Lender Criteria + Lending Process

A buyer is purchasing a home appraised at $480,000. The buyer is obtaining a 90% loan, and the lender will charge an origination fee of 1% at closing. How much will the loan origination fee be? A. $4,320 B. $4,712 C. $4,728 D. $4,800

A. $4,320

How's interest defined as it's related to a mortgage loan payment? A. A fee paid to lenders for the use of their money B. A fee to keep other borrowers from taking interest in your property and buying it out from under you C. Extra money paid to cover any unexpected bank fees D. Random charges

A. A fee paid to lenders for the use of their money

Rhonda and her husband filed for bankruptcy five years ago. They want to purchase a new house but don't have the best credit score. They've decided to buy the home using an FHA loan. Which of these is a true statement? A. A minimum down payment of 3.5% is required. B. Mortgage insurance is not required. C. The loan-to-value ratio must be less than 80%. D. They must have PMI.

A. A minimum down payment of 3.5% is required.

The Adams family is financing their loan through Acme Bank and their agent negotiated a great sales price on their new home. Smith Title Company processed the loan documents. The Adamses must purchase mortgage insurance. Who does the insurance protect? A. Acme Bank B. Smith Title C. The Adamses D. The realtor

A. Acme Bank

Bobbi Jo wants to purchase a house for $350,000. She's pre-approved for $300,000, but wants to buy a $350,000 house and doesn't have $50,000 in cash. A down payment assistance program approves her for a second mortgage for $40,000, and the sale closes two weeks later. What made this a legal second mortgage, and not fraud? A. Bobbi Jo disclosed the down payment assistance to the lender. B. Bobbi Jo referred to it as a gift, not a silent second mortgage. C. Bobbi Jo signed an affidavit stating that she had independently secured the full $50,000. D. The lender provided the down payment assistance.

A. Bobbi Jo disclosed the down payment assistance to the lender.

Which of the following is an action borrowers take to temporarily lower the interest rate on their mortgage loan? A. Buydown B. Down payment C. Gap financing D. Usury

A. Buydown

Your buyer client, Percival, was pre-approved for the exact amount he needed to buy the home of his dreams, and he made an offer that was accepted by the seller. What's his next step? A. Complete a loan application. B. Obtain pre-approval from another lender. C. Review the underwriter's decision. D. Sign a purchase agreement.

A. Complete a loan application.

In an amortized loan, the interest portion of the mortgage payment generally ______ over the life of the loan. A. Decreases B. Has no bearing on the total C. Increases D. Remains the same

A. Decreases

Leonard is offered a loan at 5.75%. Because he plans to be in his home for several years, he chooses to pay points up front to have the rate reduced to 5.25%. What's this an example of? A. Discount points B. Down payment C. Gap financing D. Usury

A. Discount points

Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance? A. Her down payment of $50,000 isn't at least 20% of the purchase price. B. Her lender is a subprime lender. C. PMI is triggered at the $50,000 down payment amount. D. She has poor credit.

A. Her down payment of $50,000 isn't at least 20% of the purchase price.

Your client, Devin, asks about the risks and benefits of locking in a rate. You explain that which of the following is a risk he should consider? A. If the lock expires before the loan closes, rates will be charged at the current market rate. B. Lock-in periods are usually 30-60 days, which gives the lender time to complete the loan processing. C. Lock-ins can be set up with a locked rate and locked points, locked rates and floating points, or floating rates and floating points. D. Lock-ins cannot protect against rising interest rates and potentially higher payments.

A. If the lock expires before the loan closes, rates will be charged at the current market rate.

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 cancelled? A. Maybe, but they'll have to petition their lender B. No, because PMI lasts for the life of the loan C. Yes, because their equity is over 20% D. Yes, because their equity position is at least 50%

A. Maybe, but they'll have to petition their lender

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 one-and-a-half points? A. $5,000 B. $6,750 C. $750 D. $7,500

B. $6,750

Glenn is purchasing a home for $400,000. The property appraised at $415,000 and Glenn is financing $300,000. What's the loan-to-value ratio? A. 72% B. 75% C. 82% D. 96%

B. 75%

For conventional loans in which the loan-to-value ratio is in excess of a certain percentage, lenders generally require private mortgage insurance. What's this percentage? A. 75% B. 80% C. 85% D. 90%

B. 80%

Your clients, Yuliana and Moe, are looking to buy a new house to accommodate their growing family of eight. They don't have enough money to put down for the home they'd like to purchase and are thinking about applying for a down payment assistance program. What eligibility requirement they might encounter would you need to inform them of? A. Age of potential homebuyer B. Household income threshold C. Number of minors living in the residence D. Square footage of new home

B. Household income threshold

When the lender gathers all kinds of information about the borrower's assets, debts, income, employment history, and pulls their credit report, the buyer is ___________________. A. Approved B. Making an application for a loan C. Preparing for the closing D. Prequalified

B. Making an application for a loan

What does the "T" in PITI stand for? A. Tariff B. Taxes C. Term D. Territory

B. Taxes

What do property taxes in a mortgage payment pay for? A. Taxes have no real purpose in a mortgage payment, except to fatten government coffers B. The cost of public services as a percentage of the property value C. The cost of the local community budget divided by the total number of homes in the area D. The cost of the property divided by the local population

B. The cost of public services as a percentage of the property value

What's the purpose of the fixed/adjustable rate note? A. To convert the interest rate from adjustable to fixed B. To convert the interest rate from fixed to adjustable C. To convert the loan from a fixed rate to an adjustable rate D. To convert the loan from an adjustable rate to a fixed rate

B. To convert the interest rate from fixed to adjustable

Your buyer clients don't have a lot of money saved up for a down payment. Which of these statements would be the best way to advise them? A. "Don't even bother looking at property until you've got at least $10,000 available for a down payment, because lenders won't give you a loan otherwise." B. "If you can qualify based on your income level, you might be able to get a mortgage grant from your lender." C. "You may be able to qualify for a down payment assistance program. They're available at the national, state, and local levels." D. "Your only option is likely to be an FHA loan, which is overall a lower-cost loan anyhow."

C. "You may be able to qualify for a down payment assistance program. They're available at the national, state, and local levels."

The purchase price of the home Leroy is buying is $300,000. He's putting $100,000 down and is paying three discount points. How much will this cost? A. $2,000 B. $4,000 C. $6,000 D. $9,000

C. $6,000

A calculation that describes the amount being borrowed compared to the value of a property is called ______ ratio. A. Appraisal B. Housing C. Loan-to-value D. Total debt

C. Loan-to-value

The acronym PITI is a reference to what real estate-related concept? A. Annual property maintenance B. Annual property taxes C. Mortgage payment D. Required loan documentation

C. Mortgage payment

What would happen if your client's rate lock expires three days prior to closing? A. Nothing, there is a three-day grace period after the date of the lock expiration. B. The interest rate lock can be extended by paying an additional fee. C. The interest rate will revert to the current rates. D. The interest rate will revert to the rate at the time of the application.

C. The interest rate will revert to the current rates.

When calculating loan-to-value ratios, which of the following will be used by the lender? A. The appraisal value B. The greater of the sales price or appraisal value C. The lesser of the sales price or appraisal value D. The sales price

C. The lesser of the sales price or appraisal value

The Shores are in the process of buying a beautiful 3,000-square-foot home from the Bishops. They've completed all the required paperwork on their loan application. Mary's analyzing the package to determine their ability to repay the loan. She examines the property's value, the property type, and the loan-to-value ratio, among other things. Her recommendation is that the Shores' loan application be approved. What is Mary's role? A. Member of the loan committee B. The seller C. The seller's real estate agent D. The underwriter

D. The underwriter

How long does the borrower have to pay private mortgage insurance? A. 12 years B. 20 years C. Until 50% of the original loan is paid off D. Until the borrower reaches a 22% equity position

D. Until the borrower reaches a 22% equity position