her loan amount is

$68,000

What loan will NOT have a balloon payment due at the end of the loan term (the termination date, stop date, or due date)

$90,000 loan at 8% interest amortized over 20 years

The income housing expense and total debt service ratios for traditional 10% and 20% down conventional loans normally are

28% and 36%

Qualifying guidelines on most FHA loans are ___________ housing ratio and _______ total debt ratio

31%; 43%

PMI covers the risk of

A default on the loan repayment

Which clause in a mortgage allows the lender to declare the entire unpaid balance due upon the borrower's default?

Acceleration clause

Funding of a construction loan is usually made

After the time for filing liens has expired

A mortgage clause that prevents someone else from assuming a loan is a(n)

Alienation clause

The government national mortgage association is

Also known as Ginnie Mae

The property value acceptable to the FHA as loan collateral is determined

As the lesser of the appraised value of the purchase price

To be eligible for an FHA loan, one must

Be a U.S. Citizen, permanent resident, or nonpermanent resident with a work visa

A mortgage that covers a number of parcels of real property, and that may provide for the separate sale of each parcel, is known as a(n)

Blanket mortgage

Which is NOT an advantage of an FHA loan?

Borrowers can use secondary financing for the minimum down payment

Conventional loans follow the underwriting guidelines of a. Fannie Mae b. the FHA c. Freddie Mac d. Both A and C

Both A and C

For an FHA loan, a borrower CANNOT

Buy a rental property

When determining whether income is durable and stable and can be used in qualifying a person for a mortgage loan, a factor the underwriter will NOT consider is

Child support payments that will not continue for less that three years

A debtor may redeem property from the foreclosure process up until the _________ takes place

Confirmation of sale

Interest rates are a measure of the

Cost of money

Private mortgage insurance covers the risk of the possibility of

Default in loan repayment

The purpose of an acceleration clause in a mortgage instrument is to

Define that, in the event of default, all future payments become due immediately

The federal national mortgage association is

Designed to increase the availability of money to primary lenders

The interest rate charged by the Federal Reserve for loans to member banks is called the

Discount rate

Which Act prohibits discrimination granting credit?

ECOA

ECOA refers to

Equal Credit Opportunity Act

The interest or value remaining in a property after all liens and other debts are taken into account is known as

Equity

The act of depositing something of value with a disinterested third party creates a(n)

Escrow

For a lower-income buyer with higher debt ratios, the best loan choice would most likely be a(n)

FHA loan

The Federal National Mortgage Association is also known as

Fannie Mae

Three main secondary market sources are

Fannie Mae, Freddie Mac, and Ginnie Mae

The federal government influences money supply with

Fiscal and monetary policy

Which mortgage requires principal and interest payments at regular intervals until the debt is satisfied?

Fully amortized mortgage

The Veterans Administration (VA)

Guarantees lenders against default

The FHA is administered by

HUD

A person may be turned down for a mortgage loan if

He has poor credit and income too low to qualify

A loan that includes a fixed rate period followed by an adjustable rate period is known as a(n)

Hybrid loan

On an ARM, the margin is the difference between the

Index value and the interest rate charged

The Federal Housing Administration (FHA)

Insures mortgage lenders against default

What statement regarding the Federal Reserve is FALSE?

It sets the prime rate

Which is NOT covered by RESPA laws?

Lender may not discriminate based on source of income

A mortgage broker's basic source of income is derived from

Loan origination fees charged to the borrower

Which is NOT a benefit of a VA loan?

Loans are available for homes and business

Which is NOT a way for a buyer to avoid PMI on a conventional loan?

Make a 10% down payment of a house

The one promising to pay the money in a promissory note is known as the

Maker

An agent should NOT refer a prospective buyer to a lawyer for advice about

Market interest rates

To be eligible for a VA loan, a veteran must

Meet the VA's eligibility requirements

When qualifying for a residential mortgage loan, an applicant's liabilities are most likely to be calculated as

Minimum monthly payment amounts

In real estate finance, disintermediation means

Money flows out of saving institutions into higher return investments

Which is a voluntary lien?

Mortgage

A lender that makes a secured loan for the purchase of real estate is known as the

Mortgagee

In regard to a mortgage loan, the borrower is referred to as the

Mortgagor

An adjustable rate mortgage where the loan balance increases is experiencing

Negative amortization

The term used when a loan balance grows due to deferred interest is

Negative amortization

The Equal Credit Opportunity Act, which is designed to limit discrimination in credit transactions, includes which restriction?

No restrictions can be placed on the source of income received

Which charge is used to increase a lender's yield on real estate loans?

Origination fee

A loan that includes periodic payments of principal and interest followed by a balloon payment is known as a

Partially amortized loan

When assuming a loan, the buyer would

Pay the seller the equity in their property

The main characteristic of a shorter-term loan is the

Payments are higher

Broad forces influencing housing cycles are

Physical, economic, governmental, and social

With a fixed-rate loan,

Principal and interest payments must remain constant

If the borrower obtains a conventional loan and makes a 20% down payment

Private mortgage insurance is not required

The Real Estate Settlement Procedures Act does NOT require

Prohibiting agents from owning shares in lending companies

The secondary market for mortgage loans can be best described as the

Purchase and/or sale of mortgage loans after origination

Funds for making FHA loans are provided by

Qualified lending institutions

Which is NOT a method used by the Federal Reserve to control monetary policy?

Raise or lower the prime rate

RESPA applies to all

Real estate credit transactions for one-to-four dwelling units

Regulation Z applies to

Real estate credit transactions for personal use

In a foreclosure, the debtor can get the house back through

Redemption

The federal Truth in Lending law

Regulates advertising with references to a mortgage interest rate

The Closing Disclosure is NOT required in the settlement of a transaction of a(n)

Retail store building

In which market can lenders sell mortgages?

Secondary market

In a purchase transaction, a major source of second mortgages could be

Sellers

With a VA loan, a veteran has the option of

Selling the home to a non-veteran, who may then assume the balance of the loan

Which is NOT included in a borrower's income analysis?

Sporadic overtime and commissions

When the interest rate is much lower initially in order to get a buyer to use a particular loan program, then jumps to a higher rate at the end of a specified period, this is said to be a

Teaser rate

Which information can be found in a note?

Terms and repayment provisions

On a VA loan, who makes the final decision of the approval or denial of a loan?

The VA and the underwriter

RESPA does NOT prohibit and/or place limits on

The amount paid for origination fees

Which statement regarding a VA loan is TRUE?

The funding fee can be financed

The interest rates charged for FHA and VA loans are established by

The market

The VA guarantee program provides eligible veterans with

The opportunity to buy a home with little or no down payment

On an adjustable rate loan,

The rate is tied to a specific index

The annual percentage rate (APR), as required to be disclosed on a Loan Estimate, is

The relationship between total cost of borrowing and the actual amount borrowed

What is the minimum down payment for a VA loan on a $75,000 home?

There is no minimum requirement for qualified, eligible veterans

Gloria qualifies for an FHA loan. She should make her loan application

Through any FHA-approved lender

When a mortgage loan is paid off over a shorter term, the major advantage is a reduction in the

Total interest costs

For a conventional mortgage loan, who makes the final decision on approval or denial?

Underwriter

An FHA buyer may currently

Use a gift for his entire down payment

Which statement regarding VA loans is FALSE?

VA loans are available for investors who are veterans

The maximum allowable mortgage for an FHA loan

Varies by county

The law that prohibits discrimination in the lending process is

the ECOA

The best loan for a buyer to obtain for a single-family home in need of repairs is

the FHA Streamlined 203(k) loan