unit 13 exam
A seller buydown can ______.
Help a borrower meet lender qualification standards
Wendy is buying a house from Tom. Tom helps Wendy out by paying for a 2-1 buydown. The lender has given Wendy an interest rate of 5%. Which of the following describes what the buydown will do to Wendy's interest rate?
Her rate will be 3% for the first year, 4% the second year, and 5% after that.
A seller is offering a second loan to help the buyer with her down payment via a contract for deed. Why might the buyer's lender have an issue with this?
Lenders don't like a contract for deed arrangements.
When a real estate transaction is financed using a contract for deed, what advice should real estate agents give to their clients?
Have an attorney review the contract.
Victor is selling his property to Sheila. He's acting as the lender, and the property is unencumbered. Which of the following options describes the type or types of financial instruments Victor may use for the loan agreement?
Note with a contract for deed, mortgage, or a note with a deed of trust
Lisa, a seller, is providing Darwin, a buyer, with a seller second on the purchase of her property. Darwin's conventional lender uses a note with deed of trust to secure the first loan. What instrument is Lisa most likely to use for her second loan with Darwin?
Note with deed of trust
How does a 3-2-1 buydown work?
The interest rate starts low but increases by 1% each year for three years until it reaches the rate stated in the note.
Which of these statements about a buydown is true?
A permanent buydown will cost more than a temporary buydown.
Your clients, the Nguyens, have signed a contract for deed to purchase a property. What rights do the Nguyens receive?
Equitable title and possession of the property
Melanie is a buyer who has agreed to purchase Stan's property using a contract for deed. Who holds legal title to the property during the term of the loan?
Stan
Which of the following is a potential concern of a buyer who's entering into a contract for deed with a seller?
The buyer could lose the property after missing only one mortgage payment.
Bob is selling a four-bedroom house that he bought as an investment property. Victoria would like to buy it, but she has a low credit rating and can't find a bank that will offer her a loan. After reviewing Victoria's financial situation, Bob feels confident that she's an acceptable risk. He offers to extend her a line of credit for the purchase in the form of a contract for deed. What issue should Bob be aware of?
Victoria could cause an involuntary lien to be placed on the property.
Ralph and Mort are neighbors. Ralph is selling, Mort is buying, and Ralph is offering a second loan to help Mort with his down payment, using a contract for deed. When Mort presents this idea to his lender, his lender balks. Why might that be?
Lenders don't like contract for deed arrangements.
Babs is buying Kirk's property. Babs needs help with the down payment, and Kirk offers to supplement Babs' bank loan with a second loan, allowing her to meet her lender's down payment requirements. Which finance instrument(s) may be used for the agreement between Babs and Kirk?
Mortgage or deed of trust
Beth needs help with the down payment to buy Mark's property. Mark is going to supplement Beth's bank loan with a second loan, allowing her to meet her lender's down payment requirements. What finance instruments may be used for this agreement?
Mortgage or deed of trust
Jacob is selling his unencumbered property to Shem and is acting as lender in the transaction. Which type(s) of finance instrument can Jacob use for the loan agreement?
Note with mortgage, note with deed of trust, or contract for deed
Gertrude is buying Sam's house, and Sam has agreed to finance the purchase. Gertrude is aware that a seller-financed transaction creates certain risks for her that a conventional loan wouldn't. Which of the following is an issue that Gertrude is protected from via her loan agreement?
Sam could sell the property to another person at any time, canceling Gertrude's equitable interest in the property and her right to possess it.