Flashcards in Real Estate Course Chapter 12 Deck (34):
True or False: The Federal Housing Administration (FHA) regulates interest rates.
True or False: Florida statute requires mortgagees to send the recorded satisfaction to mortgagors within 60 days
True or False: A deed in lieu of foreclosure is sometimes referred to as a friendly foreclosure.
True or False: A contract for deed is a method of buying a property in a single lump sum.
The statement is FALSE. A contract for deed is a method for buying real property, usually with very little cash investment. The seller accepts a down payment from the buyer and finances the rest of the purchase price.
True or False: The primary appeal of an adjustable-rate mortgage (ARM) is a lower interest rate over the life of the loan.
FALSE. An ARM offers a lower initial interest rate, but over the life of the loan an ARM's rate can rise considerably higher than the initial rate.
True or False: Borrowers are charged a mortgage insurance premium for a VA loan.
The statement is FALSE. The VA does not charge a mortgage insurance premium; however, the borrower is charged a funding fee or user's fee to help the government defray the cost of foreclosures.
True or False: FHA mortgages typically have a higher loan-to-value (LTV) ratio compared with conventional mortgages.
True or False: The VA uses a total monthly obligations ratio of 39 percent to qualify loan applicants.
The statement is FALSE. The VA uses a total monthly obligations ratio of 41 percent to qualify loan applicants
True or False: In a mortgage, the mortgagor owns the mortgage, while the mortgagee owns the property.
The statement is FALSE. The opposite is true: the mortgagor owns the property, while the mortgagee owns the mortgage
True or False: The open-end clause permits the borrower to increase the loan amount as long as the total debt does NOT exceed the original amount of the loan.
The statement is TRUE. The borrower may increase the loan amount under the open-end clause, but only if the total debt does not exceed the original amount of the loan
At closing the seller retains legal title to the property. The buyer receives equitable title and a promise that the buyer will receive title to the property at a later date. What type of instrument has been executed?
The answer is LAND CONTRACT. A land contract (or contract for deed) is a special arrangement that can be used when the buyer has little down payment. Title to the real property remains with the seller. The buyer receives equitable (legal) interest in the property.
Which mortgage plan is BEST suited to people who expect significant increases in income within the next few years?
The answer is GROWING-EQUITY. A growing-equity mortgage rapidly increases the equity in a property by increasing the monthly payments by a certain percentage each year and applying the increases to the principal.
Which mortgage clause allows another mortgage created at a later date to take priority?
SUBORDINATION CLAUSE. A subordination clause provides that the lender (usually the seller) voluntarily will allow a subsequent mortgage to take priority over the lender's otherwise superior mortgage (the act of yielding priority).
What is Florida's equitable right of redemption?
A BORROWER WHO IS IN DEFAULT, PRIOR TO FORECLOSURE, HAS THE RIGHT TO REPAY THE AMOUNT OWED PLUS INTEREST TO PREVENT FORECLOSURE.
A prospective borrower has an estimated monthly housing expense of $900. The borrower's total monthly obligations are $1,200. Monthly gross income totals $2,950. What is the total obligations ratio? (Round to nearest percent.)
The answer is 41 PERCENT. The solution is: $1,200 total monthly obligations ÷ $2,950 monthly gross income = .4067 or 40.67% or 41% (rounded to the nearest percent).
The process of transferring ownership of a mortgage from one company to another is accomplished by executing which instrument?
ASSIGNMENT OF MORTGAGE
Which statement is TRUE regarding a level payment plan mortgage?
A)The principal is repaid in equal amounts each month.
B)The amount of interest owed is paid in full during the first few years of the loan.
C)The mortgage typically includes a prepayment penalty clause.
D)The monthly principal and interest payment remains constant for the entire loan term.
D) THE MONTHLY PRINCIPAL AND INTEREST PAYMENT REMAINS CONSTANT FOR THE ENTIRE LOAN TERM
The borrower retains equitable title in which mortgage theory?
The answer is C) TITLE. In title theory states, the borrower retains equitable title to the property. Once the debt is paid in full, the lender conveys legal title to the borrower.
Which type of mortgage is used to pledge personal property and real estate as collateral for the mortgage loan?
B) PACKAGE. A package mortgage loan includes both real and personal property as security for the debt
What is another term for a release of mortgage, and within how many days must the lender execute the release?
SATISFACTION OF MORTGAGE. 60 DAYS.
Which method of purchasing mortgaged property relieves the seller of any liability in the event of default and makes the buyer personally liable for the existing mortgage?
Which statement is FALSE regarding biweekly mortgages?
A)Each payment is equal to one half the normal monthly payment.
B)The interest rate is typically higher compared with fixed-rate mortgages amortized monthly.
C)The loan is typically paid off in less time.
D)The borrower makes the equivalent of one extra month's payment each year.
B) THE INTEREST RATE IS TYPICALLY HIGHER COMPARED WITH FIXED-RATE MORTGAGES AMORTIZED MONTHLY.
FHA requires the borrower to pay which items as part of the monthly payment?
PRINCIPAL, INTEREST, TAXES, HAZARD INSURANCE, AND MONTHLY INSURANCE PREMIUM, IF APPLICABLE.
Which mortgage component increases as a result of negative amortization?
OUTSTANDING LOAN BALANCE
Which expense does the VA charge veteran borrowers in order to help the government defray the costs of foreclosures?
The answer is USER'S FEE. The VA requires a user's fee (or funding fee) to help the government defray the cost of foreclosures.
A homeowner has a residence with a value of $300,000 and a mortgage debt of $270,000. What is the loan-to-value ratio?
The answer is 90 percent. The solution is: $270,000 loan ÷ $300,000 value = .90 or 90%.
Consumers sometimes use which type of loan to purchase big ticket items because of the deductible interest feature?
HOME EQUITY LOAN
The interest rate on an adjustable-rate mortgage loan is calculated by adding the index rate to the
Which term applies to a nonjudicial procedure whereby a borrower who is in default on the mortgage loan transfers title of a property to the lender?
A)Deed in lieu of foreclosure
B)Deed of trust
DEED IN LIEU OF FORECLOSURE.
When conventional lenders qualify a buyer for a mortgage, they usually require the buyer's total debt to income to be no more than what percent of gross monthly income?
The answer is 36. FNMA's benchmark ratio for total debt to income is 36 percent.
What is the effect of the due-on-sale clause?
LENDER MAY REQUIRE REPAYMENT IN FULL IF THE PROPERTY IS SOLD OR TRANSFERRED WITHOUT THE LENDER'S CONSENT.
Which mortgage clause allows the mortgagee to demand immediate repayment of the entire unpaid loan in the event of default?
Which legal instrument contains the loan amount, interest rate, and loan term?