Real Estate Finance Quiz (2/2)
What is the greatest risk of default
95% conventional loans. The smaller the down payment.
What is a FHA 203k loan
A FHA 203k loan combines the acquisition cost and the rehabilitation cost in one mortgage.
What must a FHA appraiser do
A FHA appraiser notes any major health and safety deficiencies on the Uniform Residential Appraisal Report (URAR), as well as an major defects and certain defects.
When is PMI required
A PMI (private mortgage insurance) is required on loans that exceed 80% of the value of the property.
Know about fixed rate mortgage
A closed rate mortgage remains at the same rate of interest for the life of the loan with equal payments each month.
What is a conventional loan
A conventional loan is any loan not insured or guaranteed by a government agency.
Know what a jumbo loan is and when is it used
A jumbo loan is a nonconforming loans that exceed the maximum loan limits set by FNMA or FHLMC for a single-family residence. It used when you want to buy a more expensive home that is not within the loan limit of FNMA or FHLMC.
What is a liquid asset
A liquid asset includes cash and any other asset that can be quickly converted to cash.
If they submit a new loan estimate under the TRID rule, what is the new waiting period
A new three-day waiting period is required
Know what a silent second is
A silent second is a scheme where the down payment is actually borrowed or carried as a second mortgage by the seller but never documented in the purchase agreement, escrow instructions or recorded, thereby giving the First Mortgage lender the false impression that the buyer has "skin" in the game.
When must you report a bankruptcy on a loan application
You must report a bankruptcy within the past 7 years.
What is alienation clause
Alienation clause is a clause on loan documents that limit the debtor's right to transfer the property without the creditor's permission.
What is an estoppel letter for
An estoppel letter is for the lender to acknowledge the loan transfer and waive the right to accelerate the loan on account of the transfer.
Know an option and the parties involved
An option is an agreement to keep open, for a predetermined period of time, the right to purchase or sell property. The parties involved are the optionee (prospective purchaser) and the optionor (property owner).
An MLO can only receive compensation (based only on the principal amount) only on what?
For taking residential loan application, assist an applicant on obtaining a loan, or negotiate terms for a loan.
Know what Ginnie Mae is (GNMA)
Government National Mortgage Association was created with the passage of the Housing and Urban Development Act (1968). It is a wholly owned government corporation that replaced FNMA, when it became privately owned.
If you want to participate in creative financing, what should you do
Have an attorney, seek legal council, and due diligence.
Math problem on adding interest and cap rates
Interest Rate of Loan + Cap Rate of Interest Increase = Maximum Possible Total Interest Rate of Loan
If a loan meets the standard of the secondary market, what is it called
It is called a conforming loan.
When there is a foreclosure, know the timeframe of when it has to be published in the newspaper
It must be published one a week during the 21-day (3-week) publishing period.
What does market value mean
Market value is the most probable price that a property should bring in an open and competitive market when neither buyer nor seller is under any compulsion to act.
Know what mortgage fraud is
Mortgage fraud is the intentional misrepresentation or omission of material facts by applicants or others to improperly influence a mortgage loan lender
On a loan application is it mandatory to provide your race, national origin, and sex?
No this is entirely voluntarily.
If you are going to be using a FHA loan on a mixed property, know the percentages of how much can be commercial and how much can be residential
One-story property with 25% commercial (max) and 75% residential (min). Two-story property with 49% commercial (max) and 51% residential (min). Three-story property with 33% commercial (max) and 67% residential (min).
Know what property flipping is
Property flipping is a scheme in which a recently acquired property is resold for a considerable profit with an artificially inflated value, often as a result of collusion with an appraiser
Know about proration
Proration is the apportioning of the expenses (or benefits) fairly to each party.
What is redlining
Redlining is the refusal to lend within a designated area, restricting the number of loans within an area, or restricting the size and type of loans within a designated area.
What is a short sale
Short sale is when a lender will accept less than the amount owed on a debt if the property is sold.
Know about the fair credit reporting act (FCRA)
The FCRA gives consumers rights as to who has access to their credit files, as well as to know what is in their files and the right to correct inaccurate credit information.
Understand what the TRID rule
The TRID rule requires 2 disclosures. The loan estimate form (within 3 business days of applying) and the closing disclosure form (within 3 business days before signing loan documents). This allows the borrower to review and compare both disclosures before signing and have time for corrections.
What does an escrow agent do
The escrow agent simultaneously follows the instructions of both the buyer and seller, and is responsible for providing the lender with a certified copy of the escrow instructions.
Know about maximum veteran entitlement
The maximum is $36,000.
What is the maximum origination fee on a FHA loan
The maximum origination fee on a FHA loan is 1%.
Know the prerequisites of the NMLS licensing
The requirements are pre-license education, criminal background check, and testing.
Know about the growth equity mortgage (GEM)
There are many variations of the GEM, but they share the following characteristics: 1) Interest rate is fixed over the life of the loan, 2) First-year payments of the principal and interest are based on a 30-year term, 3) The borrower's payments are increased at specified intervals (usually annually) for all, or a portion of, the life of the loan, 4) Because the interest is fixed, 100% of the annual payment increases are used to reduce the principal balance.
Know the FHA debt ratios (minimums and maximums)
There is no minimum. The home loan may not exceed 31% of the borrower's gross monthly. All installment debt, including the home loan payment, may not exceed 43%.
What can the real estate commissioner do
They can deny, suspend, or revoke any license issued by the Bureau of Real Estate.
If a lender offers ARMs loans, what must they provide
They must provide a general brochure about adjustable-rate loans and any disclosure that apply. These disclosures are the index used to determine the interest rate, where the borrower can find the index, an explanation of how interest rate and payment will be determined, suggest that the borrower ask the lender about the current margin and interest rate, a disclosure of the initial rate being discounted and to inquire what the discount amount is, interest and payment adjustment periods, explain how to calculate the payments for the loan, statement that the loan has a demand feature (a call provision or acceleration clause), description of the information that will be included in the adjustment notices and when these notices will be provided, statement that disclosure forms are available for the lender's other ARM programs, and any rules regarding changes in the index, interest rate, payment amount, or loan balance (including an explanation of any caps, a conversion option, or the possibility of negative amortization).
Know about the mortgage reform and antipredator lending act
This act focuses on standardizing data collection for underwriting and imposes obligations on mortgage originators to only lend to borrowers who are likely to repay their loans.
In a foreclosure, what is a court ordered sale called
This is called a judicial foreclosure.
