Chapter 10
What is the monthly payment on a $360,000 loan with a mortgage factor of 4.7? $7,200 (Dollars) $1,692 (Dollars) $1,280 (Dollars) $460 (Dollars)
$1,692 (Dollars)
What is the monthly payment on a $450,000 loan with a mortgage factor of 4.2? $1,320 (Dollars) $1,760 (Dollars) $1,890 (Dollars) $3,980 (Dollars)
$1,890 (Dollars)
You have a mortgage balance of $250,000. You recently had an appraisal completed on your home and found out that it is worth $400,000. How much equity do you have in your home? $0 (Dollars) $150,000 (Dollars) $250,000 (Dollars) $400,000 (Dollars)
$150,000 (Dollars)
Josh is purchasing a $360,000 house and needs to obtain a $280,000 loan to close on the property. How much will Josh pay as a loan origination fee if the lender charges a fee of 0.75%? $2,800 (Dollars) $3,600 (Dollars) $2,650 (Dollars) $2,100 (Dollars)
$2,100 (Dollars)
What amount of interest would be paid if you took a $200,000 mortgage for 1 year at 10% annually? $20,000 (Dollars) $10,000 (Dollars) $200,000 (Dollars) $50,000 (Dollars)
$20,000 (Dollars)
What is the amount paid in yearly interest on a $640,000 interest-only loan with a 4.5% interest rate? $2,400 (Dollars) $28,800 (Dollars) $12,500 (Dollars) $6,400 (Dollars)
$28,800 (Dollars)
A property is under contract for $420,000, but the appraisal came back at only $415,000. What is the maximum loan amount a lender will provide using an 80% LTV? $330,000 (Dollars) $332,000 (Dollars) $310,000 (Dollars) $415,000 (Dollars)
$332,000 (Dollars)
What is the loan amount if a borrower paid $4,300 in loan origination fees at a rate of 1.25% $430,000 (Dollars) $410,000 (Dollars) $368,000 (Dollars) $344,000 (Dollars)
$344,000 (Dollars)
A lender is offering a buyer a loan with an LTV of 75%. Assuming the contract price and appraised value are equal, what is the value of the property if the loan amounts to $292,500? $320,000 (Dollars) $380,000 (Dollars) $360,000 (Dollars) $390,000 (Dollars)
$390,000 (Dollars)
Amy is purchasing a $520,000 house and needs to obtain a $410,000 loan to close on the property. How much will Amy pay as a loan origination fee if the lender charges a fee of 1.25%? $5,200 (Dollars) $4,100 (Dollars) $5,125 (Dollars) $4,850 (Dollars)
$5,125 (Dollars)
2.5% is equal to how many discount points? 0.25 2.5 25 250
2.5
3 discount points is equal to ............. of the loan amount? 0.3 percent 1 percent 3 percent 6 percent
3 percent
If a property sells for $480,000 and the lender provided the buyer with a $336,000 loan, what was the LTV? 85 percent 82 percent 75 percent 70 percent
70 percent
If a property sells for $250,000 and the lender provided the buyer with a $200,000 loan, what was the LTV? 75 percent 80 percent 85 percent 82 percent
80 percent
If Jessica wants a stable monthly payment, what should she look for in a loan? An adjustable rate loan. A fixed interest rate loan. A 30-year loan term. A low interest rate loan.
A fixed interest rate loan.
What's a usury law? A law that limits how a loan can be used. A law that limits how much interest banks can charge. A law outlining the terms of a promissory note. A law that says how the home can be used when obtaining a loan.
A law that limits how much interest banks can charge.
What is an FHA loan? A loan from the Federal Reserve. A type of insurance product available to home buyers. A loan backed by the Federal Housing Administration with easier qualifications. A loan designed for those who are low risk and want the least expensive loan.
A loan backed by the Federal Housing Administration with easier qualifications.
What is a reverse mortgage? A loan to purchase a home in which you owe more after 10 years than when you first bought the home. A loan for buying a home in which you pay more principal than interest in the first few years. A loan that allows a senior citizen to borrow against the equity in their home while still living in it. A loan the seller makes to the borrower.
A loan that allows a senior citizen to borrow against the equity in their home while still living in it.
What's the difference in a home loan and mortgage? A mortgage and home loan are the same thing. A mortgage is the contract while a loan is the debt. A mortgage is the legal process, while a home loan is the financing for it. A home loan refers to the legal process while the mortgage is paid monthly.
A mortgage is the legal process, while a home loan is the financing for it.
What are the two types of variable-rate mortgages? ARMs and FHA loans. ARMs and graduated payments. Graduated payments and FHA loans. Graduated payments and balloon mortgages.
ARMs and graduated payments.
Who qualifies for a VA loan? Anyone that works for the federal government. Those who apply for a loan through Veterans Affairs. Active duty and retired veterans of the United States Armed Forces. Anyone that plans to serve in the government.
Active duty and retired veterans of the United States Armed Forces.
When is the mortgage recorded? When the home's debt is paid in full. After all documents are signed at the closing and the title company transfers the title. When the mortgage is late and the lender files to foreclose. After the trustee completes the paperwork.
After all documents are signed at the closing and the title company transfers the title.
Roger is selling his home and has $50,000 worth of equity. What happens to this value? The lender has first priority to all funds. Roger can cash out and walk away with that money even if the home sells. After the home loan is paid off, the remaining sale value is paid to Roger. The trustee handles the negotiations here.
After the home loan is paid off, the remaining sale value is paid to Roger.
What happens during the property closing? The buyer has to agree to new terms on the loan. The buyer officially gets the keys. The loan's terms are reviewed again to make changes. All parties sign the documents and close the loan. It transfers hands.
All parties sign the documents and close the loan. It transfers hands.
Jamie wants to buy a duplex and rent the second half to a friend. Will her lender allow it? An Assignment of Rent allows for this at the time of securing the loan. Of course, what else would the lender expect from a duplex? The lender will not allow it because of the risk. The lender won't approve a mortgage for a duplex.
An Assignment of Rent allows for this at the time of securing the loan.
What Is Ginnie Mae? An organization that's government-owned and managed through HUD offering mortgage security guarantees A type of loan offer from financial institutions with low interest rates A loan program for people who want to buy investment property An organization that handles high-risk borrowers An organization that's government-owned and managed through HUD offering mortgage security guarantees
An organization that's government-owned and managed through HUD offering mortgage security guarantees
How many missed payments does it take for the lender to send a notice of default? Two payments. It takes 90 days for it to happen. As few as one, but this depends on the state's laws. It's up to the lender to decide.
As few as one, but this depends on the state's laws.
Which of the following are examples of loans that are not fully amortized? ARM and negative amortization loan. 30-year fixed mortgage, negative amortization mortgage, and balloon mortgage. Balloon mortgage, negative amortization loan, and interest-only loan. Interest-only loan and graduated payments loan.
Balloon mortgage, negative amortization loan, and interest-only loan.
Why do longer loan terms cost more in interest? It ties up the lenders money. The longer term should offer a lower interest rate. During a longer term, the lender maintains the same risk but for a longer time. The borrower's risk will worsen over time.
During a longer term, the lender maintains the same risk but for a longer time.
Sally wants to do whatever it takes to avoid foreclosure. What can you tell her? Just pass the lender's requirements to get a loan. Don't buy with a mortgage. Ensure you are well qualified for the loan before entering into it. Always work with private lenders instead of banks.
Ensure you are well qualified for the loan before entering into it.
What are discount points? Commission paid to a realtor for selling the home. Fees paid directly to the lender at the time of the loan closing that will reduce the interest rate. A discount received at closing for homeowner's insurance. The term period in which the loan is paid off after regular payments.
Fees paid directly to the lender at the time of the loan closing that will reduce the interest rate.
Jacob is ready to buy a home. How does he know what type of loan he should obtain? He should contact the VA. He should contact FHA. He meets with a mortgage lender to see what type of loan he is best suited for. Jacob should sit down with his real estate agent to discuss the loan options available.
He meets with a mortgage lender to see what type of loan he is best suited for.
Samantha wants to know if she lives in a deed of trust state. How do you find out? Her lender will know, but any title company can clarify this. She can go to the library and look it up. She has to call an attorney to find out. All states are deed of trust states.
Her lender will know, but any title company can clarify this.
If Bob just got a job, could he qualify for a home loan? Conventional loans require long-term employment. In some cases, if he has a down payment and a good credit score. No, he needs to wait 3 years. Yes, but only if his employer says he can remain on the job for a long time.
In some cases, if he has a down payment and a good credit score.
What role does the Federal Reserve play in the real estate mortgage industry? It originates loans. It loans money to home buyers directly. It creates rules to govern the industry. It offers loan programs for needy borrowers.
It creates rules to govern the industry.
Maggy told you she has a loan with an escalator clause. What does this mean for Maggy? It means the lender can foreclose on the property at anytime. It means the lender can transfer the loan at anytime. It means the lender can increase or decrease interest rates at any time with notice. It means the lender can charge additional loan fees later on.
It means the lender can increase or decrease interest rates at any time with notice.
What is a pre-qualification letter? It says the lender has committed to lending to the borrower. It outlines the concerns the lender has with the buyer. It's an approval letter for a loan. It says the lender has done basic levels of determining if a home buyer is qualified to buy.
It says the lender has done basic levels of determining if a home buyer is qualified to buy.
In simplistic terms, what is a deed of trust? It's an agreement to make payments. A deed of trust outlines the debt owed and monthly payments. It's a home loan. It's an IOU to the lender to repay the debt.
It's an IOU to the lender to repay the debt.
What is amortization? It's the breakdown of the loan's interest. A process that outlines fees the home buyer will pay to buy a home. Nothing the borrower needs to worry about. It's the mathematical calculation of the amount of interest the buyer will pay on the loan.
It's the mathematical calculation of the amount of interest the buyer will pay on the loan.
How can you explain to Dave why his lender is charging him more for a home loan than his friend? Tell Dave to improve his credit score. Tell him to find a new lender. Tell Dave he's buying the wrong home. Like with the stock market, lenders assign risk to each investment. High risks have to yield a high return. Higher interest rates are charged to high-risk borrowers.
Like with the stock market, lenders assign risk to each investment. High risks have to yield a high return. Higher interest rates are charged to high-risk borrowers.
What is LTV? Loan to value ratio, it's used to determine the risk of the borrower. Loan to value ratio, a term used to describe the amount of interest on a loan. A term that compares the value of the loan to the value of the down A term used to estimate interest rate on a loan.
Loan to value ratio, it's used to determine the risk of the borrower.
Will a borrower need to pay closing costs on his VA loan? Maybe, but these are often paid by the seller and are typically lower. Yes, all loans require closing costs. No, only the seller pays these. No, the lender does not charge closing fees for VA loans.
Maybe, but these are often paid by the seller and are typically lower.
Ellen has a good income, but has missed payments on her credit report. What impacts her credit score more? If Ellen makes enough money, nothing else matters. As long as she paid her debts, it doesn't matter if she is late.Whether or not the missed payments were real estate-related matters most. Missed payments will hurt the borrower more than any other factor.
Missed payments will hurt the borrower more than any other factor.
Why doesn't Alex's lender send a pre-approval? It doesn't want to lend to her. She doesn't have a good credit score. She hasn't asked for it. Most often, information is missing or not completed.
Most often, information is missing or not completed.
Lenders want to foreclose. Is that true? No, the process is too complex. No, it's costly, long, and rarely profitable. Yes, lenders want to free up their money. Yes, lenders want to find other buyers fast.
No, it's costly, long, and rarely profitable.
Are FHA loans available for 100 percent financing? No, most will need to have a loan to value ratio of 90 percent or less, but more if the borrower has good credit. No, these borrowers need to have at least $10,000 down. Yes, 100 percent financing is available. Yes, but only if the buyer negotiates the terms.
No, most will need to have a loan to value ratio of 90 percent or less, but more if the borrower has good credit.
Alexia wants to catch up on her loan payments to avoid foreclosure. Will this be enough? Yes, paying all owed debt will mean avoiding foreclosure. Alexia should just sell the home instead. No, the lender will force foreclosure no matter what. Not always, sometimes lenders fees must be paid if it is possible to get caught up.
Not always, sometimes lenders fees must be paid if it is possible to get caught up.
How much does Jessie need to have for a down payment on a VA loan? VA loans require 3.5 percent down. VA loans require 20 percent down. It depends on what the Veterans Affairs office says. Nothing. These loans are available at 100 percent financing.
Nothing. These loans are available at 100 percent financing.
If your client received a 30-year, 7% mortgage on a $500,000 loan, the $500,000 amount represents the: Interest. Points. Principal. Taxes.
Principal.
What is a federally backed loan program? Fannie Mae and Freddie Mac lenders Loans given by any bank to a home borrower including conventional loans Programs like FHA and VA loans, which help borrowers avoid default and help them get into low-interest loans. A loan given to those with very good credit with very low interest rates
Programs like FHA and VA loans, which help borrowers avoid default and help them get into low-interest loans.
Robert is moving, but doesn't want to sell the home. Can his friend Jerrell take over the loan? Yes, but as long as Jarrell makes payments on time. No, the lender will require a brand new loan instead. Robert must sell the home instead. Robert must get approval from the lender for the Assumption Clause.
Robert must get approval from the lender for the Assumption Clause.
Are special assessments on a 'for sale' property of concern to the real estate agent? Special assessments have to do with the conditions of the home. An assessment is simply an evaluation of the home's worth. Special assessments are paid first at the time of the home's sale, above the mortgage. Buyers may need to pay enough to cover all of these debts. A special assessment describes the special sale of the home.
Special assessments are paid first at the time of the home's sale, above the mortgage. Buyers may need to pay enough to cover all of these debts.
The foreclosure on a debt shouldn't be a surprise to the homeowner. Why? The borrower should know it's common sense to make payments on time. The borrower agreed to the terms and conditions of the loan at the time of buying the home. Foreclosures always come with dozens of warnings before they happen. Because lenders always foreclose.
The borrower agreed to the terms and conditions of the loan at the time of buying the home.
What happens when real estate is bought through assuming an existing loan? The buyer officially takes over the existing mortgage, with the lender's knowledge. The buyer assumes the loan without lender knowledge or permission. The buyer assumes that the loan to the home has already been paid in full by the previous owner. The seller charges the buyer a higher interest rate each month so that they make money if the buyer pays on time.
The buyer officially takes over the existing mortgage, with the lender's knowledge.
What is the lender's cost to borrow money? This is the fee charged by the Federal Reserve. The closing costs. The interest rate. The cost the lender pays to borrow money to fund a loan from other banks.
The cost the lender pays to borrow money to fund a loan from other banks.
What is a deed in lieu of foreclosure? A deed is signed over to a trustee. This is a legal notice sent by the lender to the borrower. It's an offer to buy out the loan. The homeowner asks the lender to accept the deed on a home to stop the foreclosure process and walks away from the home.
The homeowner asks the lender to accept the deed on a home to stop the foreclosure process and walks away from the home.
What is a default judgment? The judge issues a statement saying the borrower is late. A court system rules the homeowner is unfit. It's a decision made by the lender to foreclose. The homeowner failed to catch up on the loan payments, and the court ruled against the homeowner.
The homeowner failed to catch up on the loan payments, and the court ruled against the homeowner.
What is a lien theory state? The lender holds the lien. A trustee holds the home's title. The lender is in control over the home. The homeowner holds the deed for the property throughout the entire loan.
The homeowner holds the deed for the property throughout the entire loan.
Steve is struggling to remember to make real estate tax payments. How can the lender help? The lender can collect taxes and insurance and hold them in escrow for payment. The lender can default on the loan since he doesn't want to make payment. Steve can set up auto reminders. The lender will call and remind him.
The lender can collect taxes and insurance and hold them in escrow for payment.
Steve is struggling to remember to make real estate tax payments. How can the lender help? The lender can default on the loan since he doesn't want to make payment. The lender can collect taxes and insurance and hold them in escrow for payment. Steve can set up auto reminders. The lender will call and remind him.
The lender can collect taxes and insurance and hold them in escrow for payment.
Justin is behind on the mortgage in a lien title state. What happens? The lender can take legal steps to foreclose on the loan. The trustee will sell the home. The lender will force Justin to make payments or take it from his account. Justin will be sued by the trustee.
The lender can take legal steps to foreclose on the loan.
Who is the typical first priority lien holder on a mortgage? The lender generally is the first priority and is repaid first out of the sale price.The homeowner. The trustee involved in the case. Anyone who files a mechanic's lien.
The lender generally is the first priority and is repaid first out of the sale price.The homeowner.
Gomer has a pre-approval letter. What does this mean? The lender has completed their verification and plans to lend to the borrower. It means the home is sold. It means the borrower needs to provide more information before approval. It signals you should stop showing homes.
The lender has completed their verification and plans to lend to the borrower.
Which is a right that the lender has during the short sale process? The lender has the right to direct the homeowner as to who they can show the home The lender has the right to negotiate and approve the final sales price of the short sale the lender has the right to choose the homeowner's real estate representative during the short sale process the lender has the right to take possession of the property prior to the completion of the short sale process
The lender has the right to negotiate and approve the final sales price of the short sale
Max is selling his home to avoid the acceleration clause from impacting him. What's that? The interest rate is about to accelerate significantly. The loan is almost over and he wants to move. The lender is requiring payment in full due to a breach in the contract. He wants a new loan with lower interest rates.
The lender is requiring payment in full due to a breach in the contract.
Who decides what credit score is good enough to secure a loan? Experience and TransUnion. FICO. The lender. The credit unions.
The lender.
Who is the mortgagee in a mortgage contract? The borrower. The lender. The trustee. The court system.
The lender.
Who pays for the foreclosure process in a judicial case? The homeowner is required to pay for it. The trustee pays out-of-pocket. The lender. No one, there is no cost involved.
The lender.
What happens if Susan doesn't pay according to the terms of her promissory note? She can walk away from the loan She can refinance the loan The loan defaults, she can be sued in court, and the home may be sold She can catch up with the loan next time
The loan defaults, she can be sued in court, and the home may be sold
If Jimmy serves in the Army, but you don't know any details, who should he see about getting a VA loan? A local mortgage lender. The FHA loan approval board. The local credit union. The local Veterans Affairs office for approval.
The local Veterans Affairs office for approval.
What happens during underwriting? The home is appraised. The title of the home changes hands. The lender talks with the seller about the home's value. The mortgage lenders take a close look to make sure they can loan the funds to buy the home.
The mortgage lenders take a close look to make sure they can loan the funds to buy the home.
Christopher's home was lost in foreclose, but no one bought it. Who gets ownership? The mortgagee has the right to take possession as a REO. The lender has to sell it on the market. The trustee owns it. Since no one bought it, Christopher owns it.
The mortgagee has the right to take possession as a REO.
Amy says she has an interest rate of 5%. Where is this located in her loan documents? The deed of trust The offer placed on the home On her amortization schedule The promissory note lists the interest rate, or cost to borrow the funds
The promissory note lists the interest rate, or cost to borrow the funds
Iris wants to find the record of her deed and title. Where does she go? The lender will have this information. The county court system manages all of this city-wide business. The registrar of deeds or county recorder. An attorney she hires to pay for the service.
The registrar of deeds or county recorder.
Angela wants to buy a home with an existing tax lien. What should she do? She can't buy the home as the city owns it. She has to pay the taxes and the home sale price. Angela needs to file a lawsuit in court to get rid of the tax lien. The tax lien must be settled first, and in some cases, the buyer will pay these off to clear the title.
The tax lien must be settled first, and in some cases, the buyer will pay these off to clear the title.
What will happen to a homeowner in the event of a non-judicial foreclosure? The trustee involved will sell the home at an auction. The home may revert back to the lender if no buyer is found. The trustee will file a motion in court to dismiss the loan. The lender will walk away from the loan. A judge rules whether or not the homeowner loses the home.
The trustee involved will sell the home at an auction. The home may revert back to the lender if no buyer is found.
How long are FHA loans? They are available for as long as 40 years. They are available as 15 year or 30 year loans. They are available to home buyers with any term need. These loans are always 30 year terms.
They are available as 15 year or 30 year loans.
When might a negative amortization loan make sense for a borrower? They are buying land, and they will develop and sell the land for more money before the end of the term. The borrower has limited resources. The borrower wants to avoid risk. The borrower is elderly.
They are buying land, and they will develop and sell the land for more money before the end of the term.
Steve wants to buy a home that's in pretty bad need of repairs. Are conventional loans a good option? Yes, but only if he pays for most of the loan out of pocket. No, the best option for Steve is to find a hard money lender instead. They can be because other loans have high restrictions imposed by the backers. No.
They can be because other loans have high restrictions imposed by the backers.
Why does Martha's lender need to know about her recent expense on her savings account? They want to ensure there's no hidden concern or drop in creditworthiness. The lender wants to know you're spending only on your home. It's not any concern to the lender. Martha can tell the lender it's nothing to worry about.
They want to ensure there's no hidden concern or drop in creditworthiness.
Can Glenn negotiate with the mortgage banker about a lower interest rate? Yes, the person he is speaking to can set any rate. No, this is set in stone based on his credit score. Glenn should never negotiate - it could lead to being denied a loan. To some point, but often this is set by the lending company, not the broker on the phone.
To some point, but often this is set by the lending company, not the broker on the phone.
If Christine is moving and has someone who can take over her VA loan, will the VA allow it? Yes, as long as Christine approves of the lender. No, it is not possible to change the loan documents like this. VA loans are assumable, but the lender must approve it. VA loans are not assumable.
VA loans are assumable, but the lender must approve it.
What is the benefit of mortgage-backed securities to a home buyer? a. Nothing, it's just a way for banks to make money. It's all about profit. b. These securities make the bank money, but also provide the government with profits. c. With mortgage-backed securities, lenders sell loans in packages across the country, making it possible for borrowers in low-income areas to qualify for loans. d. The home buyer benefits from low interest rates and better terms because of these investment opportunities.
With mortgage-backed securities, lenders sell loans in packages across the country, making it possible for borrowers in low-income areas to qualify for loans.
If Cindy owned a home in 2010, can she apply for an FHA loan? No, FHA loans are just for first time home buyers. Yes, but only if she promises never to buy another home. Yes, because it has been at least three years. No, FHA loans are only available if the individual has 10 percent down.
Yes, because it has been at least three years.
Abagail thinks she wasn't approved for a loan because of her race. Does this matter? Yes, but only if she sues them in court. Yes, it is a potential violation of the Equal Credit Opportunity Act. No, race is never a concern because lenders wouldn't do that. No, it's common for race to be used as a factor in lending.
Yes, it is a potential violation of the Equal Credit Opportunity Act.
Danielle says she is using an unsecured loan to buy a home. Is she wrong? Yes, an unsecured loan is one for vehicles. Yes, nearly all home loans are secured loans. No, the bank just trusts her. No, the lender believes she's a good risk and wants to offer a lower rate.
Yes, nearly all home loans are secured loans.
Otis sees a drop in income in the weeks before closing on a loan. Does this matter? Yes, he has to resubmit all information before the loan closes anyway. No, at this point, it's all done and in place. Yes, the underwriting process will verify the borrower's ability to make payments. No, the lender isn't interested as long as he makes payments.
Yes, the underwriting process will verify the borrower's ability to make payments.
Can the underwriter deny a loan? Yes, but only if the down payment isn't received in time. No, at this point, it's a go. Yes, which can happen if the borrower's credit changes or for other reasons. No, the lender has approved the loan.
Yes, which can happen if the borrower's credit changes or for other reasons.
Your buyer wants to list a home as a short sale. What is your obligation? As an agent, this isn't your place. You tell the borrower to talk to their lender. You can list it, but recognize that the lender must approve the process. You work with the trustee to complete the process. You list the home for sale like any other property.
You can list it, but recognize that the lender must approve the process.
Why do you need to sit down with Sara and explain to her how the mortgage market works? After all, she just wants to buy a home, not enter into a financial degree program. a. Sara needs to know the terms of the market because she will need to make financial decisions about Freddie Mac and Fannie Mae. She needs to buy the right mortgage investment. b. Sara doesn't need a lot of information about the industry. She just needs to know who offers the lowest interest rate. c. It's important to know about the market because she may want to invest in mortgages down the road. d. Understanding the mortgage finance market can help Sara to actually find the best loan with the lowest costs. This not only helps her buy the home she wants, but helps you to sell a home that's more valuable.
d. Understanding the mortgage finance market can help Sara to actually find the best loan with the lowest costs. This not only helps her buy the home she wants, but helps you to sell a home that's more valuable.
