FINANCE CHP 6 Flashcards
The Jones family is buying a home $105,000 and it appraised for $102,000 On an $80,000 loan, six points is equal to
a. $4800
b. $4896
c. $6120
d. $6300
a. $4800
If the sale price of a home is $120,000, it appraises for $122,000, and the buyer takes out a loan for $96,000, the discount points charged by the lender are computed on
a. $96,000
b. $114,000
c. $120,000
d. $122,000
a. $96,000
Each of these would be considered a typical “nontraditional financing program” EXCEPT
a. adjustable rate mortgages
b. permanent buydowns
c. temporary buydowns
d. fully amortized mortgages
d. fully amortized mortgages
A permanent buydown plan can reduce the borrower’s payments
a. early in the loan only, but will require a balloon payment at the end of the term
b. for the entire life of the loan
c. for the entire life of the loan, but with an automatic prepayment penalty
d. through gradual payment decreases throughout the life of the loan
b. for the entire life of the loan
Which is NOT an advantage of a permanent buydown for a borrower
a. easier qualifying standards
b. lower monthly payments
c. the possibility of qualifying for a larger loan
d. lower down payment
d. lower down payment
Adjustable rate mortgages do NOT
a. allow the lender to adjust the interest rate in accordance with a chosen index at specific intervals
b. may cause mortgage payments to increase or decrease over time
c. pass part of the risk of interest rate fluctuations from the lender to the buyer
d. generally have a higher initial interest rate than a fixed-rate loan
d. generally have a higher initial interest rate than a fixed-rate loan
There may be a difference in interest rates among lenders who use the same index primarily because of the
a. commission paid to real estate agents
b. lender’s stock value
c. loan balance
d. profit and/or the administrative expenses of the lender
d. profit and/or the administrative expenses of the lender
The margin is the difference between the
a. APR and the cost-of-funds index (COFI)
b. index value and the interest rate charged to the borrower
c. value of the home and the amount borrowed
d. initial interest rate and the current interest rate
b. index value and the interest rate charged to the borrower
Which is NOT an element of an ARM
a. index
b. margin
c. positive amortization cap
d. rate
c. positive amortization cap
Negative amortization can occur in each of the circumstances EXCEPT when
a. interest rate adjustments occur more frequently than mortgage payment adjustments
b. the interest rate rises but payments are locked at a low amount due to payment caps
c. the loan balance grows from deferred interest
d. the borrower’s temporary buydown expires and the interest rate rises
d. the borrower’s temporary buydown expires and the interest rate rises
A typical hybrid arm loan might also be called a(n)
a. 7/1 ARM
b. option ARM
c. piggyback loan
d. VA loans
a. 7/1 ARM
In Ohio, to learn more about first-time homebuyer loans, you should check with the
a. Federal Reserve Bank
b. Home Loan Bank Board
c. Ohio Housing Finance Agency
d. Department of Veterans Affairs
c. Ohio Housing Finance Agency
Which statement about a reverse mortgage is TRUE
a. The borrower must be over age 62
b. The borrower may receive only a monthly payment
c. The borrower must be able to make a 3.5% down payment
d. The borrower must own a home with a large outstanding mortgage
a. the borrower must be over age 62
Bob, the buyer, takes over Sally’s the seller, mortgage. Bob is now personally liable for the debt and agrees to pay the balance of the purchase price to Sally under a contract. Bob and Sally now have a(n)
a. assumption and release
b. encumbered property cash-out
c. land contract to an existing mortgage
d. land contract with assumption of an existing mortgage
d. the land contract with assumption of an existing mortgage
Which statement about a lease/option agreement is FALSE
a. it allows prospective buyers to clean up their credit score before applying for a loan
b. it could result in no sale and, therefore, no commission
c. it requires only a minimal cash investment from the tenant/prospective buyer
d. It obligates the tenant/prospective buyer to purchase the property within a specified timeframe
d. it obligates the tenant/prospective buyer to purchase the property within a specified timeframe
