Chapter 16

Question 1

The __________________________ addendum is to be used if the buyer is applying for a loan with conventional, FHA, VA or other forms of financing.

Answer 1

Third Party Financing Addendum for Credit Approval addendum

Question 2

What is the most common FHA loan type by number?

Answer 2

The FHA 203 (B) loan

Question 3

What is the current maximum dollar allowed by the General Land Board of Texas?

Answer 3

$424,100

Question 4

What must be included in all addenda?

Answer 4

All addenda must have the names of the parties involved and the legal address of the property it pertains to.

Question 5

Many lenders write their _______________ (alienation clause) in such a way that a borrower would not be allowed to have someone assume the loan.

Answer 5

Due on sale clause

Question 6

_______________ “according to value” taxes are assessed amounts for items such as casualty insurance, mortgage insurance premiums, and the current year’s tax bill.

Answer 6

Ad valorem taxes

Question 7

The ______________________________ may be used when the seller is concerned that his or her responsibility for the loan may continue beyond the closing.

Answer 7

TREC Release of Liability Addendum

Question 8

What is an ad valorem tax?

Answer 8

A property is taxed according to the value the taxing authority places on the property

Question 9

The TREC No. 41-2 addendum is used for what purpose?

Answer 9

Loan assumptions

Question 10

What are the two possible ways to deal with an unbalanced closing statement?

Answer 10

1) The buyer could pay the seller cash for the difference at closing.
2) The sales price will be lowered to reflect the new lower amount that is owed on the property.

Question 11

TREC No. 26-7 _____________________ is needed when the seller carries a note for a buyer for all or a portion of the sales price.

Answer 11

Seller Financing Addendum

Question 12

On a Seller Financing Addendum, Paragraph B states there are ______ days in which the buyer must get the financial information to the seller. If the seller does not receive it in a timely manner, the seller could terminate the contract and receive the earnest money.

Answer 12

7

Question 13

What type of loan assumption requires a lawyer directed transaction?

Answer 13

Financing through a contract for deed

Question 14

The _______________ is the fee VA charges to protect the lender from default by the buyer. It is similar to the Mortgage Insurance charged with conventional and FHA loans, except the VA states it is a guarantee.

Answer 14

Funding Fee

Question 15

What are 2 reasons a buyer would want to assume a seller’s existing note?

Answer 15

1) The interest rate of the current loan is less than the market rate (spread needs to be at least 2%)
2) the current note has been paid down a considerable amount with more of the money going to principal instead of interest.

Question 16

The Third Party Financing Addendum for Credit Approval is used when?

Answer 16

A buyer is applying for a loan with CONV, FHA, VA, or other forms of financing.

Question 17

If a buyer only has enough money for a 10% downpayment:

Answer 17

The buyer may apply for 2 loans - one for 80% and the second for 10%.

Question 18

True or false: The TREC Seller Financing Addendum form stipulates the payment of a 5% late fee on any installment not paid within 10 days of the due date, and an interest rate of 1.5% per month for any matured unpaid amounts.

Answer 18

True

Question 19

For sellers who are carrying notes for buyers, TREC Seller Financing Addendum requires a late payment fee of how much for any payment made more than 10 days late?

Answer 19

5%

Question 20

When a seller carries a loan for a buyer, matured unpaid amounts will bear interest at what rate or at the highest lawful rate, whichever is lower?

Answer 20

1.5% per month