Unit 11
In 2012, a man purchased a new home at the FHA appraisal amount of $100,000 and financed it with an FHA mortgage loan. To what amount must he reduce the outstanding loan balance before he no longer has to pay the 0.5% annual mortgage insurance premium?
$78,000
A man is shopping for a new loan and has narrowed the field to two choices. One is a 30-year fixed-rate loan that has principal and interest payments of $940 per month. The other is a biweekly mortgage. What is the difference in the annual payments based on this information?
$940
A $127,000, 30-year fixed-rate mortgage with a 5.5% rate has a mortgage payment factor of .0056779. Annual payments for property taxes are $2,400. The annual insurance premium is $600. What will be the monthly PITI payments?
$971.09
On January 10, the one-year Treasury bill index was 4%. A mortgage company used that index to write a new one-year adjustable-rate with a 2.5% margin. What is the calculated interest rate?
) 6.5%
The FHA adjustable-rate mortgage limits increases on interest rates to
1% annually.
What is the maximum amount of a buyer's closing costs that the seller can pay under conventional lending standards when the borrower is making a 5% down payment?
3% of the purchase price
Total interest rate increases on an FHA adjustable-rate loan may NOT exceed what percentage over the life of the loan?
5%
A woman is shopping for a new $150,000 mortgage. She expects to live in her new home for about four years. She can get a 30-year, 4.75% fixed-rate mortgage with principal and interest payments of $1,074.62 with no points. She can also get a 4.25% mortgage loan (payments of $1,023.26) with three points. How many months will it take the woman to break even on the points if she takes the lower interest rate loan, using simple arithmetic?
87.6
A biweekly mortgage has 24 payments each year.
False
A house was purchased for $200,000 with a $180,000 loan. The private mortgage insurance will terminate automatically when the mortgage amount is $140,400.
False
A standard provision of ARMs is a prepayment penalty
False
Licensees should advise buyers who are shopping for a mortgage to focus exclusively on those lenders who are offering the lowest rates.
False
The 15-year fixed-rate mortgage has become popular in recent years, even though it costs borrowers thousands of dollars more in interest charges than would be incurred with a 30-year fixed-rate mortgage.
False
The maximum seller-paid closing costs on a new FHA loan for a house being purchased for $200,000 is $6,000.
False
The popularity of adjustable-rate mortgages (ARMs) increases when interest rates fall.
False
The payment factor for a 30-year mortgage at 4.5% is 5.07 per thousand. The monthly principal and interest for a 30-year loan of $300,000 at 4.5% is $1,125.
False The monthly payment of principal and interest is $1,521 ($300,000 ÷ 1,000 = $300; $300 × 5.07 = $1,521).
What is the index measuring the base interest rate paid on deposits between banks in the Eurodollar market that is used in many adjustable-rate mortgages?
LIBOR
Which is TRUE about a loan's effective interest rate?
Origination fees should be added to the points charged in making the calculation.
Of the recognized indexes used on ARM loans, which is MOST volatile?
Prime rate charged by money center banks
Which is FALSE about the annual percentage rate (APR) disclosure?
The effective rate of interest is not affected by the number of years the mortgage loan stays in force.
Private mortgage insurance will probably NOT be canceled when the borrower achieves 22% equity if the borrower has not been current on the payments within the year before the time for termination or cancellation.
True
The PITI payment includes the principal, interest, and escrow expenses in the monthly mortgage payment.
True
The annual percentage rate (APR) must, by law, be the relationship of the total financing charge to the total amount financed, and it must be computed to the nearest one-eighth of 1%.
True
If a lender offers a first mortgage for 4.5% and charges four points, the effective interest rate if the loan is held for at least 12 years is 5%.
True The formula to calculate the effective interest rate is note rate + (points ÷ 8) = effective interest rate. 4.5% + (.04 ÷ 8) = 4.5% + .5% = 5%.
Disclosure of the annual percentage rate of interest need NOT
be given to a prospective buyer of a single-family home who is paying all cash.
The interest rate that major banks charge to MOST favored customers and that is commonly used for home equity loans is the
prime rate.
When compared with a 30-year mortgage, a 15-year mortgage has
slightly lower interest rates.
The MOST common type of real estate mortgage is
the 30-year fixed-rate mortgage.
Disclosure of the annual percentage rate on a mortgage loan is required by
the Truth in Lending Act (TILA.)
The factor in an adjustable-rate mortgage that causes the calculated interest rate to change is
the index.
The component of an adjustable-rate mortgage that does NOT usually change is
the margin.
ARM loans are more popular
when interest rates are high.
