CH11: NC Real Estate Exam Practice Questions | Finance Flashcards
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
a. the interest rate changes according to changes in the selected index
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
a. the interest rate changes according to changes in the selected index
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
d. equity of redemption
The clause that makes a mortgage unassumable is which of the following?
a. defeasible
b. alienation
c. mortgage
d. prepayment
b. alienation
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
a. the purpose of a mortgage is to secure the payment of a promissory
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
d. sales expenses
What is the purpose of FHA programs?
a. making house loans
b. guaranteeing house loans
c. purchasing housing loans
d. insuring housing loans
d. insuring housing loans
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
c. equity redemption
A deed in lieu of foreclosure conveys a title to which of the following?
a. lender
b. borrower
c. trustee
d. mortgagor
a. lender
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
c. term
A deficiency judgment is available to which of the following:
a. mortgagee
b. mortgagor
c. trustee
d. trustor
a. mortgagee
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
a. purchase money mortgage
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
b. $730
Step #1: 125 of $73,000 = 8,760
Step #2: 8,760 divided by 12 months = 730
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
d. $6,880
Step #1: 80% of $172,000 = 137,600
Step #2:
Step #3
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
a. marital staus
Six Points: name income social security address estimate of value Mortgage amount
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
d. they must be executed by the lender
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
b. they require a prepayment penalty
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
d. primary mortgage market
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
b. balloon mortgage
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
b. time of recording
Which of the following is a mortgage that is subordinate to another?
a. leasehold
b. blanket
c. junior
d. participation
c. junior
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
a. blanket
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
d. private mortgage insurance
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
a. it applies to commercial mortgage loans
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
b. VA loans are for 100% of the lessor f property value established by the VA or the sales price
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
c. disintermediation
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
d. acquisition cost or appraisal value, whichever is less
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
d. discount points are a form of prepaid interest
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%
c. 85%
Step #1: 155,00 divided by 182,350 = 85%
Don’t use the purchase price
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
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
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
b. Ginnie Mae
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
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
