FINANCE FINAL 2 Flashcards
The law that prohibits discrimination in the lending process is
a. the Civil Rights act of 1866
b. the ECOA
c. the Ohio Civil Rights Law
d. Title Vill
b. the ECOA
The best loan for a buyer to obtain for a single-family home in need of repairs is
a. the FHA Streamlined 203(k) loan
b. Section 234(c) loan
c. the standard FHA Section 203(b) loan
d. a VA guaranteed loan
a. the FHA Streamlined 203(k) loan
A mortgage broker’s basic source of income is derived from
a. charges for escrow fees for closing a loan
b. charges for service fees for collecting loan payments
c. loan origination fees charged to the borrower
d. loan origination fees charged to the lender
c. loan origination fees charged to the borrower
Which statement regarding a VA loan is TRUE
a. all closing costs can be financed
b. all prepaid escrows can be financed
c. the funding fee can be financed
d. the VA limits the purchase price for a house
c. the funding fee can be financed
In regard to a mortgage loan, the borrower is referred to as the
a. mortgagee
b. mortgagor
c. trustee
d, vendor
b. mortgagor
The interest rates charged for the FHA and VA loans are established by
a. the FHA and/or VA
b. Ginnie Mae
c. HUD
d. the market
d. the market
If the borrower obtains a conventional loan and makes a 20% down payment
a. the homeowners insurance is not required
b. the loan will be insured by a gov’t entity
c. private mortgage insurance is not required
d. private mortgage insurance is required
c. private mortgage insurance is not required
When a mortgage loan is paid off over a shorter term, the major advantage is a reduction in the
a. amount of each monthly payment
b. number of payments over that which is stated in the note
c. total interest costs
d. total principal amount
c. total interest costs
ECOA refers to
a. Economic Concern Overview Act
b. Environmental Concern Overview Act
c. Equal Community Opportunity Act
d. Equal Credit Opportunity Act
d. Equal Credit Opportunity Act
A loan that includes a fixed rate period followed by an adjustable rate period is known as a
a. hybrid loan
b. interest only loan
c. piggbyback loan
d. subprime loan
a. hybrid loan
For an FHA loan, a borrower CANNOT
a. buy a rental property
b. have the seller pay their closing costs
c. pay their own closing costs and prepaids
d. receive a gift for the down payment
a. buy a rental property
The FHA is administered by
a. Fannie Mae
b. the FDIC
c. Freddie Mac
d. HUD
d. HUD
When qualifying for a residential mortgage loan , an applicant’s liabilities are most likely to be calculated as
a. minimum monthly payment amounts
b. a percentage of cash required
c. a percentage of the property value
d. a ratio against total assets
a. minimum monthly payment amounts
The main characteristic of a shorter term loan is the
a. loan is paid off sooner and less equity is built up
b. loan is paid off sooner and less principal and interest must be paid
c. loan is paid off sooner and less principal is required to be paid
d. payments are higher
d. payments are higher
which is a voluntary lien
a. assessments
b. mechanic’s lien
c. mortgage
d. property taxes
c. mortgage
What is the minimum down payment for a VA loan on a $75000 home
a. $750
b. $1,500
c. $2.250
d. There is no minimum requirement for qualified eligible veterans
d. There is no minimum requirement for qualified eligible veterans
Funding of a construction loan is usually made
a. after all construction has been completed and approved by the lender
b. after the time for filing liens has expired
c. in full at the time when the not and the mortgage are signed
d. periodically as the house is constructed
d. periodically as the house is constructed
What is the minimum down payment (cash investment) contribution for an FHA loan on a $170,000 home
a. $1,700
b. $5,950
c. $8,500
d. there is no minimum requirement
b. $5,950
Which is NOT an advantage of an FHA loan
a. borrowers can use secondary financing for the minimum down payment
b. higher property standards
c. less borrower out of pocket cash up front
d. less stringent qualifying standards
a. borrowers can use secondary financing for the minimum down payment
For a lower income buyer with higher debt ratios the best loan choice would most likely be a
a. conventional loan
b. FHA loan
c. REIT
d. VA loan
b. FHA loan
To be eligible for an FHA loan one must
a. be a first time homebuyer
b. be a US citizen, permanent resident, or nonpermanent resident with a work visa
c. buy a home in a designated target area
d. meet the FHA’s income requirements
b. be a US citizen, permanent resident, or nonpermanent resident with a work visa
To be eligible for a VA loan, a veteran must
a. be a combat veteran
b. be a relative of a veteran
c. get a Certificate of Reasonable Value
d. meet the VA’s eligibility requirements
d. meet the VA’s eligibility requirements
The income housing expense and total debt service ratios for traditional 10% and 20% down conventional loans normally are
a. 28% and 36%
b. 28% and 41%
c. 29% and 36%
d. 29% and 41%
a. 28% and 36%
What loan will NOT have a balloon payment due at the end of the loan term (the termination date, stop date, or due date)
a. $90,000 loan at 8% interest amortized over 20 years
b. $90,000 loan at 8% interest amortized over 30 years, due in 10 years
c. $90,000 loan at 8% interest with interest only payments due in 10 years
d. $90,000 loan with variable interest rate of 8% plus CMT index due in 10 years
a. $90,000 loan at 8% interest amortized over 20 years
The term used when a loan balance grows due to deferred interest is
a. disintermediation
b. hypothecation
c. interest only
d. negative amortization
d. negative amortization
Broad forces influencing housing cycles are
a. environment, asbestos, lead paint, and radon gas
b. Federal Reserve, Treasury, President, and Congress
c. physical, economic, governmental, and social
d. reserve requirements, discount rates, open market operations, and moral suasion
c. physical, economic, governmental, and social
The Federal National Mortgage Association is also known as
a. Fannie Mae
b. Freddie Mac
c. Ginnie Mac
d. Ginnie Mae
a. Fannie Mae
When the interest rate is much lower initially in order to get a buyer to use a particular loan program, then jumps to a higher rate at the end of a specified period , this is said to be a
a. permanent buydown
b. prime rate
c. teaser rate
d. usury rate
c. teaser rate
the Federal Gov’t influences money supply with
a. buying and selling stock
b. direct and indirect policy
c. fiscal and monetary policy
d. physical and monetary policy
c. fiscal and monetary policy
A person my be turned down for a mortgage loan if
a. he has poor credit and income too low to qualify
b. he is a member of a minority group or other protected class
c. he is too old
d. his income is too high to qualify
a. he has poor credit and income too low to qualify
The one promising to pay the money in a promissory note is known as the
a. holder
b. holder in due course
c. maker
d. payee
c. maker
PMI covers the risk of
a. the death of the borrower
b. a default on the loan repayment
c. a failure of the loan service agent to service the loan properly
d. a loss in value of the property serving as collateral
b. a default on the loan repayment
A debtor may redeem property from the foreclosure process up until the __ takes place
a. appraisal or advertising
b. confirmation of sale
c. foreclosure
d. A debtor cannot redeem property
b. confirmation of sale
if a buyer purchases a $100,000 home and gets an $80,000 mortgage loan at an interest rate of 6% how much are 4 points
a. $320
b. $3,200
c. $4,000
d. $32,000
b. $3,200
On an ARM the margin is the difference between the
a. APR value and the cost of funds index
b. home value and the amount borrowed
c. index value and the interest rate charged
d. qualifying ratio and highest ratio allowed
c. index value and the interest rate charged
When determining whether income is durable and stable and can be used in qualifying a person for a mortgage loan a factor the underwriter will NOT consider is
a. child support payments that will continue for less than three years
b. stability in the income or payments
c. a two-year history of employment at a job (or in the same field)
d. a verification of employment and income
a. child support payments that will continue for less than three years
The FHA
a. insures mortgage lenders against default
b. makes residential loans
c. must follow rules of the Federal Reserve
d. require a prepayment penalty
a. insures mortgage lenders against default
the maximum allowable mortgage for an FHA loan
a. depends on the interest rate
b. is $108,750
c. is set by the lender
d. varies by county
d. varies by county
For a conventional mortgage loan, who makes the final decision on approval or denial
a. Fannie Mae
b. the FHA
c. loan processor
d. underwriter
d. underwriter
Which is NOT a benefit of a VA loan
a. loans are assumable
b. loans are available for homes and business
c. loans are available with no money down
d. most loans are fixed rate amortized loans
b. loans are available for homes and business
The Dept. of Veteran Affairs (VA)
a. guarantees lenders against default
b. makes residential loans
c. loans are available with no money down
d. requires a prepayment penalty
a. guarantees lenders against default
On a VA loan, who makes the final decision on the approval or denial of a loan
a. the FHA and the underwriter
b. Ginnie Mae and the secondary market
c. HUD and the loan officer
d. the VA and the underwriter
d. the VA and the underwriter
Three main secondary market sources are
a. Fannie Mae, Freddie Mac. and Ginnie Mae
b. Federal Reserve, S&L’s, and Fannie Mae
c. the FHA, the VA, and conventional
d. REIT, federal gov’t, and insurance companies
a. Fannie Mae, Freddie Mac. and Ginnie Mae
Conventional loans follow the underwriting guidelines of
a. Fannie Mae
b. the FHA
c. Freddie Mac
d. both a and c
d. both a and c
A seller takes back a second mortgage for $12,000 at 10% interest. the note calls for monthly interest only payments for five years, then a balloon. What is the first payment amount
a. $100
b. $1,000
c. $1,200
d. $12,000
a. $100
A lender gives Jenny a $15,000 second mortage at 9.5% interest. Payments are interest only for 10 years. what balloon payment will be due
a. $150
b. $1,500
c. $15,000
d. there will not be any balloon payment due
c. $15,000
Regulation Z applies to
a. any real estate purchase transactions
b. business loans with collateral
c. commercial real estate loans only
d. real estate credit transactions for personal use
d. real estate credit transactions for personal use
RESPA applies to all
a. business loans with collateral
b. commercial real estate loans only
c. real estate credit transactions for one to four dwelling units
d. real estate purchase transactions
c. real estate credit transactions for one to four dwelling units
which is NOT a trigger statement in regard to advertising under the TILA
a. “20% down”
b. “no down payment”
c. “only 360 monthly payments”
d. “pay only $700 per month”
b. “no down payment”
Which is NOT covered by RESPA laws
a. buyer will get a goo faith estimate of closing costs
b. buyer will get a closing disclosure at closing
c. lender may not discriminate based on source of income
d. no kickbacks allowed
c. lender may not discriminate based on source of income
