Financing (Test Questions)
A buyer with a $242,000 loan has a monthly principal and interest payment of $1,317.66. If $1,033.54 is interest, what's the new principal balance after the first payment is applied?
$241,715.88
A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a one-point loan origination fee. How much is the loan origination fee?
$3,200
A buyer has a 30-year, $750,000 loan with a 5.75% interest rate. How much of the first monthly payment is interest?
$3,593.75 (Multiply the principal balance by the interest rate: $750,000 x .0575 = $43,125;. Then find the monthly rate by dividing $43,125 by 12 to get $3,593.75. Since the principal balance is less the next month, the interest amount will change too.)
A buyer with a 30-year, $750,000 loan at a 5.75% interest rate has a monthly principal and interest payment totaling $4,376.80. If $3,593.75 is interest, how much is applied to principal?
$783.05
Margo is purchasing a home for $520,000. The property appraised at $550,000 and Margo is financing $416,000. What's the loan-to-value ratio?
0.8 (Based on sales price)
Which of the following percentages is an allowable loan origination fee?
2%
What is the best-case scenario with a debt-to-income ratio?
20% debt-to-income
Which of the following is the credit score range?
300 and 850
A buyer is purchasing a property for $500,000. His lender's loan-to-value ratio is 90%. How much is the buyer financing?
450,000
Danny and Wendy recently relocated to California. They are buying a three-bedroom home in an established neighborhood where they look forward to raising a family. Their real estate agent, Brunhilda, thinks that their income, which is on the low side, and the property could make them eligible for ______, which would offer reduced, fixed interest rates on a loan.
A CalHFA loan product
David is an active duty member of the U.S. Air Force. Assuming he and the property meet the qualifications, which type of mortgage may be the best option for him?
A VA-guaranteed loan
Which of the following describes loan-to-value ratio?
A calculation that describes the amount being borrowed compared to the value of a property
Cathy is hoping to purchase a home using a VA loan. A VA-assigned real estate appraiser is required to provide ______ for the property.
A certificate of reasonable value
What is a loan origination fee?
A fee a lender charges for processing a loan
In relation to the work of an MLO, which of the following is an example of a residential mortgage loan?
A home equity line of credit
Which of these individuals will have a unique identification number in the Nationwide Mortgage Licensing System and Registry?
A real estate licensee with an MLO endorsement
With which type of mortgage does the interest rate vary according to a specified index?
Adjustable rate
What does ARM stand for?
Adjustable rate mortgage
When a buyer takes over the seller's original loan with the lender's permission, this is called ______.
An assumption
Which of these is a reason that the deed of trust is the standard security instrument used in California real estate transactions?
Because California foreclosure laws allow a statutory right of redemption of up to one year with a judicial foreclosure.
Which of these is a type of gap financing that's used temporarily until the consumer can obtain permanent financing?
Bridge loan
Robert is a rancher. He was told about the USDA Farm Service Agency offerings. What can he use an approved loan for?
Building a new hay barn
How does Farmer Mac support agricultural producers?
By creating a secondary market for agricultural loans, making it possible for agricultural lenders to fund more loans
What is one way that the FHA has helped to stabilize and improve the mortgage market?
By requiring appraisers to be state licensed or certified to evaluate property for FHA-insured loans
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.
When obtaining a mortgage to purchase a home, for what does the borrower use the property?
Collateral
Which type of lender is a member-based cooperative that provides credit for auto loans and home loans, takes deposits, and offers savings vehicles and money markets?
Credit union
With a VA loan, the certificate of reasonable value is used to ______.
Determine the value of the loan that the VA will guarantee
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
A home equity line of credit (HELOC) is based on the homeowner's available ______.
Equity
Which of the following entities generally acts in the secondary market?
Fannie Mae
Identify the entity or entities responsible for setting conforming loan limits.
Fannie Mae and Freddie Mac
Which type of mortgage has an interest rate that remains constant over the life of the loan?
Fixed-rate
With what type of loan do the principal and interest payments remain the same for the life of the loan?
Fixed-rate
The Federal Housing Administration's loan program is designed for borrowers who ______.
Have a minimal down payment and less than stellar credit
Jarod has obtained an FHA loan for which he pays an annual mortgage insurance premium. How will he likely make this payment?
He will pay 1/12 of it monthly with his mortgage payment.
Bindy 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?
Home equity
What's another term for front-end ratio?
Housing
How does the Federal Housing Administration fund its mortgage insurance program?
How does the Federal Housing Administration fund its mortgage insurance program?
What's a key feature of the Federal Housing Administration's loan program?
Insures lenders against loss from borrower default
Which of these statements best describes a purchase money mortgage?
It may be a first mortgage, a junior mortgage, or a junior wrap-around mortgage.
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.
Tina is purchasing a home that appraised for $10,000 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.
In a title theory state, which of the following is a true statement?
It's generally much easier for a lender to foreclose on a property.
What information is listed on the promissory note?
Loan amount and schedule of repayment
To find a factor on an amortization chart, you need to know the interest rate and the ______.
Loan term
Which of the following statements is true about usury laws in California?
Loans secured by real property and arranged for by a real estate broker are exempt from state usury laws.
An ARM usually offers an initial interest rate that's ______ a fixed rate mortgage for a period of time.
Lower than
Darrel loves working in the mortgage lending industry. On a daily basis, he works with multiple lenders to find and negotiate the best deals for his customers. What is Darrel's profession?
Mortgage broker
In the secondary market, how are mortgages grouped together and sold?
Mortgage-backed securities
When using an amortization chart, you use the interest rate and the loan term to arrive at a factor, such as 5.17808. Now what do you do?
Multiply the number of thousands in the loan by the factor.
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
Samantha is an assistant to Matt, a real estate licensee with an MLO endorsement. She performs administrative tasks on his behalf. Does she need an MLO endorsement?
No, she doesn't need an MLO endorsement because she is only performing administrative tasks.
Iris is planning to purchase her first home. Based on what you know about the nature of real estate finance in our country, which approach is she most likely to use?
Obtaining a loan to purchase the home
What's the definition of a qualified mortgage?
One that meets stringent CFPB guidelines
Which occupancy type is eligible for a VA loan?
Owner-occupied
With this type of loan, personal property is included with the real property in the sale. It's commonly seen in commercial real estate, but you may also see this in the sale of furnished condominiums.
Package mortgage
Which clause is standard in a deed of trust and affects the foreclosure process that can be used if the borrower defaults?
Power of sale
Amy purchased a new home and obtained financing through a bank, called Natula Bank. Natula originated the loan, but before Amy's first mortgage payment was due, it sold her loan to CitiMortgage. As a loan originator, what market is Natula Bank operating in?
Primary mortgage market
What often comprises the sum total of a buyer's mortgage payment?
Principal, interest, taxes, and insurance
Tom, the seller, is helping the buyer with financing. Tom will give this mortgage to the buyer, and the money will go toward the down payment. What kind of mortgage is this?
Purchase money mortgage
Seth is purchasing a vacant piece of land, on which he'll build a new single-family home for his growing family. His real estate agent, Dani, is authorized to assist him with the loan he uses to buy the property because Dani has her MLO endorsement and this is a ______ loan.
Residential mortgage
It requires lenders to make credit equally available to all creditworthy applicants, regardless of the applicant's protected class status.
Savings and loan
Which type of lender specializes in taking in savings deposits and then lending money out to consumers through mortgages and other loans?
Savings and loan
When a buyer takes over payments on a loan without telling the lender, this is called a purchase ______.
Subject to existing financing
______ make homeownership available for many who otherwise could not qualify for a mortgage loan.
Subprime lenders
Loans made to high-risk borrowers, at higher interest rates and with higher fees, are ______.
Subprime loans
Which of the following is a true statement about U.S. Department of Veterans Affairs loans?
The VA will guarantee a loan based on the sales price or the certificate of reasonable value (CRV).
How is a loan assumption documented?
The buyer and seller both sign an assumption agreement.
Which of the following is true of construction loans?
The loan is based on the builder's plans for improvement and an appraisal.
Who holds the promissory note while it's being repaid?
The payee (Lender)
The purpose of the Seller Financing Disclosure Law is ______.
To ensure that all parties are educated about loan terms and about who will be compensated for arranging credit
Why does the federal government have agricultural lending programs?
To ensure that credit is available to agricultural producers, who often can't meet conventional underwriting standards due to the nature of their work
Lawrence is a buyer closing on a home purchase for which he's obtaining financing. He receives a Loan Estimate from his lender. What's one purpose of this document?
To provide the estimated closing costs for Lawrence's loan
The _______ requires lenders to disclose financing terms to consumers in a manner that's not misleading or deceitful.
Truth in Lending Act
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?
USDA Rural Development Single Family Housing Program
To be eligible for a ______, an applicant must have participated in farm or ranch management for at least three years.
USDA loan through the Farm Service Agency
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.
Which of the following describes a buydown?
Your clients opt to pay their lender two discount points in a lump sum so they can lock in a reduced interest rate.
What type of foreclosure is commonly used when a deed of trust is the security instrument?
non-judicial
