CA Real Estate Finance Course Exam

What is the current value of a ppt that was purchased two years ago for $260k, assuming an appreciation rate of 2%?

$270,504 | multiply the OG value by the 2%, add it to the OG value, repeat to find the second-year of appreciation

A buyer is purchasing a pt for $400k. his lender's loan-to-value ratio is 80%. How much is the buyer financing?

$320k

You're estimating your annual income and find that the average sale price of a home in the area you'll be working is $300,000. You determine your expected commission is 2% and you plan to make six transactions in the year. Assume there is no broker's split. What will your estimated income for the year be?

$36,000

A buyer is purchasing a ppt for $500k. His down pymnt of $50k and is financing the rest. What's the amount of the loan origination fee if the lender charges one-and-a-half points?

$6750

A ppt valued at $1 mill is returning a net income of $85,000. What's its cap rate?

8.5%

PMI may be required on conventional loans where the loan-to-value ratio is in excess of ___%

80

Danny and Wendy recently relocated to California. They are buying a 3 bed home in an estab neighborhood where they look forward to raising a family. Their RE agent, Brunhilda, thinks that their income, which is on the low side, and the ppt could make them eligible for ___, which would offer reduced, fixed interest rates on a loan.

A CalHFA loan product

Because of the Mortgage Disclosure Improvement Act, the only advance fee that a creditor can charge to a consumer before providing required loan disclosures is ___.

A credit report fee

What falls under the definition of 'dwelling' according to Senate Bill 36?

A mobile home

What describes a Housing Choice Vouchers?

A program to help very low-income families, the elderly, and disabled individuals to afford decent, safe, and sanitary housing in the private market.

Lic Lynn has several accounts set up as part of her personal financial plan to help her manage cash flow. She's allocated 10% of each commission check to business expenses, 15% to taxes, 8% to her retirement fund, 12% to various savings goals, and the rest goes to her living expenses. When she received a check, how does she direct the funds?

After depositing it in her business checking account, she puts 90% of it in her personal checking account to be distributed to the other savings accounts as appropriate

Who needs to obtain a mort loan originator endorsement and register with the Nationwide Mortgage Licensing System and Registry?

Anyone who acts as a mort loan originator

What's an example of an inquiry a consumer initiated that may appear on a credit score?

Application for a loan

An increase in ppt value is ____.

Appreciation

How should you analyze data obtained from tracking your personal spending?

Assign categories to all items and look for trends

____ is a legal action that liquidates or restructures debt. It can have a long-lasting negative impact on the borrower's ability to obtain financing.

Bankruptcy

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

Business checking

During which phase of the RE cycle does a RE professional have the most impact?

Buying/selling

Lucy is a mortgage banker. Her business is regulated by ____.

CA Residential Mortgage Lending Act

The planned transfer of money from your business checking account to your personal checking account to your savings accounts is called ____.

Cash flow

Chuck needs to make a few repairs and upgrades to his home, but he needs some cash to do it. He decides to tap into the equity in his home, which he purchased using a VA home loan. What VA program can Chuck use to do this?

Cash-out refinance

Who typically performs an appraisal?

Certified appraiser

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

Community Reinvestment Act

Tyler is a developer who renovates a long-abandoned warehouse in a low-income neighborhood into a community center, complete with space for after-school programs, a daycare, and a gym. Tyler is able to complete the reno with a loan funded by a local bank. Which act req financial institutions to make credit available for this type of development?

Community Reinvestment Act

Cassie is helping her buyer client, Gus. As they discuss preparations for closing, she cautions Gus, "make sure you review the Closing Disclosure as soon as you receive it and ____"

Contact your lender immediately if you find errors or have any questions.

Which RE finance instrument includes the promise to repay and the security instrument within the same document?

Contract for deed

Rather than be foreclosed on, Jarod turned his deed over to his bank. This is called a _____.

Deed in lieu

For which of these properties would gross rent multiplier be calculated?

Duplex used as a rental property

How many hours of continuing edu must a RE licensee complete each year to renew their MLO endorsement?

Eight hours

Kathy has some unexpected expenses when she breaks her leg skiing. which of the accounts in her personal finance system is designed to help her pay bills while she is recovering and unable to work at her usual pace?

Emergency fund

Your clients, the Nguyens, have signed a contract for deed to purchase a ppt. What rights do the Nguyens receive?

Equitable title and possession of the ppt

Rick finds that some of his ongoing expenses as a licensee are paid monthly, some quarterly, and some annually. How can he arrive at a standard monthly figure that will help him manage his cash flow?

Estimate total annual expenses and divide by 12 for a monthly amount

In order to analyze your spending habits, you should track ___.

Every dollar that you spend

Lydia put the minimum 3.5% down on her $210k home. She'll have to pay a MIP. What type of loan does Lydia have?

FHA

Federal Home Loan Bank is regulated by what agency?

FHFA

Which entity generally acts in the secondary market?

Fannie Mae

What is the secondary mortgage market made up of?

Fannie Mae, Ginnie Mae, Farmer Mac, and lending institutions that buy loans from other lenders

In '08, as a response to the '07 financial crisis, the Federal Housing Finance Agency began acting as conservator over which institutions?

Fannie and Freddie Mac

Brenda's go-to financial expert has no fiduciary responsibility to her. This is because she's working with a(n) ____.

Financial advisor

Which entity buys loans primarily through thrifts?

Freddie Mac

The amount of the ___ a veteran must pay depends on factors, such as military status, down pymnt amnt, and whether the veteran's entitlement is being used for the first time or a subsequent time.

Funding fee

The Farm-Credit System is _____.

Government-sponsored enterprise

What is the economic impact of mortgage loan payments?

Increase in economic growth

Payment history, age of accounts, credit usage, types of accounts, and ___________ are factors considered in calculating a credit score.

Inquiries

Which type of RE investment trust derives its income from the rent or sale of ppt and interest dividends?

Investment REIT

Tina is purchasing a home that appraised for $10k more than the sales price. On which figure will the lender base the loan-to-value ratio?

It will be based on the sales price | lenders use the lesser price to determine the LTV

Because of the Secure and Fair Enforcement for Mortgage Licensing Act, borrowers can determine if mortgage loan originator is ___.

Licensed and registration

What would most likely be found in the "potentially negative items" section of a credit report?

Lien

Closing costs are itemized on page two of the Closing Disclosure and all amount are ___.

Listed according to who paid them; borrower, seller, or other

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

Lower than

Store of value, unit of account, and what other factor define money?

Medium of exchange

Maxine is purchasing a small craft shop, including the underlying real estate. She applies for a commercial loan from her federally insured bank to complete the purchase. Is Maxine's transaction covered by the RESPA

No, commercial and business loans are exempt from RESPA requirements

To qualify for the FHA Streamline Refinance program, a homeowner must ______.

Not be delinquent on mortgage payments

Bobby is completing a residential loan app. On the app, he lists his liabilities. What are liabilities?

Obligations the borrower owes

What is a wrap-around mortgage?

One that may involve seller financing

Analyzing spending habits allows you to evaluate the impact of a purchase in terms of ____.

Opportunity cost

Several actions take place on the secondary mort market. What is a common activity?

Packaging loans into mortgage-backed securities

Which type of participation agreement involves more than one mortgagee as owner of the finance instrument in which each receives an equal share of the mortgage payment?

Partnership among mortgagees

Wendy has been approved for her first mort. The lender advertised a 4.6% interest rate. She's nervous about the terms and fees. What info is the lender required to provide?

Payment schedule, APR, finance charges, pre-pymnt penalties, late penalties, and total financed amount

The two most common insolvency methods put in place when a bank fails are the purchase and assumption method and the ___ method.

Payout

The fewer ppts on the market, the greater the scarcity. What's the effect on prices?

Prices are pushed upward.

What does the lump sum payment at the end of an interest-only mortgage loan consist of?

Principal only

The doc that describes the loan amount and the terms for repaying and is attached to a security instrument is called the ____.

Promissory note

A goal written according to the SMART criteria is ______.

Realistic

In which phase of the RE market would you expect to see unemployment increasing, prices falling, and foreclosures on the rise?

Recession

When using a financial system, what activities should you complete on a weekly basis?

Record purchases and file receipts

In which phase of the RE market cycle would you expect to see ppt under valued and a large supply of homes on the market?

Recovery

Since the FHA was established, it has taken strategic action to stabilize the mortgage market. Which of these items is one of the FHA's strategies?

Reduce lender risk by establishing borrower qualification standards.

Annual MIP can be removed from an FHA loan by _____.

Refinancing to a conventional loan

The ___ account is a recommended component of a personal financial plan that should be started as early as possible and contributed to throughout your working life.

Retirement

A loan made from a homeowner's equity where funds are drawn over time and the bank gains corresponding ppt ownership is called a ______.

Reverse annuity mortgage

Where can a party reviewing a title commitment find requirements that must be met before a title insurance policy will be issued?

Schedule B-1 : lists items the title insur co. req to be addressed b4 it will issue the title insur policy.

What type of loans issued in CA may be protected from a deficiency judgement?

Second mort. issued in Aug13 to purchase a single family home

Elijah has identified his personal values, estimated his income, and analyzed his current expenses. With this info, he's ready to ______.

Set his financial goals

Your client, Shelby, a veteran using a VA loan to finance his purchase, just learned that the CRV came in lower than the sales price. But no problem: Shelby's bro is willing to loan him the difference. If the loan is approved ____.

Shelby must still be under the VA's debt-to-income ratio

Chanel is buying a brand new home with a VA loan. She's obtained a certificate of reasonable value. For how long is that CRV valid?

Six months for resale ppts and 12 months for new construction

What is a potential concern of a buyer who's entering into a contact for deed with a seller?

The buyer could lose the ppt after missing only one mort pymnt

What are ppt taxes in a mort pymnt?

The cost of public services divided by the assessment for the ppt

Who's the mortgagee in a mortgage

The lender

What describes the federal funds rate?

The rate at which a bank can obtain a loan from another bank

What's a reason a seller might consider selling his ppt through an installment plan instead of a traditional sale?

The seller may pay less in capital gains taxes if he receives the proceeds from the sale over time rather than in a lump sum.

The funding fee on a VA loan is waived when ____.

The vet has a 10% or higher VA disability

When does the mort insurance requirement requirement end for a borrower with a VA loan?

There is no mortgage insurance req. for a VA loan

Why are self-employed individuals required to pay estimated income taxes?

They don't have taxes removed from a paycheck

What's true about buydowns with a VA loan?

They're allowed only on fixed rate loans

What's the purpose of CA's Covered Loan Law?

To curb predatory lending in CA

A calculation that looks at all recurring (or installment) debt - such as monthly mort, car, credit, and loan pymnts - as a percentage of the borrower's monthly gross income, is called ____.

Total debt ratio

Stacey's lengthy military service makes her uniquely eligible for a(n) ____.

VA loan

Sissy is a veteran who used her full entitlement to purchase a home. The loan has since been paid off, and Sissy still owns the home. Now, she'd like to buy a second home using another VA loan. Is Sissy allowed to do this?

Yes, Sissy can apply to have her entitlement restored and can buy a second house using a VA loan.

When obtaining a mortgage to purchase a home, the borrower uses the ppt as ______.

collateral

what type of value may consumers be interested in if they are looking for the potential rate of return?

investment value

What is one of the qualifying standards for a VA-guaranteed loan?

must have a certificate of eligibility

A loan with borrow options that can be long term with periodic adjustments or short term with more frequent adjustments to the rate is a(n) ___ mortgage.

renegotiable rate

What must a prudent lender do with the info received on a loan app?

verify it

Cheyenne is selling the family farm on an installment contract. What is one advantage of selling the farm this way?

will pay less in capital gains taxes by receiving the proceeds from the sale over time, rather than in a lump sum

Millie and Jerry are purchasing a home using their VA loan benefit. The sale price on the home they buy is $320k, with 100% financing. Assuming that Jerry has a typical level of entitlement, how much of their loan does the VA guarantee?

$80,000

If the annual taxes on a ppt are $1,000, how much is paid monthly?

$83.33

In calculating a PITI mort payment, the annual taxes and insurance are divided by ___, and added to the monthly principal and interest payment to make up the total monthly payment.

12

Your business is booming, and you'd really like someone else to maintain your financial records. The best person for this role is ___.

A bookkeeper

By stabilizing and improving the mortgage market, the FHA helped to build ____.

A global market for mortgage-backed securities

What is a potential ramification for the seller if a short sale is completed?

A short sale can negatively impact the seller's credit

Albert wants to sell his house to his cousin, who's willing to assume the loan. What clause in Albert's mortgage requires him to obtain the lender's permission to do this?

Alienation clause

Which of these are essential elements of personal financial responsibility?

An emergency fund and retirement plan

When a promissory note is sold, what is recorded in county land records?

Assignment of the note

How much should the emergency fund hold, according to the recommendation for creating a responsible financial plan for personal finances?

At least six months

Which doc is used to estab the path and proof of ownership?

Chain of title

Which of these individuals may benefit from USDA Rural Development program offerings?

Community-managed lenders

Craig's loan is secured by a mortgage. Who holds legal title when this security instrument is used?

Craig

One alternative to foreclosure is a voluntary conveyance of ___.

Deed

Farm and Country Bank provides credit to the farmers, ranchers, and other rural residents of its community. What government program helps the bank maintain enough capital to fund those loans?

Farmer Mac

Randall needs some new equipment for his ranching operation, and he needs a loan to purchase the equipment. When he approaches his local bank and applies for a Farm Credit System loan, how is the loan funded?

From the sale of Farm Credit System debt securities

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.

When you develop your financial plan, you should start by ____.

Identifying your personal values

A borrower who has received a certificate of eligibility will qualify for a VA loan ____.

If the applicant also has sufficient credit and income.

Your client has a VA loan and wants to refinance to a lower rate. What's the simplest option?

Interest rate reduction refinance

Describe an equity real estate investment trust?

Invests in equity by owning income-producing ppt, such as malls, apartments, or office parks

What's the purpose of the Equal Credit Opportunity Act?

It requires lenders to make credit equally available to all creditworthy applicants, regardless of the applicant's protected class status.

What best describes the CA short sale addendum?

It's a form that accompanies an offer of purchase for a short sale.

This foreclosure process must be used when the security instrument doesn't contain a power of sale clause.

Judicial

What is it called when the borrower and lender work together to restructure work together to restructure the terms of a home loan?

Loan modification

Which type of real estate investment trust involves both residential and commercial ppts?

Mortgage REIT

With this type of loan, personal ppt is included with the real ppt in the sale. It's commonly seen in commercial real estate, but you may also see this in the sale of furnished condos

Package mortgage

What best describes the state of the market during the over-supply phase of the real estate cycle?

Ppts selling for more than their appraised value, many buyers in the market, and lots of new construction

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

Premiums and deductibles

One of these actions is considered an MLO activity. Which one?

Presenting a revised loan offer to the consumer after they requested a lower rate.

A borrower sued a foreclosure consultant for violating the Mortgage Foreclosure Consultant Law. The borrower may receive actual damages, legal fees, and in severe cases ____.

Punitive damages up to three times the borrower's actual damage

Kristoff got a bit behind on his mort and missed several pymnts. He and his lender devised a schedule that gives Kristoff an opportunity to make up those delinquent pymnts. What is this an example of?

Repayment plan

What qualifying ratios are used in a VA home loan?

Residual income and debt-to-income

Because of the funding fee required for a VA loan, a borrower with no down payment funds saved should ____.

Roll the funding fee into the loan

The lender, the employer, and the ___ all complete parts of the request for verification of employment form.

Seller

A homeowner is behind on his mortgage. He's decided to try to sell the ppt and is working with his lender to do so. He owes $315k on his loan balance and closing closts. He has an offer for $300k, which the lender approves. What is this an example of?

Short Sale

Melanie is a buyer who has agreed to purchase Stan's ppt using a contract for deed. Who holds legal title to the ppr during the term of the loan?

Stan | when a contract for the sale of land is executed, equitable title passes to the buyer and the seller holds legal title. When the conditions on the sale contract have been met, legal title passes to the buyer.

Which act exempted homeowners from paying taxes on capital gains up to a specified value?

Taxpayer Relief Act of 1997

Which parties must be identified on the promissory note?

The borrower and the lender

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

The economy may grow due to an increased money supply.

The annual MIP is recalculated each year using ___.

The end-of-year loan balance, plus the balance after the next 11 payments

Sophia and Antonio are expecting twins. They want to sell their old house and buy a larger home using a conventional loan. In order to be sure they'll get the PMI waived, what will they need to have?

They should have a loan-to-value ratio of 80% or less.

There are a lot more sellers than buyers in the current market. How will this demand influence value?

Value will be pushed downward