Financing

Question 1 of 30

How does a home equity line of credit differ from a second mortgage?

The interest accrued on a home equity line of credit is not tax deductible.
A home appraisal is not necessary for a home equity line of credit.
With a home equity line of credit the borrower can draw money as they need it.
The terms can be used interchangeably.

Question 2 of 30

What is the primary advantage of a biweekly mortgage?

faster loan payoff
they accept those with lower credit scores
easier for budgeting
they offer a better interest rate

Question 3 of 30

When a property is released from a mortgage because it has been paid off by the borrower, what document does the lender provide to prove this to be true?

satisfaction piece
postponement of lien
estoppel certificate
land release

Question 4 of 30

Which government entity was created to encourage low-income housing?

FNMA (Fannie Mae)
FmHA
FNMA (Freddie Mac)
GNMA (Ginnie Mae)

Question 5 of 30

A loan for a new house has an origination fee of one point. If the loan is for $275,000, what would the cost of that point be?

$275
$1375
$1000
$2,750

Question 6 of 30

What is the purpose of underwriting?

to get a current appraisal on a home’s value
to determine how much a property is worth
to determine the risks of making a loan
to compare the interest rates of different lenders

Question 7 of 30

If a borrower puts down 10% on their home loan, what is the loan-to-value ratio?

90%
20%
10%
80%

Question 8 of 30

A homeowner is buying a new home but hasn’t sold their old one. Which type of loan would they obtain in the short term and pay back as soon as their old house is sold?

swing
home equity
sale-leaseback
wraparound

Question 9 of 30

Which is not one of the “three c’s” of underwriting?

credit
collateral
conformity
capacity

Question 10 of 30

Who is the typical reverse mortgage customer?

someone with a lot of equity in their home
all of these
someone without a lot of liquid capital
someone elderly

Question 11 of 30

A mortgage broker’s primary role is to ____.

sell mortgage loans
bring borrowers and lenders together
underwrite mortgage loans
originate mortgage loans

Question 12 of 30

Mortgage lenders make their money by ____.

all of these
charging annual loan servicing fees
charging loan origination fees
charging loan application fees

Question 13 of 30

Subprime loans are usually an option for ____.

people with subpar credit and come with a higher interest rate
people with great credit who get a lower interest rate
people with subpar credit and come with a lower interest rate
people with great credit who want to remove any interest payment entirely

Question 14 of 30

Most Real Estate loans deal with simple interest, the formula for which is ____.

Rate x Loan Balance = Annual Interest
none of these
Annual Interest x Monthly Payment = Rate
Rate x Monthly Payment = Annual Interest

Question 15 of 30

Which of these is a tool the Federal Reserve can use to control/influence monetary policy and supply?

setting the discount rate
buying and selling securities on the open market
raising and lowering reserve requirements for banks
all of them

Question 16 of 30

What financial instrument is given by a borrower to the lender as promise to repay a debt?

a note
a lien
a trust deed
a mortgage

Question 17 of 30

A mortgage is a ____.

promise to repay a debt
written contract pledging real property as security for a debt
written contract that allows a buyer to own a home outright immediately
type of loan used to purchase real property

Question 18 of 30

Gradual liquidation through periodic payments of principal and interest is called ____.

an amortized loan
a reverse annuity mortgage
a take-out loan
a HELOC

Question 19 of 30

How does an ARM mortgage differ from a fixed rate mortgage?

ARM stands for adjustable rate mortgage, whose rate may vary with changes in interest rates.
The fixed rate will always be the most fiscally smart choice.
There is no difference.
Upon default, the borrower must give up his/her left or right arm.

Question 20 of 30

A foreclosure sale is ____.

preceded by a statutory right of redemption period
an auction sale to the highest bidder
no different from strict foreclosure
a notice of default

Question 21 of 30

A mortgage lien is placed on real estate by ____.

the IRS in the event of a default
a buyer in exchange for funds to buy the real estate
a lender after a default
a lender in exchange for funds to buy the real estate

Question 22 of 30

A promissory note must contain the following three things: ____.

a signed promise to repay, evidence of the mortgage, and the deed
a copy of the deed, the term of the loan, and evidence of title insurance
the amount of the loan, the term of the loan, and the interest rate of the loan
the amount of the loan, the interest rate, and the applicable tax rate

Question 23 of 30

A borrower in a title theory state repays his loan in full, and fulfills any other obligations of the loan. The lender now holds ____.

no title
equitable title
legal title
simple title

Question 24 of 30

Under lien theory, the mortgagee receives ____.

legal title and the right to place a lien on the property
the right to place a lien on the property
legal title and equitable title
equitable title only

Question 25 of 30

A VA loan would most likely be used by ____.

a veteran or active-duty member of the U.S. military
a homebuyer in Virginia
a homebuyer with an unusually low credit score
any government employee that’s looking to buy a home

Question 26 of 30

What is the lowest possible down payment on an FHA loan?

3.5%
20%
10%
2%

Question 27 of 30

Amortization refers to the process by which ____.

a balloon payment is calculated to pay off the principal that remains at the end of the loan
monthly payments are calculated so that the interest paid is the same every month
interest is paid monthly, and principal payments are made on an as-needed basis
monthly payments are calculated so that the principal is paid off over the life of the loan

Question 28 of 30

Over the life of a fixed-rate, fully amortizing loan, the portion of each payment that goes toward principal will gradually ____.

increase
not change; the ratio of principal to interest is fixed
decrease
be unpredictable, as the ratio of principal to interest is erratic

Question 29 of 30

A chattel loan would be used to purchase ____.

a single-family residence
a condominium
a mobile home
a duplex

Question 30 of 30

Fannie Mae is ____.

one of the largest corporations in the U.S.
a primary lender
a government agency
a specialty lender

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