Chapter 4 General Mortgage Knowledge Flashcards
Which of the following requires the use of an approved appraiser? A. Conventional B. FHA C. USDA D. VA
Answer: B
FHA loans require the use of an FHA-approved appraiser.
Which of the following has a maximum loan value depending on county? A. Conventional B. FHA C. USDA D. VA
Answer B
FHA loans have a maximum loan amount in each county, which does not include the Up Front Mortgage Insurance Premium.
What is true of FNMA and Freddy Mac Loan?
A. They are assumable and do not have a due n sale clause
B. are not assumable; they do have a due-on-sale clause.
C. They are Partially assumable
D. They have no due-on-sale clause
Answer B
Most conventional mortgages are not assumable; they do have a due-on-sale clause.
Which of the following is usually not assumable? A. Conventional Loan B. FHA C. VA D. USDA
Answer A
Most conventional mortgages are not assumable; they do have a due-on-sale clause.
A fully amortized loan with terms of 15-30 years is known as A. Bridge Loan B. 360/180 Loan C. Term Mortgage D. Fixed Rate Loan
Answer D
A Fixed-Rate Mortgage is one example of a fully amortized loan. During the first few years of the loan, most of the monthly P & I is going toward paying the interest. Payments during the last few years are almost entirely principal repayment
Which of the following is partially amortized? A. Balloon loan B. Interest Only Loan C. Reverse Mortgage D. Fixed Rate Loan
Answer: A
Balloon Mortgage is partially amortized. Monthly payments are usuallycalculated as if it was a 30-year term but the balance of the loan will come due before that time and has to be paid in one lump sum; 5, 7, and 10-year terms are popular.
Which of the following is a non amortized loan? A. Balloon loan B. 360/180 C. Term Loan D. Fixed Rate Loan
Answer C
A term mortgage also known as an interest Only mortgage is non-amortized.
A balloon amortized over 30 years with a lump-sum payment due after 15 years is known as A. Bridge Loan B. 360/180 Loan C. ARM loan D. Fixed Rate Loan
Answer: B
A 360/180 loan is a balloon amortized over 30 years with a lump sum payment due after 15 years.
Which of the following is a fully amortized loan? A. Bridge Loan B. 360/180 Loan C. Term Loan D. Fixed Rate Loan
Answer D
Which of the following is a negative amortized loan? A. Balloon loan B. Reverse Mortgage C. Term Loan D. Fixed Rate Loan
Answer B
Which is true of a term loan? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
A
Which is true of a fixed rate loan? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
B
Which is true of a balloon mortgage? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
D
Which of the following is a non amortized interest only loan? A. Bridge Loan B. 360/180 Loan C. Term Mortgage D. Term Reverse Mortgage
Answer C
A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.
A balloon amortized over 30 years with a lump-sum payment due after 15 years is known as A. Bridge Loan B. 360/180 Loan C. ARM loan D. Fixed Rate Loan
Answer: B
A 360/180 loan is a balloon amortized over 30 years with a lump sum payment due after 15 years.
Which of the following is a fully amortized loan? A. Bridge Loan B. 360/180 Loan C. Term Loan D. Fixed Rate Loan
D
Which of the following is a negative amortized loan? A. Balloon loan B. Reverse Mortgage C. Term Loan D. Fixed Rate Loan
B
Which is true of a term loan? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
A
Which is true of a fixed rate loan? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
B
Which is true of a balloon mortgage? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
D
Which of the following is a non amortized interest only loan? A. Bridge Loan B. 360/180 Loan C. Term Mortgage D. Term Reverse Mortgage
.
Answer: C
A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment
Which is true of Term Mortgage? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
Answer A
A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.
Which of the following is a non amortized loan? A. Interest Only B. 360/180 Loan C. Reverse Mortgage D. Fixed Rate Loan
A
A Term Mortgage is a non-amortizing interest-only loan. The balance is due at the end of the term in a balloon payment.
Which of the following is true of reverse mortgages?
A. Reverse mortgage interest can be fixed or an ARM that adjusts annually
B. Reverse mortgage interest can be fixed or interest Only
C. Reverse mortgage interest cannot be fixed
D. Reverse mortgages can be a balloon
Answer A
Reverse mortgage interest can be fixed or an ARM that adjusts annually with a 2% annual cap and a 5% lifetime cap. Lenders may also offer an ARM that adjusts monthly with only a lifetime cap. The type of interest cannot be changed after closing,
Which of the following is a negative amortization loan? A. Bridge Loan B. Reverse Mortgage C. Interest Only D. Fixed Rate Loan
B
Which is true of reverse mortgages? A. It is non-amortized B. It is fully amortized C. It is a negative amortization D. Partially Amortized
C
Which of the following are Reverse mortgage loans?
A. GPM, GEM, 360/180, Tenure, Modified
B. GPM, GEM, 360/180, Tenure, Term
C. Tenure, Term, Line of Credit, Modified Tenure and Modified Term
D. Tenure, Term, Line of Credit, Modified Tenure and Balloon
C
Which of the following reverse mortgage does payments continue for the life of the borrower as long as it remains the principal residence? A. Tenure B. Term C. Line of Credit D. Modified
A
A reverse loan that borrowers select the desired number of monthly payments is A. Tenure Reverse Mortgage B. Tenure Mortgage C. Term Mortgage D. Term Reverse Mortgage
Answer D.
A combination of a loan in which payments continue for the life of the borrower as long as it remains the principal residence added to a line of credit is known as A. Tenure B. Term C. Modified Tenure D. Modified Term
C
A type of combination loan in which borrowers select the desired number of monthly payments and line of credit is known as A. Alt-A loan B. Hybrid C. Modified Tenure D. Modified Term
D
On a reverse mortgage, what type of disclosure is required?
A. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, CRV Certification
B. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, Appraisal Certification
C. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, HUD-1 Counseling
D. Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, HUD-1 Certification
Answer D
A reverse mortgage requires the following disclosure:
Notice of Recession, ARMs Disclosure (if needed), Initial Payment Plan details, HUD-1 Closing Statement, HUD-1 Certification
Which of the following is used to calculate how much a borrower can borrow for reverse mortgage? A. Age, Interest Rate, Value of Home B. Age, years till death, Appraisal C. Age, Income, Stability D. Age, Principal balance and Income
Answer: A
Lenders calculate how much a borrower is authorized to borrow overall, based on age, the interest rate, and the value of the home.
The factors used to calculate how much one can borrow in a reverse mortgage is known as A. TIL Disclosures B. Partial Payment Limit C. initial principal limit D. Initial payment limit
Answer C
This number is known as the initial principal limit, and it increases every year of the loan.
On a reverse mortgage, how much of the initial pay,ent limit calculation is allowed to be withdrawn?
A. 60% of initial principal limit or 70% if enough to pay off existing mortgage
B. 60% of initial principal limit or 100% if enough to pay off existing mortgage
C. 80% of initial principal limit or 70% if enough to pay off existing mortgage
D. 80% of initial principal limit or 78% if enough to pay off existing mortgage
Answer: A
60% of the initial principal limit OR Enough to pay off an existing mortgage (if it’s more than the 60%, plus 10% of the principal limit.
Which of the following is used to calculate how much a borrower can borrow for reverse mortgage? A. Age, Interest Rate, Value of Home B. Age, years till death, Appraisal C. Age, Income, Stability D. Age, Principal balance and Income
Answer: A
Lenders calculate how much a borrower is authorized to borrow overall, based on age, the interest rate, and the value of the home.
The factors used to calculate how much one can borrow in a reverse mortgage is known as A. TIL Disclosures B. Partial Payment Limit C. initial principal limit D. Initial payment limit
Answer C
This number is known as the initial principal limit, and it increases every year of the loan.
On a reverse mortgage, how much of the initial payment limit calculation is allowed to be withdrawn?
A. 60% of initial principal limit or 70% if enough to pay off existing mortgage
B. 60% of initial principal limit or 100% if enough to pay off existing mortgage
C. 80% of initial principal limit or 70% if enough to pay off existing mortgage
D. 80% of initial principal limit or 78% if enough to pay off existing mortgage
Answer: A
60% of the initial principal limit OR Enough to pay off an existing mortgage (if it’s more than the 60%, plus 10% of the principal limit.
A loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount is known as a? A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage
Answer: A
A Buy-Down Mortgage is a loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount.
Which of the following is true of Buy-Down Mortgages?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer?
C. A revolving credit in which the home serves as collateral is known as
D. loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount.
Answer D
A Buy-Down Mortgage is a loan that begins at a rate below the existing market rate and then rises, usually every year, at a predetermined amount.
A loan that can be amortizing or non-amortizing, and the lien includes personal property as well as real property is called a A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage
Answer: B
Package Mortgage can be either amortizing or non-amortizing, and the lien includes personal property as well as real property.
Which of the following can be either amortizing or non-amortizing? A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage
Answer: B
Package Mortgage can be either amortizing or non-amortizing, and the lien includes personal property as well as real property.
Which of the following is true of a Package Mortgages?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. can be either amortizing or non-amortizing, and the lien includes personal property as well as real property
C. A revolving credit in which the home serves as collateral is known as
D. mortgage in which the payment starts low and increases over time.
B
A Package Mortgage can be either amortizing or non-amortizing, and the lien includes personal property as well as real property.
A mortgage in which the payment starts low and increases over time. A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage
Answer: C
A Graduated Payment Mortgage (GPM) is a mortgage in which the
payment starts low and increases over time.
Which of the following is true of Graduated Payment Mortgages?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer?
C. A revolving credit in which the home serves as collateral is known as
D. mortgage in which the payment starts low and increases over time.
Answer D
A Graduated Payment Mortgage (GPM) is a mortgage in which the
payment starts low and increases over time.
Which of the following is a seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer? A. Buy Down Mortgage B. Package Mortgage C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage
Answer: D
On a Wrap-around-mortgage, The original loan cannot have adue-on-sale clause since the seller will continue to make these payments after title is transferred to the new purchaser.
Which of the following is true of a wrap around mortgage?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer?
C. A revolving credit in which the home serves as collateral is known as
D. mortgage in which the payment starts low and increases over time.
Answer B
On a Wrap-around-mortgage, The original loan cannot have adue-on-sale clause since the seller will continue to make these payments after title is transferred to the new purchaser.
A mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly is known as A. Home Equity Line of Credit B. Growing Equity Mortgage (GEM) C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage
Answer: B
Growing Equity Mortgage (GEM) has a fixed interest rate and
increasing payments so that the loan balance is paid off more quickly.
Which is true of a GEM mortgage?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer?
C. A revolving credit in which the home serves as collateral is known as
D. mortgage in which the payment starts low and increases over time.
Answer: A
Growing Equity Mortgage (GEM) has a fixed interest rate and
increasing payments so that the loan balance is paid off more quickly.
A revolving credit in which the home serves as collateral is known as A. Home Equity Line of Credit B. Growing Equity Mortgage (GEM) C. Graduated Payment Mortgage (GPM) D. Wrap-around-Mortgage
Answer: A
A Home Equity Line of Credit is a form of revolving credit in which the Home serves as collateral. The amount of the available credit line usually depends on the borrower’s equity in the home (appraised value – loan balance = borrower’s equity).
Which if true of Home equity Line of Credit?
A. mortgage that has has a fixed interest rate and increasing payments so that the loan balance is paid off more quickly
B. seller financing which the original loan cannot have a due on clause since the seller will continue to make these payments after title transfer?
C. A revolving credit in which the home serves as collateral is known
D. mortgage in which the payment starts low and increases over time.
Answer C
A Home Equity Line of Credit is a form of revolving credit in which the home serves as collateral. The amount of the available credit line usually depends on the borrower’s equity in the home (appraised value – loan balance = borrower’s equity).
When must borrowers be notified of an ARM rate changes before initial reset? A. 30 days B. 60 days C. Three Months D. Six Months
Answer: D
Borrowers must be notified of an ARM rate change six months before the initial reset.
Which of the following require title insurance to equal full value of the house at the time of closing? A. Bridge Loan B. Reverse Mortgage C. Interest Only D. Fixed Rate Loan
Answer: B
Reverse mortgage title insurance must equal the full value of the house at the time of closing.
An FHA mortgage: A. Is 100% insured B. Is partially guaranteed C. Has a 5% late fee D. Is not assumable
A
FHA loans are insured 100%
FHA maximum loan amounts:
A. Are set by the U.S. Department of State
B. Do not include the Up Front Mortgage Insurance Premium
C. Are set at $500,000
D. Are set at $1,000,000
Answer B
FHA loans have a maximum loan amount in each county, which does not include the Up Front Mortgage Insurance Premium.
A VA mortgage has all the following features EXCEPT: A. It is partially guaranteed B. It has a mortgage insurance premium C. It has a 4% late fee D. No required down payment
Answer B
VA loans require no monthly insurance premium.
A VA appraisal is known as a: A. Qualified appraisal B. Certificate of reasonable value C. Certificate of market value D. VA designated market appraisal
B
A conventional mortgage does NOT have a: A. 3% minimum down payment B. 5% late fee C. Due-on-sale clause D. Borrower income limit
D
A conventional mortgage does NOT have a: A. 3% minimum down payment B. 5% late fee C. Due-on-sale clause D. Borrower income limit
Answer D
Conventional Loans do not have a borrower Income Limit.
Most conventional mortgages are not assumable; they do have a due-on-sale clause.
A reverse mortgage is an example of: A. Positive amortization B. Negative amortization C. Lender error D. Bridge loan
B
Which of the following is expressed as basis points in an adjustable rate mortgage. A. Index B. Margin C. Fully indexed rate D. Term
B.
The margin is expressed in basis points where 100 points = 1%.
A term mortgage is NOT: A. Non-amortizing B. Interest only C. Satisfied by a final lump sum payment D. Fully amortized
D.
A graduated payment mortgage:
A. Is for college graduates only
B. Has payments that start low and increase over time
C. Has payments that start high and decrease over time
D. Is only for borrowers with a minimum age of 62
B
Borrower’s equity equals A. Appraised value – loan balance B. Appraised value – down payment C. Loan balance + down payment D. Loan balance – down payment
B
Private Mortgage Insurance is required for:
A. FHA loans
B. VA loans
C. Jumbo loans
D. Conventional loans when there is less than a 20% down payment
D
What type of mortgage has a fixed interest rate and increasing payments? A. Adjustable rate mortgage B. Package mortgage C. Growing equity mortgage D. Wraparound mortgage
C
Which of the following is a common index used in ARMs: A. CD rate B. The London Inter-Bank Offered Rate C. The Chase Fluctuating Index D. The New York Times Index
B
Which has the superior lien position? A. Senior mortgage B. Junior mortgage C. Mortgages under $250,000 D. First signed mortgage
A
Which lien will most likely have the lowest lien position? A. Property tax B. Senior mortgage C. Junior mortgage D. IRS Tax Lien
D
Typical lien priority and order of payoff areas follows:
- Government expenses of sale.
- Delinquent property taxes.
- Special assessment liens.
- Federal estate tax lien.
- 1st mortgage (Senior Mortgage).
- 2nd mortgage (Junior Mortgage).
- 3rd mortgage (Junior Mortgage).
Unlimited possible number of additional junior mortgages, in order ofrecording time. - IRS Tax Liens and other creditors.
A partially amortized loan which consists of a lump sum payoff at theend of the term is: A. Balloon mortgage B. Package mortgage C. Chattel mortgage D. Buy-down mortgage
A
A loan in which interest is subsidized for a stated period of time is a: A. Buy-down mortgage B. Term mortgage C. Bridge loan D. Collateral loan
Answer A.
*** Which of the following CANNOT contribute money towards theborrower’s down payment: A. Employer B. Real estate agent C. Domestic partner D. Borrower’s relative
B
Those who can contribute on IPC include family relatives, employer, charity, domestic partners
The maximum FHA seller concession is: A. 3% B. 4% C. 6% D. 9%
C
LTV/CLTV Greater than 90% = 3%, LTV/CLTV = 75-90% = 6%, LTV/CLTV = 75% or less= 9%
FHA = 6%
VA = 4%
RHS = No Max
What is the minimum down payment usually required for non-owner occupied rental properties? A. 5% B. 10% C. 15% D. 20%
D
Because non-owner occupied rental properties are considered riskier thanowner-occupied ones, lenders will usually charge a higher interest rate and a larger down payment (usually a minimum of 20%).
Borrowers must be notified of an ARM rate change how many months before the initial reset? A. 1 B. 3 C. 6 D. 9
C
Borrowers must be notified of an ARM rate change six months before theinitial reset.
