16 Practice Questions

Your client hates the fact that out of her $1,027 monthly payment, more than $900 is going toward interest. What do you tell her? "That's amortization for you." "That's highway robbery! Who's your lender?" "There must be some mistake." "You should refinance."

"That's amortization for you."

George and Annette are refinancing their home. They're borrowing $267,500 at a 5% interest rate, and their lender is charging them a flat commitment fee of $1,500. They'll pay $6,600 in closing costs. Whether they close or not, George and Annette will pay a ______ loan commitment fee. $0 $13,425 $1,500 $6,600

$1,500

Tom and Allie are buying an investment property for $279,500. Their loan amount is $215,000, and their interest rate is 4.375%. The lender is charging them a flat commitment fee of $1,500. Whether they close or not, Tom and Allie will pay a ______ loan commitment fee. $12,228 $1,500 $4,825 $9,406

$1,500

Harley and Quinn are refinancing their home and their lender is charging them 1% for their loan commitment fee. Their loan amount is $192,000, their interest rate is 4.75%, and their appraised value is $275,000. Harley and Quinn will pay a ______ loan commitment fee. $1,920 $2,750 $3,650 $9,120

$1,920

A buyer is purchasing a home appraised at $480,000. The buyer is obtaining a 90% loan, and the lender will charge an origination fee of 1% at closing. How much will the loan origination fee be? $4,320 $4,712 $4,728 $4,800

$4,320

Client Bette asked licensee Frank about a home equity line of credit versus home equity loan. Which of the following offers an brief overview of what a home equity line of credit is? A borrower borrows against the equity in the house and pays back the amount withdrawn plus interest. A borrower can pick up paying on the mortgage where the seller left off, assuming the buyer qualifies for the loan. A veteran can obtain the loan with no down payment and no private mortgage insurance requirement. It's a very low-interest loan where borrower will have to repay the entire home balance in seven years.

A borrower borrows against the equity in the house and pays back the amount withdrawn plus interest.

To which of the following borrowers might a lender be most likely to recommend an FHA loan? An investor who intends to use equity in another investment property as his down payment A retired couple interested in downsizing from a large four-bedroom house they own free and clear to a condominium A single stockbroker with a $40,000 down payment and significant assets in a stock portfolio A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores

A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores

After getting into a fender bender, Parker had to buy a new car. To make the down payment on the car, he had to skip a couple of his mortgage payments. He received a notice from his lender indicating the remaining amount of his loan is due immediately and in full. What clause in his mortgage stipulates this? Acceleration Alienation Defeasance Due-on-sale

Acceleration

Which of the following is a true statement about FHA financing?' An FHA loan is best for borrowers who have large down payments. An FHA loan is usually more attractive to borrowers who have lower credit scores and down payments. FHA loans are available to all borrowers, regardless of credit history. FHA loans have more stringent requirements than conventional loans do.

An FHA loan is usually more attractive to borrowers who have lower credit scores and down payments.

Which of the following options describes a subordination agreement? An agreement between a contractor and any subcontractors An agreement between a landowner and a contractor An agreement between the court and landowner to decrease property taxes An agreement between two lien holders to modify the order of lien priority

An agreement between two lien holders to modify the order of lien priority

Madison is purchasing a townhome and has signed an existing home contingency because she needs to sell her townhome before she can purchase Tom's. When can Tom remove the contingency? At any time, regardless of whether he has received another purchase agreement Only after the contingency period lapses Only if Madison asks him to remove the contingency Only when he receives another offer

At any time, regardless of whether he has received another purchase agreement

Daniel purchased a townhome and obtained financing from Bank A on February 1, 2014. On April 1, 2015, he took out a home equity loan on the property with Bank B. On August 1, 2015, Daniel refinanced his mortgage through Bank C, which resulted in Bank A's loan being paid off. Bank B signed a subordination agreement related to Bank C's loan. Which lender will be paid first in the event of a foreclosure? Bank A Bank B Bank B and C will be paid at the same time. Bank C

Bank C

Craig's loan is secured by a mortgage. Who holds legal title when this security instrument is used? A third-party trustee Craig Craig's lender The seller

Craig

Which mortgage clause requires the lender to discharge the mortgage lien once the borrower has paid in full? Acceleration Alienation Defeasance Due-on-sale

Defeasance

Which of the following statements about deficiency judgments is false? Deficiency judgments allow the lender to pursue the borrower by a placing lien on any current and future owned property to cover losses. Deficiency judgments apply to the property currently owned by the borrower. Deficiency judgments apply to the property owned by the borrower in the future. It allows the lender to recover losses incurred in the foreclosure process.

Deficiency judgments allow the lender to pursue the borrower by a placing lien on any current and future owned property to cover losses.

What's an up front charge to make up for the difference between the interest rate the borrower is paying and the rate the lender normally requires? Discount point Interest Note Usury

Discount point

A home equity line of credit (HELOC) is based on the homeowner's available ______. Cash Credit Equity References

Equity

Lydia put the minimum 3.5% down on her $210,000 home. She'll have to pay an MIP. What type of loan does Lydia have? Conventional FHA Standard VA

FHA

Lending eligibility requirements for USDA loans are considered ______. Exclusive Fairly lenient Nonexistent Stringent

Fairly lenient

Conventional loans may be conforming or nonconforming, depending on whether they meet ______ guidelines. Department of the Treasury Fannie Mae and Freddie Mac FDIC State banking law

Fannie Mae and Freddie Mac

Phyllis and Maury obtained a mortgage from Taylor Bank & Trust in 1998. In 2014, they obtained a second mortgage from Quail Loans. What's the loan with Taylor Bank & Trust considered? First mortgage Home equity line of credit Junior mortgage Subordinate mortgage

First mortgage

Cindy received a loan based on the amount of equity she had in her house. She used this lump sum to fund her daughter's college education. What type of loan did she get? Conventional Convertible Home equity Scholastic interest

Home equity

A loan made based on the amount of equity available in an person's home or property is called a ______. Conventional loan Flexible annuity loan Home equity loan Home valuation loan

Home equity loan

What type of loan is given based on the amount of equity a borrower has in the home? Bridge loan Home equity loan Shared equity mortgage Swing loan

Home equity loan

Which type of support does the USDA Rural Development Program offer to its target audience of rural residents? It offers direct loans, grants, and loan guarantees for housing and other rural needs, as well as advisor services to agricultural producers. It oversees community development efforts in rural areas and advises Congress on financial policies that affect rural Americans. It provides access to educational services and help for job seekers who live in rural areas. It purchases residential loans from rural lenders and sells them in the secondary market.

It offers direct loans, grants, and loan guarantees for housing and other rural needs, as well as advisor services to agricultural producers.

Fairwell Lending must seek the court's permission to foreclose on a property used as collateral for a loan that is in default. What type of foreclosure process is likely being used? Arbitration Deed in lieu of foreclosure Judicial foreclosure Non-judicial foreclosure

Judicial foreclosure

USDA loans are designed for ______. Income-producing farmers Individuals living on more than five acres Low- to moderate-income home buyers Start-up farms

Low- to moderate-income home buyers

What is the borrower charged for all FHA loans? Discount point Mortgage insurance premium Pre-payment penalty Private mortgage insurance

Mortgage insurance premium

The acronym PITI is a reference to what real estate-related concept? Annual property maintenance Annual property taxes Mortgage payment Required loan documentation

Mortgage payment

Which of the following statements best describes a foreclosure by advertisement? Notification of pending auction, public auction, notice of eviction Notification of pending auction, repossession, notice of eviction Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed Petition to enter, repossession, notice of eviction

Notification of pending auction, public auction, notice of eviction

Generally, there are covenants between the borrower and the lender within a mortgage document. Which of the following is a mortgage covenant? Agree to refinance only with the current lender. Give the lender first right of refusal. Move all checking and savings account to the lender's institution. Pay any charges and assessments against the property.

Pay any charges and assessments against the property.

Which of the following best describes foreclosure by writ of entry? Notification of pending auction, public auction, notice of eviction Petition for immediate repossession and eviction Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed Petition to enter, repossession, notice of eviction

Petition for legal ownership, opportunity to redeem property, notice of eviction if property is not redeemed

Sophie only has 15% to put down on her new home. What might the lender require in order for Sophie to obtain conventional financing? A co-signer A letter of reference A mortgage insurance premium Private mortgage insurance

Private mortgage insurance

Which of the following is a promise from the borrower to repay a certain sum of money to another party (the lender or holder of the note) under specified terms? Deed of trust Mortgage lien Promissory note Usury

Promissory note

Robert and Carla are considering loan options. One of the options they're reviewing involves a higher monthly payment, but reduced total interest over the loan life. This loan option is called a ___________. Bi-weekly payment plan Conventional mortgage plan Partially amortized loan Reduced loan term

Reduced loan term

A RAM is a type of equity financing. What does RAM stand for? Renewed annual mortgage Retired American mortgage Reverse annual mortgage Reverse annuity mortgage

Reverse annuity mortgage

A loan that's offered based on a homeowner's equity in which funds are drawn over time and the bank gains corresponding property ownership is called a ______. Home equity line of credit Home equity loan Renewed annual mortgage Reverse annuity mortgage

Reverse annuity mortgage

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 by using his house as collateral. What is this type of loan called? Adjustable rate mortgage (ARM) Home equity line of credit (HELOC) Home equity loan Reverse annuity mortgage (RAM)

Reverse annuity mortgage (RAM)

Which of the following describes the most typical motivation for a seller in a short sale situation? Ability to choose the best buyer Sell at a price acceptable to the seller's lender Sell at a profitable price Sell at the top of the market

Sell at a price acceptable to the seller's lender

Who or what entity has legal title to a financed property in a lien theory state? The beneficiary The borrower The lender The state

The borrower

When would a lender require a mortgage insurance premium? The borrower has an FHA mortgage. The borrower is unable to put at least 20% down on a conventional loan. The borrower is unable to put at least 25% down on a conventional loan. The borrower wishes to lower his interest rate on a loan.

The borrower has an FHA mortgage.

What's true about the draw period on a home equity line of credit (HELOC)? It's always at least five years. It's never more than 10 years. The draw period varies. There really isn't a draw period to speak of.

The draw period varies.

Janice is selling her property, and Tim wants to assume her loan. If a due-on-sale clause exists in Janice's mortgage, ______. Janice will have to pay any loan assumption fee The entire loan balance may be due at once, and Tim won't be able to assume it The interest rate will rise with the assumption Tim will have to accept existing terms of the loan

The entire loan balance may be due at once, and Tim won't be able to assume it

Who must agree and consent in order for a homeowner to conduct a short sale? The buyer's attorney The courts The lenders The seller's attorney

The lenders

Where are mortgages recorded? Mortgages are not recorded; only deeds are. They're recorded at the lending bank's main office. They're recorded at the real estate brokerage's main office. They're recorded at the recorder's office in the county where the property is located.

They're recorded at the recorder's office in the county where the property is located.

What's the purpose of the fixed/adjustable rate note? To convert the interest rate from adjustable to fixed To convert the interest rate from fixed to adjustable To convert the loan from a fixed rate to an adjustable rate To convert the loan from an adjustable rate to a fixed rate

To convert the interest rate from fixed to adjustable

What is the trustee's role when a deed of trust is used to secure property for a loan? To collect payments and service the loan To hold funds in escrow To hold legal title to the property on behalf of the beneficiary until the loan is repaid To hold the note to the property on behalf of the trustor until the loan is repaid

To hold legal title to the property on behalf of the beneficiary until the loan is repaid

Which government program assists rural Americans by offering loans, grants, and loan guarantees for housing? Farm Credit Administration Farm Credit System Farmer Mac USDA Rural Development

USDA Rural Development

Sylvia is a single mother living in a small town surrounded by ranch and farm land. She would like to buy a house there, but her income level and her status as an independent contractor makes it hard for her to qualify for a conventional loan. What government program might provide her with a direct loan to purchase a home? Farm Credit Administration Rural Loan Program Farmer Mac Direct Loan Program Small Town America Residential Loan Program USDA Rural Development Single Family Housing Program

USDA Rural Development Single Family Housing Program

What's another name for a nonconforming loan? Hybrid loan Jumbo loan Piggyback loan Specialty loan

Jumbo loan

Rob and Jill obtained a mortgage from Taylor Bank & Trust in 1998. In 2014, they obtained a second mortgage from Quail Loans. What is the loan with Quail Loans considered? First mortgage Graduated mortgage Home equity line of credit Junior mortgage

Junior mortgage

Which of the following is a mortgagor's responsibility? Assign the mortgage. Charge late payment penalties. Foreclose on the property if in default. Keep the property in good repair.

Keep the property in good repair.

The Bensons are looking at buying a $650,000 property with a 30-year loan at a 3.125% interest rate. How much would their monthly principal and interest amount be? Use 4.80738 as the factor for a 30-year loan at a 3.125% interest rate. $3,098.54 $3,124.80 $3,451.19 $3,719.25

$3,124.80

What purpose does the promissory note serve? It gives the lender the right to begin foreclosure proceedings if the buyer defaults. It gives the trustee the right to begin foreclosure proceedings if the buyer defaults. It's a promise made to the buyer that the lender will not foreclose as long as the note is kept current. It's a promise the buyer makes to the lender that the note will be repaid in full.

It's a promise the buyer makes to the lender that the note will be repaid in full.

Whether borrowers use a formal (shorter-term or bi-weekly mortgage) or an informal (making periodic additional principal payments) payment plan, they can significantly reduce the total amount paid back to the lender by taking which of the following actions? Finding a less expensive homeowner's insurance policy Making their loan payments on time each month Paying additional interest each month Reducing the principal balance on the loan as quickly as possible

Reducing the principal balance on the loan as quickly as possible

With this type of mortgage, the borrower receives a below-market interest rate. In return, the lender receives equity in the property. What is it? Graduated payment Growing equity Rollover mortgage Shared appreciation

Shared appreciation