FINANCE CH5

Question 1

The Federal Housing Administration (FHA)
a. allows for prepayment charges if the loan is paid off within five years
b makes residential loans
c. requires alienation clauses
d. requires MIP

Answer 1

d. requires MIP

Question 2

FHA programs are directed primarily at

a. investors looking to generate high -return government subsidized housing

b. low- to middle -income homebuyers

c. luxury homebuyers

d. middle-to high-income homebuyers buying second homes

Answer 2

b. low-to middle- income homebuyers

Question 3

The FHA does NOT offer programs to insure which type of loans ?
a. condominium purchase loans
b. loans to make repairs on a home purchase
c. reverse mortgages
d. cooperative purchase loans

Answer 3

d. cooperative purchase loans

Question 4

FHA interest rates are set by
a. federal regulations
b. the FHA
c. the market
d. negotiation between buyer and seller

Answer 4

c. the market

Question 5

The FHA requires mortgage insurance (MIP) when the
a. buyer cannot pay the required down payment in cash
b. LTV exceeds 80%
c. LTV exceeds 90%
d. All FHA loans must have MIP

Answer 5

d. All FHA loans must have MIP

Question 6

Which is NOT an advantage of FHA financing ?
a. less stringent qualifying standards
b. long- term loans
c. low down payments
d. no insurance premiums

Answer 6

d. no insurance premiums

Question 7

Maximum loan limits for FHA loans depend on the
a. amount of the buyer’s down payment
b. county in which the home is located in each state
c. median home prices in the community the property is located
d. type of dwelling one to four units

Answer 7

b. county in which the home is located in each state

Question 8

A loan guaranteed by the Department of Veterans Affairs (VA) requires a minimum down payment of
a. $0
b. at least 3% of the loan amount
c. 10% of the loan amount
d. it depends on the property type

Answer 8

a. $0

Question 9

VA loans are available for
a. apartment buildings
b. commercial buildings
c. multiple-family residences of five or more units
d. one -to four-unit owner-occupied residences

Answer 9

d. one- to four-unit owner-occupied residences

Question 10

The VA sets the maximum loan amount by looking at the
a. county the home is located in
b. NOV
c. current interest rates
d. type of dwelling (e.g., one to four units).

Answer 10

b. NOV

Question 11

Which is NOT a factor that determines the amount a qualified veteran can borrow?
a. financial qualifications of the veteran
b. veteran’s cash flow analysis for residual income
c. veteran’s previous use of the program and remaining eligibility
d. veteran’s branch of the military

Answer 11

d. veteran’s branch of the military

Question 12

Which is NOT a characteristic of a VA loan?
a. no credit check of an assuming veteran
b. no due on sale clause
c. no prepayment penalty
d. Veterans can buy investment property with zero down .

Answer 12

d. veterans can buy investment property with zero down

Question 13

Which condition is NOT required to release a veteran from liability when a buyer assumes his loan?
a. The buyer must give written assumption of liability
b. The buyer must be an acceptable credit risk approved by the lender
c. The loan must be current
d. The buyer must be an eligible veteran

Answer 13

d. the buyer must be an eligible veteran

Question 14

Full VA entitlement can be restored to a veteran
a. at no time- the program can be used only once
b. if a dishonorably discharged veteran assumes the loan
c. when half of the loan amount has been repaid
d. when a veteran sells his home and pays off the loan.

Answer 14

d. when a veteran sells his home and pays off the loan