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Test > Unit 15 Real Estate Financing: Practices > Flashcards

Unit 15 Real Estate Financing: Practices Flashcards

1
Q

Which of the following defines the secondary mortgage market?
A Markets in which loans are bought and sold after they have been originated
B Lenders that deal exclusively in second mortgages
C Markets in which loans are originated
D Lenders that offer VA and FHA financing

A

A Markets in which loans are bought and sold after they have been originated

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2
Q 
The buyers purchased a residence for $95,000. They made a down payment of $15,000. The buyers financed the remaining $80,000 of the purchase price by executing a mortgage and note to the seller. This type of loan is called a
A purchase money mortgage.
B package mortgage.
C balloon mortgage.
D term mortgage.
A

A purchase money mortgage.

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3
Q

Which of the following statement(s) is/are TRUE about private mortgage insurance?
I Conventional lenders will usually require it on any loan over 80% LTV.
II It can be discontinued when the borrower’s equity in the home exceeds 20% if he or she is current on the loan payments.
A I only
B II only
C Both I and II
D Neither I nor II

A

C Both I and II

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4
Q 
A borrower obtains a line of credit to make repairs on her home. The mortgage document secures the maximum amount of funds to be used for the current home repairs as well as any future funds to be advanced to the borrower by the lender. This borrower has obtained
A an open-end mortgage.
B a package loan.
C a blanket contract.
D a reverse mortgage.
A

A an open-end mortgage.

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5
Q

Regulation Z requires that lenders
A properly inform buyers and sellers of commercial property of all settlement costs in a real estate transaction.
B inform prospective borrowers of all charges, fees, and interest involved in making a home mortgage loan.
C not discriminate in the lending of credit based on protected class.
D study the economic market before they decide what interest rate to charge on residential mortgages.

A

B inform prospective borrowers of all charges, fees, and interest involved in making a home mortgage loan.

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6
Q

A veteran’s VA entitlement can be restored
A by letting a nonveteran assume the current VA home loan.
B once the equity in the property exceeds 25% of the market value.
C by selling the property to a qualified veteran.
D by paying off the original VA loan that was secured by the entitlement.

A

D by paying off the original VA loan that was secured by the entitlement.

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7
Q 
An elderly woman continues to live in the home she purchased 40 years ago, but she now receives monthly loan installment checks from her mortgage lender thanks to her
A shared-appreciation mortgage.
B adjustable-rate mortgage.
C reverse mortgage.
D USDA loan.
A

C reverse mortgage.

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8
Q 
The buyers are purchasing an ocean-front summer home in a new resort development. The house is completely furnished, and the buyers have obtained a mortgage loan that covers the purchase price of the residence, including furnishings and appliances. This kind of financing is called a
A construction loan.
B package loan.
C blanket loan.
D home equity loan.
A

B package loan.

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9
Q 
Bridge loans are
A used to pay for personal property.
B short-term interim financing.
C always adjustable-rate loans.
D funded by the VA.
A

B short-term interim financing.

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10
Q 
A developer received a loan that covers five parcels of real estate and provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. This type of loan arrangement is called
A a construction loan.
B a blanket loan.
C a package loan.
D an open-end loan.
A

B a blanket loan.

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11
Q 
Funds for Federal Housing Administration (FHA) loans are usually provided by
A the FHA.
B the FDIC.
C qualified lenders.
D FNMA.
A

C qualified lenders.

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12
Q 
Under the provisions of the Truth in Lending Act (Regulation Z), the annual percentage rate (APR) of a finance charge does NOT include
A discount points.
B title preparation fees.
C loan origination fee.
D loan interest rate.
A

B title preparation fees.

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13
Q 
Which of the following is NOT a participant in the secondary market?
A FHLMC
B GNMA
C FNMA
D RESPA
A

D RESPA

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14
Q

All the following statements about junior mortgages are true EXCEPT,
A “their interest rates are usually higher than rates charged on first mortgages.”
B “they are always purchase money mortgages.”
C “they are more subject to default than first mortgages.”
D “they are usually for a shorter term than first mortgages.”

A

B “they are always purchase money mortgages.”

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15
Q

All of the following financing information statements are trigger terms under Regulation Z of the Truth in Lending Act EXCEPT,
A “great assumable low interest rate loan.”
B “only $500 down and $750 a month.”
C “FHA loan at 5% annual interest.”
D “easy qualifying on this 30-year loan.”

A

A “great assumable low interest rate loan.”

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16
Q 
The interest rate on FHA loans is set by the
A FHA.
B FNMA.
C lender.
D Federal Reserve.
A

C lender.

17
Q

All the following statements about Fannie Mae are true EXCEPT,
A “she was originally a HUD agency.”
B “she helped to standardize loan underwriting guidelines.”
C “she was the first secondary market institution.”
D “she makes mortgage loans directly to the consumer.”

A

D “she makes mortgage loans directly to the consumer.”

18
Q

Mortgage bankers (companies) play an important role as a source of real estate financing. Their primary functions include all of the following EXCEPT
A servicing mortgage loans they sell to investors.
B originating all types of loans.
C charging service fees to investors and origination fees to loan applicants.
D using just their own funds from deposit assets to originate mortgage loans.

A

D using just their own funds from deposit assets to originate mortgage loans.

19
Q 
Which of the following loans exposes the lender to the greatest degree of risk?
A FHA
B Conventional, with 95% LTV ratios
C Construction
D VA, with no down payment
A

C Construction

20
Q

The main purpose of the Truth in Lending Act is to
A give a full disclosure of credit charges.
B regulate the practice of redlining.
C ensure that lenders give loan estimates of closing costs.
D establish legal usury limits.

A

A give a full disclosure of credit charges.

21
Q 
For which type of loan would the buyer have to produce a CRV?
A FHA
B Conventional
C VA
D Reverse annuity
A

C VA

22
Q

The major difference between a purchase money mortgage and an installment land contract is
A only one can be used for seller financing.
B the time at which the buyer gets possession and use of the property.
C the time at which delivery of the deed is made.
D nothing; there is no difference.

A

C the time at which delivery of the deed is made.

23
Q 
A buyer purchased a new home for $175,000. The buyer made a down payment of $15,000 and obtained a $160,000 mortgage loan. The builder-seller of the house paid the lender 2% of the loan balance for the first year and 1% of the loan balance for the second year. This represented total savings for the buyer of $4,800. What type of arrangement does this represent?
A Reverse mortgage
B Purchase money mortgage
C Blanket mortgage
D Buydown mortgage
A

D Buydown mortgage

24
Q 
The federal Equal Credit Opportunity Act prohibits lenders from discriminating against potential borrowers on the basis of all of the following EXCEPT
A marital status.
B gender.
C dependence on public assistance.
D amount of income.
A

D amount of income.

25
Q

In determining LTV, value is
A 80% of the sales price or less.
B 95% of the appraised value.
C appraisal value or price, whichever is less.
D price or appraisal value, whichever is more.

A

C appraisal value or price, whichever is less.

26
Q

The Dodd-Frank Act created which oversight agency for the purpose of regulating mortgage lenders, among others?
A The Federal Reserve System
B The Federal Trade Commission
C The Consumer Financial Protection Bureau
D Housing and Urban Development

A

C The Consumer Financial Protection Bureau

27
Q

The purpose of the Federal Reserve System is to
A maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate.
B limit the number of residential loans made by savings and loan institutions.
C buy loan portfolios from the primary market.
D reserve assets for commercial and residential mortgage loans.

A

A maintain sound credit conditions, help counteract inflationary and deflationary trends, and create a favorable economic climate.

28
Q 
If a lender agrees to make a loan based on an 80% LTV, what is the amount of the loan if the property appraises for $114,500 and the sales price is $116,900?
A $80,000
B $91,600
C $92,560
D $93,520
A

B $91,600

29
Q 
A man is buying a house for $123,000. His lender will give him a mortgage loan for 95% of the purchase price. How much down payment must the buyer pay?
A $1,230
B $6,150
C $12,300
D $116,850
A

B $6,150

30
Q 
A buyer is taking out a $356,000 loan to buy a property that is appraised for $1,200,000. What is the loan-to-value ratio?
A 3.37%
B 29.67%
C 29.8%
D 30.23%
A

B 29.67%

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