CA Real Estate Finance Course (PRACTICE EXAM)
The _______ section contains the seller's existing mortgage loan payoff amount that must be paid to complete the transaction.
"Due from Seller at Closing"
Up to what amount will the FDIC insure?
$250,000
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?
$315,789
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?
$399,672.12
Millie and Jerry are purchasing a home using their VA loan benefit. The sales price is $320,000, with 100% financing. Assuming that Jerry has a typical level of entitlement, how much of their loan does the VA guarantee?
$80,000
Pattie is the widow of Oscar, a member of the Army who was killed in action. When she uses the VA loan to buy her first home, what percentage of her loan amount will be charged as a funding fee?
0%
In calculating PITI for a mortgage payment, the annual taxes and insurance are divided by ______ and are added to the monthly principal and interest payment to make up the total monthly payment.
12
John wants to do a 1031 tax exchange. He just sold his property. How many days does he have to close on a new property?
180
Over how many years is a residential income-producing property depreciated?
27.5 years
The Davidsons' lender is trying to approve them for a conventional loan. What is the minimum percentage of total debt ratio they must have to be eligible a conventional loan?
36%
What's a typical loan-to-value ratio for an FHA loan?
96.5%
Who or what entity directs the activities of credit unions?
A board of directors
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A borrower borrows against the equity in the house and pays back the amount withdrawn plus interest.
Which of the following would be the best place to keep monies intended for long-term savings?
A certificate of deposit
What's a participation certificate?
A mortgage-backed security issued by Freddie Mac
In a deed of trust, who is the trustee?
A neutral third party
What is a government-sponsored enterprise?
A private company the U.S. Congress created to make certain borrowing easier and cheaper
Which of the following would be a receipt you should save for tax purposes?
A toll fee for a business trip
Payment history, credit usage, inquiries, and types of accounts are factors considered in calculating a credit score. Which of the following options is also a factor?
Age of accounts
The ______ clause is also known as a due-on-sale clause.
Alienation
Which generation are children of the Silent Generation and products of the U.S. population explosion after World War II?
Baby Boomers
Bill's loan is secured by a mortgage. Who holds legal title when this security instrument is used?
Bill
Who is responsible for paying the loan-related closing costs in a financed real estate transaction?
Buyer
Marion has been a licensee for four years and earns a relatively steady income. Which of the following is a good way for Marion to estimate her monthly business expenses?
Calculating monthly expenses based on her expense history from the past year
Two days before closing, Barb reviews her final loan terms and closing costs. She must bring $100,000 to the closing. What document is she reviewing?
Closing Disclosure
Georgette and Elise are buying a home together, and have taken out a loan with a private loan company. They'll pay a bit more interest, and larger fees, but they feel it's worth it to have the home they've always dreamed of. What else might the private loan company require?
Collateral
Dorinda is an investor. She recently purchased shares in a tranche that holds mortgages and mortgage-backed securities. In what did she invest?
Collateralized mortgage obligation
The ______ was a response to the practice of redlining and was enacted in 1977.
Community Reinvestment Act
Amos is a new licensee who has just earned his first commission check. What should he do with it?
Deposit it into a business account separate from his personal account
The ______ was enacted in 2010 to create stricter regulation of the financial services industry to reduce costs for consumers from (for instance), undisclosed kickbacks.
Dodd-Frank Wall Street Reform and Consumer Protection Act
Which of the following could an investor who sells an apartment house buy using a 1031 exchange?
Duplex, office building, or warehouse
Natalie is a single mother of twins and receives government assistance to help make ends meet. She's been living with her mother for the last few years but really wants to buy her own home to gain some independence. She's got a little in savings and has good credit, but when a lender turns her away because she receives public assistance she worries that she'll never be able to get a loan. What act prevents automatic discriminatory practices by lenders and protects individuals like Natalie?
Equal Credit Opportunity Act
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
When establishing guidelines for conforming loans, Fannie Mae and Freddie Mac use loan limits set by which entity?
Federal Home Financing Agency
How is a mortgage banker paid?
Fees from originating and servicing loans
After purchasing a property, what can Jeremiah do to clear a possible future claim on the property's title?
File a suit to quiet title.
Jean is a high school English teacher. With the Good Neighbor Next Door program, she's able to buy a foreclosed FHA-insured property ______, though she does have to agree to live on the property for three years.
For a 50% discount off list price and a down payment of only $100
Which institution guarantees mortgage-backed securities with the full faith and credit of the United States?
Ginnie Mae
Glen is assisting a buyer who makes an offer on a condo in a high-end area of town. The seller refuses the offer, and Glen's client believes this is discriminatory behavior. How should Glen advise his client in this situation?
Glen can recommend filing a complaint with HUD about the alleged discrimination.
What's the acronym for the legislation that requires financial institutions to document and publicly disclose lending practices?
HMDA
How and when does a contractor performing work associated with a 203(k) loan receive funds from the lender?
Half is received up front and the other half after the work is completed and approved
Rick is required to file quarterly estimated taxes. Why might this be?
He's self-employed.
Stacy is preparing to sell her home, but learns she can't transfer the property until she removes an encumbrance. Which of these is encumbering her property?
Her existing mortgage
Veronica is an independent contractor, so in addition to setting aside money for an emergency fund in case there is a lapse in her income, she knows that she must save money to pay for ______.
Her income taxes
Lenny the lender is reviewing mortgage applications. Applicant Catherine has a good credit history, but the property she wants to buy is in an area of town where home prices have been headed down, and neighborhoods are starting to look grim. Lenny denies Catherine's loan application. What California legislation makes Lenny's decision illegal?
Housing Financial Discrimination Act (Holden Act)
Joseph is self-employed and wants to buy his first home. What additional document may he need to provide to the lender when trying to obtain a loan?
IRS Form 4506-T
What's a key feature of the Federal Housing Administration's loan program?
Insures lenders against loss from borrower default
Construction loans are a type of ______ financing.
Interim
Why should licensees maintain a business account separately from any personal accounts?
It makes it easier to recognize when the business is profitable.
Which of the following is a true statement about the Hardest Hit Fund?
It was available in the states with the most underwater homeowners.
Private loan companies may place a ______ on the property for which the loan is being taken.
Lien
Melissa is a new licensee. Which of these items will be among the expenses she will incur as she begins her business?
Lockbox fee
What attracts borrowers to adjustable rate mortgages?
Lower initial interest rate
The ______ defines individuals who perform certain foreclosure-related activities for compensation for borrowers.
Mortgage Foreclosure Consultant Law
Which type of real estate investment trust involves both residential and commercial properties?
Mortgage REIT
Yancey purchased a home six months ago using a VA loan. Due to an inheritance, he is suddenly able to pay off his mortgage. Will he pay a pre-payment penalty?
No
You want to make $50,000 in a year from your real estate business. You know that about 15% of the leads you get turn into clients. You earn an average of $8,000 on every closed transaction. Is this everything you need to know to use a funnel to determine how many leads you need to generate to get your $50,000?
No, you also need to know the percentage of clients who turn into closed transactions.
When a buyer uses an FHA loan, the down payment amount is calculated ______.
On the lesser of the sales price or the appraised value of the property
Carla is a licensee who manages her money with a personal financial plan. When she receives two large commission checks in a row, her personal checking account is holding three months' worth of living expenses. What should she do?
Open a living expenses savings account and move the two-month excess into it.
George has a lot of outstanding debt on three different credit cards. As he considers his financial goals, what should be at the top of his list?
Paying off his credit cards and keeping them paid off each month
Which of the following statements is true regarding closing costs on a VA loan?
Payment of closing costs may be negotiated.
Two examples of loan adjustments or modifications are moratorium and ______.
Recasting
What is it called when borrowers pay back all of the amounts owed and become current (no longer in default) on their loan?
Reinstatement
______ is the term that the VA uses to describe the amount of net income remaining after deduction of debts, obligations, such as utility and phone bills, and monthly shelter expenses.
Residual income
The three-business-day period following the latter of either the date that the transaction is consummated or the date the disclosure is made, during which a borrower can cancel their loan, is called the ______.
Right of rescission
Contributions for this type of IRA aren't tax-deferred.
Roth
Zack and April are purchasing a home. They apply to three different lenders and review the Loan Estimates they receive. Each form includes a field identifying the National Mortgage Licensing System ID number for the lender. What is the act that requires this licensing identification to be available to consumers?
SAFE Act
Sally, Larry's appraiser, has provided her with a title commitment and indicated there's a problem with the title. Where can Larry find the requirements that must be met before a title insurance policy will be issued?
Schedule B-1
What is the name of the federal act that sets requirements for mortgage loan originators (MLOs)?
Secure and Fair Enforcement for Mortgage Licensing Act
The ______ table discloses the amounts associated with the transaction that the seller will pay and receive, usually resulting in a total cash to seller.
Seller's Transaction
After bonds are ______, their value goes up and down with the market.
Sold
Which of the following is a typical benefit of a retirement account?
Tax deferment of income
Cassie is helping her buyer client, Gus, prepare for closing. What should she encourage him to verify as soon as he receives the form?
That the borrower and seller names, the property address, and the sales price are accurate and spelled correctly
Which agency sets the guidelines for qualified mortgages?
The Consumer Financial Protection Bureau
Which one of the following statements about the Torrens system is true?
The approach is only used in a handful of states.
The annual MIP is recalculated each year using ______.
The end-of-year loan balance, plus the balance after the next 11 payments
Which of the following statements about an assumption is NOT true?
The seller's credit score may improve although he's not making any mortgage payments.
Margot reviewed page three of her Closing Disclosure to see the amounts she'll pay and receive, and the total cash amount. She located this information under the "Summaries of Transaction" in the "Seller's Transaction" table, which is completed by ______.
The settlement agent
Page four of the Closing Disclosure includes consumer education about ______.
The use of an escrow account
When does the mortgage insurance requirement end for a borrower with a VA loan?
There is no mortgage insurance requirement for a VA loan.
Which of the following is true about mortgage brokers?
They don't service the loan beyond placement.
Borrowers who refinance and use equity to pay off credit card debt should be aware that ______.
They're exchanging short-term debt for long-term debt
Which definition best describes a package mortgage?
This might be used in the case of a furnished condominium.
Janie's a lender at Super National Bank. She's working with the Downings to perform a title search. Why did she also request a property survey?
To identify any changes to the legal description of the property
What is the purpose behind Appraiser Independence Requirements?
To protect appraisers' ability to assess an accurate value for a property by avoiding outside pressure or influence
The purpose of evaluating spending habits is ______.
To see where those habits do or don't align with personal values
What's another term for back-end ratio?
Total debt ratio
The _______ requires lenders to disclose financing terms to consumers in a manner that's not misleading or deceitful.
Truth in Lending Act
How long does the borrower have to pay private mortgage insurance?
Until the borrower reaches a 22% equity position
Buyers Romy and Steven are looking over closing documents and don't know if the Loan Estimate matches everything on the Closing Disclosure. Usually, amounts shown on the Closing Disclosure that don't exactly match the figures on the Loan Estimate will be due to _______.
Updates to reflect the terms of the borrower's legal obligation when the loan closes
The FHA Section 203(h) program assists ______ with an insured mortgage.
Victims of a presidentially declared disaster
The amount of the ______ a veteran must pay depends on factors such as military status, down payment amount, and whether the veteran's entitlement is being used for the first time or a subsequent time
funding fee
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
Which of these actions is an MLO violation?
Performing MLO activities before obtaining an endorsement
If Jeff is healthy and always has excellent check-ups, which of the following would likely be the most important factor in his insurance selection?
Premiums
Which of the following is a possible result of a community growing too fast?
Inadequate resources to support the population
Which approach to finding value would licensed appraiser Christina probably weigh most heavily when appraising a three-unit rental property?
Income
Which of the following approaches to value uses a capitalization rate?
Income approach
Though not a loan, buyers may be able to enlist the help of ______, who can give them a tax-free gift to help them with their purchase.
Individuals, such as family members
Which process temporarily stalls foreclosure?
Filing for Chapter 7 bankruptcy