FINANCING

To which of the following borrowers might a lender be most likely to recommend an FHA loan?

A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores *Loans insured by the Federal Housing Administration require a 3.5% down payment and permit buyers with lower credit scores to qualify for a loan*

Buyer Ed is reviewing the Loan Estimate he received from the lender he's working with. He notices the loan terms include a prepayment penalty. Because he's a savvy consumer, which of the following does Ed do?

Ask the lender if there are other options available that would not involve a prepayment penalty. *Ed should check with his lender for other loan options that would not involve a prepayment penalty*

The Baxters are looking at a $425,000 home. They have $90,000 in savings to use as a down payment. What loan type(s) would likely be the best option for them?

Conventional *A $90,000 down payment would be a little more than 20% down ($90,000 ÷ $425,000 = 0.212, or 21.2%). The Baxters should qualify for a conventional loan with that much to put down on the home, and will avoid having to buy mortgage insurance*

Which mortgage clause requires the lender to discharge the mortgage lien once the borrower has paid in full?

Defeasance *The defeasance clause means that the lender is prevented from trying to pursue additional payment because the loan has been paid in full*

The Truth in Lending Act requires lenders to make certain ______ to consumers.

Disclosures *Lenders are required to disclose the annual percentage rate, total principal and interest, finance charges, and amount financed*

Commander Halfback retires after 25 years of service in the Coast Guard. He is looking to buy a home. What type of loan should he use?

FHA, VA, or conventional *The fact he was in the military doesn't mean he has to take a VA loan. There isn't enough information to determine the best loan, so at this point all loans mentioned are viable options to consider*

Jerome is developing an ad for three properties he has listed in an upscale community. He wants to keep it short and simple. Which of these would NOT trigger full disclosure under TILA?

Get a low 4.925% APR *An ad can show the APR without disclosing all the other credit terms. But if certain other "trigger" terms are included, such as down payment, payment amount, number of payments, or interest rate (other than APR), this would require full disclosure*

As interest rates fall, what is the number of buyers in the market likely to do?

Increase *Low interest rates make home purchases more affordable to more consumers and entice existing homeowners to refinance higher rate loans to lock in lower rates*

Which of the following statements is true about government loans?

They're insured or guaranteed by a government agency. *Government loans are insured by the FHA, guaranteed by the VA, or provided by the USDA, all of which are government agencies*

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?

Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including equity lines of credit. *RESPA regulations apply to loans on one- to four-family residential properties, including assumptions, refinances, home improvement loans, and equity lines of credit*