Finance practice exam 3

12X

A 30-unit income-producing property has a sales price of $9 million. Annual gross income is estimated at $750,000. What's the gross income multiplier?

$3,200 (divide 400,000 by 80%)

A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a 1% loan origination fee. How much is the loan origination fee?

$6,750 The buyer is financing $450,000. Multiply this amount by 1.5% (or 0.015) to get $6,750. Question 65 of 150

A buyer is purchasing a property for $500,000. He has a down payment of $50,000 and is financing the rest. What's the amount of the loan origination fee if the lender charges 1.5%?

$399,672.12 Subtract $327.88 from $400,000 for a new principal balance of $399,672.12.

A buyer with a $400,000 loan has a monthly principal and interest payment of $2,661.21. If $2,333.33 is interest, what is the new principal balance after the first payment is applied?

Specific

A goal written according to the SMART criteria is ______.

Don't exceed the CRV

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 ______.

$315,789 In order to calculate this, start with 100% minus a 5% commission, which is 95% or .95. Take $300,000 and divide this amount by .95.

A seller wants to break even after the broker's commission of 5% and loan balance of $300,000 are paid. At what price must the house sell?

Lower than

An ARM usually offers an initial interest rate that's ______ a fixed rate mortgage for a period of time.

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

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

Business

Carla is a licensee who uses a personal financial system that recommends that all of her commission checks be deposited into her ______ account.

CalVet holds the legal title to the property until the loan is paid off.

Conrad has purchased a home in California and, as a veteran, he's been able to take advantage of the CalVet home loan program. How does this loan program work?

Title II, Section 203(n)

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?

Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including equity lines of credit.

Gus has applied for a home equity line of credit from his federally insured bank so that he can make some renovations to his kitchen. The same bank is his lender for his home mortgage. Will this loan be subject to Real Estate Settlement Procedures Act requirements?

Rare

How common are interest-only loans today?

Through a VA-approved appraiser

How does the VA qualify a property for a VA-guaranteed loan?

Seller

If a cloud on a title is discovered, which party is generally responsible for clearing the cloud?

Covered Loan Law

In 2001, California legislators enacted the ______ to combat predatory lending practices.

Creative

Interest-only loans are a form of ______ buyer financing.

Yes, if the total of the first and second mortgages is within the maximum loan to value ratio

Is a homeowner with an FHA loan allowed to obtain a second mortgage?

Financial responsibility

MLO applicants give permission for a credit report to be pulled so the NMLS can evaluate whether the applicant demonstrates ______.

Reverse annuity mortgage (RAM)

Monty retired 10 years ago and would like to see the world, but his retirement account won't support his desire to travel. Monty heard of a loan that would allow him to take advantage of the equity in his home by getting monthly payments from the bank with his house as collateral. What is this type of loan called?

Research typical expenses for a licensee through the Internet and by asking colleagues.

Natasha is a new licensee who needs to estimate her business expenses. Which of these is a recommended way for Natasha to do this?

Premiums and deductibles

Ronald marries and wants to start a family. Which of the following would be important in his selection of an insurance carrier?

Maybe, but they'll have to petition their lender

The Bransons have a conventional loan for which they were required to obtain private mortgage insurance. Their local real estate market has been going like gangbusters, and their house is now appraised at twice their loan balance! Will their PMI be automatically cancelled?

6%

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

The introduction of the long-term amortized loan

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

$210,000, the sales price

The Ropers are purchasing a home using VA financing. The sales price of the home is $210,000. The CRV comes in at $215,000. On what number will the VA's loan guarantee be based?

Income tax

The ______ account is an essential part of a financial plan for independent contractors, who should expect to disburse from this account on a quarterly basis.

Community Reinvestment Act

The ______ was a response to the practice of redlining and was enacted in 1977.

The largest percentage possible after paying all essential expenses.

The percentage recommended for a licensee to allocate when building an emergency fund is ______.

The economy may slow down due to a decreased money supply (if the fed buys securities, the economy will increase money supply)

What is the most likely effect when the Fed sells securities on the open market?

They increased market speculation

What role did CMOs play in the financial crisis of 2007?

Partnership between mortgagees (lenders)

What type of partnership is a real estate investment trust?

Late charge

What type of provision is standard with either the mortgage or the deed of trust, but is included in the promissory note rather than the security instrument?

Equal Credit Opportunity Act

Which federal lending act creates protections for specific classes of people?

Supply is greater than demand

Which of the following best describes a buyer's market?

A calculation that describes the amount being borrowed compared to the value of a property

Which of the following describes loan-to-value ratio?

Limited partnership

Which of the following is a passive type of real estate investment?

Population size

Which of the following is a piece of general data an appraiser may gather?

Paying down outstanding credit card debt

Which of the following is the best investment for a licensee?

Insured value

Which of the following is the cost of replacing a building in the case of total loss?

Homeowner and Equity Protection Act (HOEPA)

Which of the following specifies a requirement of pre-loan counseling for consumers?

It will decrease each year as the loan is paid down.

Which of the following statements is true about the annual MIP on an FHA mortgage?

The buyer

With a purchase money mortgage, who retains the title to the property?

Subprime lenders

______ make homeownership available for many who otherwise could not qualify for a mortgage loan.

American Recovery and Reinvestment Act of 2009 (ARRA)

Which act was also known as "the stimulus package" and sought to create new jobs and save existing ones, spur economic activity and invest in long-term growth, and foster new accountability and transparency in government spending.

Consumer Financial Protection Bureau

Which agency sets the guidelines for qualified mortgages?

Rental income

Which of the following taxes apply while an investor holds an investment property?

Loan application

Which of the following, once completed, initiates the loan process?

Ginnie Mae

Which of these HUD programs allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market?

Freddie Mac

Which of these agencies is a government-sponsored enterprise (GSE)?

Total debt-to-income

While Fannie Mae considers total and housing debt-to-income ratios in their underwriting process, Freddie Mac considers only ____________.

It increases demonstrated income.

Why might self-employed individuals who want to obtain financing for a home purchase, choose not to write off valid expenses on their tax statements?

Assesed value

What type of value is of interest to taxing authorities?

To avoid paying private mortgage insurance

What's one reason a borrower may choose a piggyback (or split) loan?

One year

In a judicial foreclosure, if the sheriff's sale wasn't enough to pay off the borrower's debt plus foreclosure costs, how long does the borrower's redemption period last?

When the government's bills exceed income collected

In what situation would the U.S. Treasury be most willing to sell securities?

California Real Property Loan Law

Jan is a real estate licensee with a mortgage loan originator (MLO) endorsement. When she acts as an MLO, what law limits the amount of commission and fees she can earn for negotiating a loan on behalf of her client?