Finance practice exam 3

The Ropers are purchasing a home using VA financing. The sales price of the home is $210,000. The CRV comes in at $215,000. On what number will the VA's loan guarantee be based?

$210,000, the sales price

A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a 1% loan origination fee. How much is the loan origination fee?

$3,200 (divide 400,000 by 80%)

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 In order to calculate this, start with 100% minus a 5% commission, which is 95% or .95. Take $300,000 and divide this amount by .95.

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 Subtract $327.88 from $400,000 for a new principal balance of $399,672.12.

A buyer is purchasing a property for $500,000. He has a down payment of $50,000 and is financing the rest. What's the amount of the loan origination fee if the lender charges 1.5%?

$6,750 The buyer is financing $450,000. Multiply this amount by 1.5% (or 0.015) to get $6,750. Question 65 of 150

A 30-unit income-producing property has a sales price of $9 million. Annual gross income is estimated at $750,000. What's the gross income multiplier?

12X

The Covered Loan Law limits total fees and points paid by the borrower prior to closing to what amount?

6%

Which of the following describes loan-to-value ratio?

A calculation that describes the amount being borrowed compared to the value of a property

Which act was also known as "the stimulus package" and sought to create new jobs and save existing ones, spur economic activity and invest in long-term growth, and foster new accountability and transparency in government spending.

American Recovery and Reinvestment Act of 2009 (ARRA)

What type of value is of interest to taxing authorities?

Assesed value

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

Business

Conrad has purchased a home in California and, as a veteran, he's been able to take advantage of the CalVet home loan program. How does this loan program work?

CalVet holds the legal title to the property until the loan is paid off.

Jan is a real estate licensee with a mortgage loan originator (MLO) endorsement. When she acts as an MLO, what law limits the amount of commission and fees she can earn for negotiating a loan on behalf of her client?

California Real Property Loan Law

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

Community Reinvestment Act

Which agency sets the guidelines for qualified mortgages?

Consumer Financial Protection Bureau

In 2001, California legislators enacted the ______ to combat predatory lending practices.

Covered Loan Law

Interest-only loans are a form of ______ buyer financing.

Creative

A second mortgage on property secured by a VA loan is acceptable under certain conditions, one of which is that the first and second mortgage liens ______.

Don't exceed the CRV

Which federal lending act creates protections for specific classes of people?

Equal Credit Opportunity Act

MLO applicants give permission for a credit report to be pulled so the NMLS can evaluate whether the applicant demonstrates ______.

Financial responsibility

Which of these agencies is a government-sponsored enterprise (GSE)?

Freddie Mac

Which of these HUD programs allows mortgage lenders to obtain a better price for their mortgage loans in the secondary mortgage market?

Ginnie Mae

Which of the following specifies a requirement of pre-loan counseling for consumers?

Homeowner and Equity Protection Act (HOEPA)

The ______ account is an essential part of a financial plan for independent contractors, who should expect to disburse from this account on a quarterly basis.

Income tax

Which of the following is the cost of replacing a building in the case of total loss?

Insured value

Why might self-employed individuals who want to obtain financing for a home purchase, choose not to write off valid expenses on their tax statements?

It increases demonstrated income.

Which of the following statements is true about the annual MIP on an FHA mortgage?

It will decrease each year as the loan is paid down.

What type of provision is standard with either the mortgage or the deed of trust, but is included in the promissory note rather than the security instrument?

Late charge

Which of the following is a passive type of real estate investment?

Limited partnership

Which of the following, once completed, initiates the loan process?

Loan application

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

Lower than

The Bransons have a conventional loan for which they were required to obtain private mortgage insurance. Their local real estate market has been going like gangbusters, and their house is now appraised at twice their loan balance! Will their PMI be automatically cancelled?

Maybe, but they'll have to petition their lender

In a judicial foreclosure, if the sheriff's sale wasn't enough to pay off the borrower's debt plus foreclosure costs, how long does the borrower's redemption period last?

One year

What type of partnership is a real estate investment trust?

Partnership between mortgagees (lenders)

Which of the following is the best investment for a licensee?

Paying down outstanding credit card debt

Which of the following is a piece of general data an appraiser may gather?

Population size

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

Assuming a CMO uses the sequential pay structure, how is principal passed through from borrowers paid to investors?

Principal payments are only made to the first tranche until it retires, then to the second tranche, and so on.

How common are interest-only loans today?

Rare

Which of the following taxes apply while an investor holds an investment property?

Rental income

Natasha is a new licensee who needs to estimate her business expenses. Which of these is a recommended way for Natasha to do this?

Research typical expenses for a licensee through the Internet and by asking colleagues.

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 with his house as collateral. What is this type of loan called?

Reverse annuity mortgage (RAM)

If a cloud on a title is discovered, which party is generally responsible for clearing the cloud?

Seller

A goal written according to the SMART criteria is ______.

Specific

______ make homeownership available for many who otherwise could not qualify for a mortgage loan.

Subprime lenders

Which of the following best describes a buyer's market?

Supply is greater than demand

With a purchase money mortgage, who retains the title to the property?

The buyer

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

The economy may slow down due to a decreased money supply (if the fed buys securities, the economy will increase money supply)

The FHA has helped to significantly improve the mortgage market through ______.

The introduction of the long-term amortized loan

The percentage recommended for a licensee to allocate when building an emergency fund is ______.

The largest percentage possible after paying all essential expenses.

What role did CMOs play in the financial crisis of 2007?

They increased market speculation

How does the VA qualify a property for a VA-guaranteed loan?

Through a VA-approved appraiser

Dana and Phil have evaluated their situation, and have decided to purchase a unit in a cooperative housing project. Which FHA loan program might work for them?

Title II, Section 203(n)

What's one reason a borrower may choose a piggyback (or split) loan?

To avoid paying private mortgage insurance

While Fannie Mae considers total and housing debt-to-income ratios in their underwriting process, Freddie Mac considers only ____________.

Total debt-to-income

In what situation would the U.S. Treasury be most willing to sell securities?

When the government's bills exceed income collected

Gus has applied for a home equity line of credit from his federally insured bank so that he can make some renovations to his kitchen. The same bank is his lender for his home mortgage. Will this loan be subject to Real Estate Settlement Procedures Act requirements?

Yes, because RESPA applies to any residential loan transaction from a federally insured financial institution, including equity lines of credit.

Is a homeowner with an FHA loan allowed to obtain a second mortgage?

Yes, if the total of the first and second mortgages is within the maximum loan to value ratio