Real Estate Financing Flashcards
(35 cards)
The Federal Reserve controls economic growth by raising and lowering the discount rate charged to member banks to borrow funds. Lower rates
(a) contract the economy.
(b) cause inflation.
(c) fuel the economy.
(d) increase unemployment.
c) fuel the economy.
Which of the following is correct regarding the relationship between interest rates and housing sales?
(a) Sales are related inversely to interest rates.
(b) Rising interest rates affect affordability.
(c) Higher housing costs associated with higher interest rates tend to increase the number of foreclosures.
(d) All of the above.
(d) All of the above.
_____________ compensate the lender for accepting an interest rate less than the lender wishes.
(a) discount points
(b) kickbacks
(c) origination points
(d) yield spread premiums
(a) discount points
Since most buyers are unable or unwilling to pay cash for real estate, long-term financing is usually necessary. For this reason, an agent should
(a) build a list of private individuals willing to lend.
(b) be constantly aware of lender policies, interest rates, points, and lending costs.
(c) be a mortgage broker as well as a real estate licensee.
(d) obtain a broker’s license to deal directly with large commercial lenders.
(b) be constantly aware of lender policies, interest rates, points, and lending costs.
Primary financing refers to
(a) the first loan recorded against the property.
(b) any junior trust deed recorded against the property.
(c) the down payment or equity position in the property.
(d) any seller financing used to fill the gap between loan and value.
(a) the first loan recorded against the property.
The Federal National Mortgage Association (FNMA) was primarily created to
(a) increase the availability of secondary financing.
(b) standardize construction guidelines.
(c) serve as a secondary mortgage market.
(d) subsidize low income housing.
(c) serve as a secondary mortgage market.
Interest rates for conforming loans eligible for purchase by Fannie Mae or Freddie Mac are generally less than rates charged for nonconforming loans because
(a) wealthy people seeking larger loans have better back-end ratios.
(b) lower loan amounts generally carry less risk.
(c) of their strict underwriting guidelines.
(d) buyers of medium priced homes have better job security.
(c) of their strict underwriting guidelines.
Conforming loans are conventional loans that meet the underwriting standards for purchase by Fannie Mae and Freddie Mac. Because of their strict underwriting requirements, the interest rates for conforming loans are generally less than rates charged for nonconforming loans.
Which of the following lenders invest more heavily in single-family home loans?
(a) savings and loan associations
(b) commercial banks
(c) insurance companies
(d) individuals
(a) savings and loan associations
Which of the following is NOT an institutional lender?
(a) insurance company
(b) savings and loan
(c) commercial bank
(d) mortgage company
(d) mortgage company
Mortgage bankers are regulated primarily by
(a) city laws and regulations.
(b) the Mortgage Loan Brokers Association.
(c) federal regulations.
(d) state laws.
(d) state laws.
Mortgage bankers are regulated by two state agencies, the Department of Real Estate and the Department of Corporations, depending on which license the mortgage banker is operating under.
When conventional financing is not available in the amount required or is too costly, purchasers often turn to
(a) nonconforming financing.
(b) renting.
(c) seller carryback financing.
(d) credit unions.
(c) seller carryback financing.
The majority of 1-4 unit dwellings are still financed by
(a) nonconventional loans.
(b) conventional loans.
(c) seller financing.
(d) family and friends.
(b) conventional loans.
Title I FHA loans are for
(a) purchases of homes only.
(b) property improvement loans.
(c) purchases of multiple units.
(d) none of these.
(b) property improvement loans.
Which of the following requires a down payment?
(a) Cal Vet
(b) FHA
(c) VA
(d) Conventional
(d) Conventional
Conventional loans require a down payment. The other financing programs may not.
The type of trust deed loan which permits borrowing additional funds at a later date is called a(n)
(a) equitable mortgage.
(b) junior mortgage.
(c) open-end trust deed.
(d) extendible mortgage.
(c) open-end trust deed.
What is the main disadvantage of the 40-year loan term for the buyer?
(a) decreases affordability
(b) higher total loan payments
(c) lower initial interest rate
(d) lower down payment.
(b) higher total loan payments
While the payments are reduced by the longer amortization period, making payments for an extra 10 years substantially increases the total payments and payoff.
With an adjustable-rate mortgage (ARM) the interest rate changes periodically, usually in relation to an
(a) index.
(b) survey.
(c) poll.
(d) margin.
(a) index.
In an adjustable-rate loan, the amount added to the index rate that represents the lender’s cost of doing business is called the
(a) marginal rate.
(b) margin.
(c) discount.
(d) overage.
(b) margin.
A situation where payments do not cover all of the interest due on a loan and results in the borrower owing more later in the loan term than at the start is called
(a) inverse amortization.
(b) reverse amortization.
(c) backward amortization.
(d) negative amortization.
(d) negative amortization.
A loan that allows the borrower to change from a variable-rate to the current rate for fixed-rate loans is called a(n)
(a) option ARM.
(b) convertible ARM.
(c) assumable ARM.
(d) bump-up ARM.
(b) convertible ARM.
Borrowers who believe they will remain in a property for many years will likely want
(a) a loan that can be prepaid without a penalty.
(b) an ARM with low initial monthly payments.
(c) an overall lower interest rate.
(d) overall lower origination costs.
(c) an overall lower interest rate.
A method used by lenders to determine the likelihood that credit users will pay their bills is called
(a) qualification ratio.
(b) FICO score.
(c) FTC score.
(d) employment history.
(b) FICO score.
Which of the following strengthens the borrowers’ capacity or ability to repay the debt?
(a) an occupation that ensures a steady income
(b) a history of second job income
(c) dual household income
(d) all of the above
(d) all of the above
Which of the following would be security for a note and deed of trust?
(a) credit of borrower
(b) value of property
(c) stability of the money market
(d) all of these
(b) value of property
