CH11: NC Real Estate Exam Practice Questions | Finance

Question 1

Which of the following statements regarding adjustable rate mortgages (ARMS) are correct?

a. the interest rate changes according to changes in the selected index
b. adjustable rate mortgages always contain a due on sale clause and a prepayment penalty
c. all adjustable-rate mortgages have a conversion feature that allows them to be converted to a fixed rate
d. none of the above

Answer 1

a. the interest rate changes according to changes in the selected index

Question 2

ECOA requires lenders to make consumer loans without regard to all of the following except:

a. age
a. the interest rate changes according to changes in the selected index
c. sex
d. marital status

Answer 2

a. the interest rate changes according to changes in the selected index

Question 3

Which of the following is not a right given to lenders by a deed of trust?

a. assignment
b. possession after default
c. foreclosure
d. equity of redemption

Answer 3

d. equity of redemption

Question 4

The clause that makes a mortgage unassumable is which of the following?

a. defeasible
b. alienation
c. mortgage
d. prepayment

Answer 4

b. alienation

Question 5

Which of the following statements concerning a mortgage is correct?

a. the purpose of a mortgage is to secure the payment of a promissory
b. the delivery of a mortgage is a conditional conveyance of title
c. a mortgage is a three-party instrument
d. the mortgage lender is called the mortgagor

Answer 5

a. the purpose of a mortgage is to secure the payment of a promissory

Question 6

Which of the following is paid first from the proceeds of a foreclosure:

a. mortgage debt
b. real property taxes
c. mortgagee’s equity
d. sales expenses

Answer 6

d. sales expenses

Question 7

What is the purpose of FHA programs?

a. making house loans
b. guaranteeing house loans
c. purchasing housing loans
d. insuring housing loans

Answer 7

d. insuring housing loans

Question 8

Which of the following gives a borrower the right to pay a debt in full and remove the mortgage lien at any time after default and prior to foreclosure?

a. defeasance
b. prepayment
c. equity redemption
d. foreclosure

Answer 8

c. equity redemption

Question 9

A deed in lieu of foreclosure conveys a title to which of the following?

a. lender
b. borrower
c. trustee
d. mortgagor

Answer 9

a. lender

Question 10

The type of mortgage requiring the borrower to pay only interest during the mortgage term is which of the following?

a. balloon
b. open end
c. term
d. closed

Answer 10

c. term

Question 11

A deficiency judgment is available to which of the following:

a. mortgagee
b. mortgagor
c. trustee
d. trustor

Answer 11

a. mortgagee

Question 12

Which of the following is a mortgage given by the buyer to the seller to secure payment of part of the purchase price?

a. purchase money mortgage
b. earnest money mortgage
c. participation mortgage
d. graduated-payment mortgage

Answer 12

a. purchase money mortgage

Question 13

What is the amount of interest paid on an amortizing mortgage at an annual rate of 12% for a month in which the principal balance is $73,000?

a. $600
b. $730
c. $876
d. $1,369

Answer 13

b. $730

Step #1: 125 of $73,000 = 8,760
Step #2: 8,760 divided by 12 months = 730

Question 14

The property has recently sold for $173,000 and the appraisal indicated an appraised value of $172,000. The lender agrees to make an 80% LTV loan at 5 3/4% interest. Assuming the investor demands a 6 3/8% yield, what would be the total amount collected for points at closing?

a. $8,328
b. $8,256
c. $6,940
d. $6,880

Answer 14

d. $6,880

Step #1: 80% of $172,000 = 137,600
Step #2:
Step #3

Question 15

Which of the following are NOT considered to be one of the six elements of a loan application?

a. marital staus
b. social security number of the applicant
c. property address
d. estimate of property value

Answer 15

a. marital staus

Six Points:
name
income
social security
address
estimate of value 
Mortgage amount

Question 16

All of the following statements are applicable to real estate promissory notes EXCEPT:

a. they must be written
b. the borrower is personally liable for payment
c. they must provide evidence of a valid debt
d. they must be executed by the lender

Answer 16

d. they must be executed by the lender

Question 17

All of the following statements about FHA and VA loans are correct except:

a. they are assumable
b. they require a prepayment penalty
c. the maximum term is 30 years
d. they require an escrow account

Answer 17

b. they require a prepayment penalty

Question 18

The activity of lending institutions making mortgage loans directly to individual borrowers is:

a. secondary mortgage market
b. money market
c. institutional market
d. primary mortgage market

Answer 18

d. primary mortgage market

Question 19

Which of the following is a mortgage that is not on a fully amortizing basis and therefore requires a larger final payment?

a. graduated mortgage
b. balloon mortgage
c. open-end mortgage
d. flexible mortgage

Answer 19

b. balloon mortgage

Question 20

The priority of mortgages in relation to one another is based on which of the following?

a. time of execution
b. time of recording
c. time of delivery
d. time of acknowledgment

Answer 20

b. time of recording

Question 21

Which of the following is a mortgage that is subordinate to another?

a. leasehold
b. blanket
c. junior
d. participation

Answer 21

c. junior

Question 22

Which of the following is a mortgage in which two or more parcels of land are pledged?

a. blanket
b. package
c. all-inclusive
d. junior

Answer 22

a. blanket

Question 23

Insurance for the protection of lending institutions making conventional loans is:

a. mutual mortgage insurance
b. conventional mortgage insurance
c. institutional insurance
d. private mortgage insurance

Answer 23

d. private mortgage insurance

Question 24

All of the following statements about Regulation Z are correct EXCEPT:

a. it applies to commercial mortgage loans
b. it requires lenders to furnish a disclosure statement to the borrower
c. it provides for a 3 day right of rescission when a residence already owned is being pledged as security for a new mortgage
d. it requires the advertising of credit terms of the property offered for sale

Answer 24

a. it applies to commercial mortgage loans

Question 25

Which of the following statements about VA loans is (are) correct? a. the repayment of a percentage of VA loans in the event of borrower default is insured to the lender b. VA loans are for 100% of the lessor f property value established by the VA or the sales price c. A veteran can not use his VA loan entitlement more than once d. A non-veteran may not assume a VA loan

Answer 25

b. VA loans are for 100% of the lessor f property value established by the VA or the sales price

Question 26

The major benefit of the secondary mortgage market is to reduce the effect of which of the following: a. amortization b. liquidity c. disintermediation d. expense settlement charges

Answer 26

c. disintermediation

Question 27

The FHA bases its commitment on a percentage of which of the following: a. certificate of reasonable value (CRV) b. purchase price c. selling price d. acquisition cost or appraisal value, whichever is less

Answer 27

d. acquisition cost or appraisal value, whichever is less

Question 28

Which of the following statements about discount points is correct? a. each point charged increases the lender yield on the loan by 1 percentage point b. each point charged by the lender costs 1/8 % of the loan amount c. points must be paid by the buyer on conventional loans d. discount points are a form of prepaid interest

Answer 28

d. discount points are a form of prepaid interest

Question 29

What is the LTV ratio where the purchase price is $193,750, the appraised value is $182,350 and the loan amount is $155,000? a. 75 % b. 80% c. 85% d. 94%

Answer 29

c. 85% Step #1: 155,00 divided by 182,350 = 85% Don't use the purchase price

Question 30

Harold has purchased a property for $118,000 and plans to obtain an 85% LTV mortgage. The cost to amortize the loan per $1,000 is $6.16. What will Harold's Monthly P&I cost? A. $513.33 B. $616.00 C. $617.85 D. $726.88

Answer 30

C. $617.85 Step #1: 118,000 x 85% = 100,300 Step #2: 100,300 divided by 1000=100.3 Step #3: 6.16 x 100.3 = 617.85

Question 31

Which of the following is a government-owned corporation that purchases mortgages? a. Fannie Mae b. Ginnie Mae c. Freddie Mac d. consumer financial protection bureau

Answer 31

b. Ginnie Mae

Question 32

A borrower has obtained a loan of $184,300 at 5.75% interest for 30 years. If his monthly P&I payment is $1,075.52 what would be the outstanding loan balance after the first monthly payment? a. $83,807.58 b. 184,107.58 c. 183,224.48 d. 183,416.90

Answer 32

b. 184,107.58 Step #1: 184,300 x 5.75% = 10,597.25 Step #2: 10,597.25 divided by 12 months = 883.10 Step #3: 1075.52 minus 883.10 = 192.42 Step #4: 184,300 minus 192.42 = 184,107.58