Practice Exam 1 Flashcards
A discount point is BEST described as a charge the borrower pays to
a. A lender to decrease the
interest rate on the
mortgage loan
b. A mortgage broker at the
time of application to
obtain
a favorable rate
c..The seller as part of the
closing costs of a loan
d. A lender to ensure against
foreclosure
a. A lender to decrease the
interest rate on the
mortgage loan
A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000. in option money to be credited at closing on a property with a sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the don payment at closing?
a. $32,000
b. $27,000
c. $30,000
d, $25,000
d, $25,000
If an applicant works 40 hours a week and is paid $13.52 per hour, what is the applicants monthly income?
a. $2,136.20
b. $2,343.47
c. .$2,379.52
d. $2,487.68
b. $2,343.47
Hourly x hours worked during week x weeks in a year (52) / 12 months
The requirements for private mortgage insurance is generally discontinued when the loan -to-value ratio falls below.
a. 20%
b. 50%
c..80%
d, 90%
c..80%
Which of the following documents itemizes all settlements costs including lender charges?
a. Agreement of Sale
b. HUD-1/Closing Disclosure
c..Form 1003
d, Forbearance agreement
b. HUD-1/Closing Disclosure
According to the Truth-in-Lending Act (TiLA), the term refinance applies to:
a. A change in payment
schedule
b. A reduction in annual
percentage rate
c..the renewal of a single
payment obligation with no
change in the original
terms
d, The satisfaction of an
existing obligation and its
replacement by a new
obligation
d, The satisfaction of an
existing obligation and its
replacement by a new
obligation
What does a loan originator use to determine the estimated value of a property based on an analytical comparison to similar property sales?
a. An appraisal
b. A market survey
c..An area survey
d, A cost-benefit analysis
a. An appraisal
Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)?
a. E-mail
b. Mailed letter
c. Telephone
d, Faxed letter
c. Telephone
The term “20 basis points” expressed as a percentage is
a. 0.02%
b. 0.20%
c..2.00%
d, 20.00%
b. 0.20%
According to the Truth-in-Lending Act (TILA), which of the following fees is EXCLUDED from the calculation of the annual percentage rate?
a. Hazard insurance
b. Wire transfer
c..Prepaid interest
d, Mortgage insurance
premiums
a. Hazard insurance
FHA loans are:
a. Partially guaranteed
b. 100% insured
c. Exempt
d, Entitled
b. 100% insured
The late fee for a conventional loan is:
a. 3% of principle and interest
b. 4% of principle and interest
c. 5% of principle and interest
d, 10% of principle and interest
c. 5% of principle and interest
A funding fee is required for a:
a. FHA loan
b. VA loan
c. Jumbo loan
d, Conventional loan
b. VA loan
A Mortgage Insurance Premium is required on:
a. FHA loan
b. VA loan
c. Jumbo loan
d, Conventional loan
a. FHA loan
The Mortgagee is:
a. Borrower
b. Lender
c..Closing Agent
d, Mortgage broker
b. Lender
The borrower does NOT sign which document
a. Deed
b. HUD-1/Loan Disclosure
c..Mortgage
d, Note
a. Deed
Which document is usually NOT recorded?
a. Assignment of mortgage
b. Note
c..Deed
d, Mortgage
b. Note
A mortgage title insurance policy is NOT:
a. Based loan amount
b. Transferable
c..Optional
d, Required by the lender
c..Optional
Which parties sign the deed?
a. Grantor, Grantee and two
witnesses
b. Grantor and two witnesses
c. Grantee and two
witnesses
d, Grantee only
b. Grantor and two witnesses
When the mortgagor and the mortgagee title insurance policies are issued at the same time, this is known as:
a. Simultaneous issue
b. Concurrent issue
c. Subsequent issue
d, Dual issue
a. Simultaneous issue
A shrubbery is on example of an:
a. Encumbrance
b. Easement
c. Entitlement
d, Acceptable title
impediment
d, Acceptable title impediment
A loan on personal property only is known as:
a. Package mortgage
b. Chattel mortgage
c. Furnishing mortgage
d, Exotic mortgage
b. Chattel mortgage
Which of the following is not a characteristic of a Tenants in Common form of ownership
a. Equal shares
b. Buy at different times
c. Right of survivorship
d, Ability to share
c. Right of survivorship
PITI payments do NOT include which of the following:
a. Principal
b. Funding Fee
c. Hazard Insurance
d, Interest
b. Funding Fee
Who does Fannie Mae hold responsible for the quality of an appraisal?
a. Appraiser
b. Borrower
c. Mortgage
d, Lender
d, Lender
Which law is known as Regulation B?
a. Truth-in-Lending
b. Real Estate Settlement
Procedures Act
c. Equal Credit Opportunity
Act
d, Patriot Act
c. Equal Credit Opportunity
Act
which law prohibits discrimination by lenders?
a. Truth-in-Lending
b. Real Estate Settlement
Procedures Act
c. Equal Credit Opportunity
Act
d, Patriot Act
c. Equal Credit Opportunity
Act
A property sold for $200,000 and was appraised at 180,000. The borrower received a loan for 150,000. What is the loan-to-value
a. 75%
b. 83.3%
c. 90%
d, 92.4%
b. 83.3%
How many days does a lender have to send an adverse action notice?
a. 5
b. 10
c. 30
d, 60
c. 30
The GFE/Loan Estimate must be mailed or given to the borrower within how many days after receiving the signed application?
a. 3 business days
b. 7 business days
c. 10 business days
d, 30 business days
a. 3 business days
The enforcement of a lien is known as a:
a. Closing
b. Foreclosure
c. Warranty inspection
d, Police Action
b. Foreclosure
What minimum percentage of ownership is a related service requires a conflict of interest disclosure?
a. 5%
b. 10%
c. 25%
d, 50%
b. 10%
What minimum percentage of
ownership qualifies an individual as self-employed?
a. 5%
b. 10%
c. 25%
d, 50%
c. 25%
A salaried employee may have to produce which of the following documents to obtain a loan
a. 90 day pay stubs
b. 2 years W2s
c. Profit and Loss statement
d, Balance sheet
b. 2 years W2s
How many months must left on an automobile lease to include it as a debt?
a. 2 months
b. 5 months
c. 10 months
d, It is always included
d, It is always included
Which law defines the right of rescission?
a. Truth-in-Lending
b. Real Estate Settlement
Procedures Act
c. Equal Credit Opportunity
Act
d, Patriot Act
a. Truth-in-Lending
How long after the application date must social security payments continue to be received in order to count as income?
a. 3 months
b. 10 months
c. 2 years
d, 3 years
c. 2 years
Credit reports on new construction are good for how many days?
a. 90 days
b. 120 days
c. 180 days
d, 225 days
b. 120 days
Which clause in a mortgage allows a lender to increase the interest rate?
a. Defeasance
b. Escalation
c. Acceleration
d, Exculpatory
b. Escalation
Which clause in a mortgage prevents the lender from foreclosing unless the borrower is in default?
a. Defeasance
b. Escalation
c. Acceleration
d, Exculpatory
a. Defeasance
The lender has how may days to send the Satisfaction of Mortgage letter to the borrower once the loan balance is paid?
a. 30 days
b. 60 days
c. 90 days
d, 120 days
b. 60 days
Which of the following increases cap rate?
a. Lower purchase price
b. Increase purchase price
c. Decrease cash flow
d, Increase interest rate
a. Lower purchase price
Who should applicants contact if they have questions about their credit score or credit information?
a. Credit reporting agency
b. Lender
c. Mortgage broker
d, Attorney
a. Credit reporting agency
Who is responsible for maintaining the national flood maps?
a. HUD
b. FEMA
c. FHA
d, VA
b. FEMA
THe VA appraisal is know as a:
a. CRV
b. Veteran appraisal report
c. Fannie Mae 1025
d, AVA
a. CRV
Certificate of Reasonable Value
Fannie Mae’s automated underwriting system is known as:
a. Fannie Mannie
b. Software helper
c. Desktop Underwriter
d, Loan Prospector
c. Desktop Underwriter
There are 10 days left in the month. The purchase price is $150,000, the loan amount is $100,000 and the interest rate is 6%. How much mortgage interest must the borrower pay at closing?
a. $164.38
b. $250.00
c. $440.20
d, $2,739.73
a. $164.38
Loan amount x interest rate/number days in year number of days left in month
100,000. x 0.06/365x10 =164.38
Private Mortgage Insurance is automatically canceled when the loan to value reaches what level?
a. 55%
b. 70%
c. 78%
d, 80%
c. 78%
Which types of loans are meant for rural areas?
a. VA
b. FHA
c. USDA
d, RAL
c. USDA
The purchase price of a home is $200,000 and the loan amount is $180,000. The borrower pays 6% interest with 1 discount point and 1 origination point. What is the cost of the points
a. $1,800
b. $2,000
c. $3,600
d, $4,000
c. $3,600
Discount points x loan amount = Point value
$180,000. x .02 = $3600.00
If the Gross Rent Multiplier (GRM) decreases, the property value:
a. Increases
b. Decreases
c. Does not change
d, Can increase or decrease
b. Decreases
What is the maximum amount of VA seller concessions
a. 2%
b. 3%
c. 4%
d, 5%
c. 4%
When a property increases in value for any reason this is known as:
a. Acceleration
b. Appreciation
c. Accumulation
d, Acclimation
b. Appreciation
Which appraisal approach is most suitable for an office building
a. Sales comparison
approach
b. Cost approach
c. Income capitalization
approach
d, Tenant collection approach
c. Income capitalization
approach
Which of the following is incorrect regarding an adjustable rate mortgage?
a. The index is fixed
b. The margin is fixed
c. There are rate caps on both
the adjustment period and
the life of the loan
d. LIBOR is a typical index
used
a. The index is fixed
Which of the following is NOT a fully amortized loan?
a. Term mortgage
b. Fixed-rate mortgage
c. Adjustable-rate mortgage
d, Bi-weekly mortgage
a. Term mortgage
Which of the following is a negatively amortizing loan?
a. Reverse mortgage
b. Balloon mortgage
c. Term mortgage
d, Wrap mortgage
a. Reverse mortgage
Fannie Mae does NOT require:
a. 6 months of bank
statements
b. Verifiable funds
c. 2 years of addresses
d, Stable 2 year work history
a. 6 months of bank
statements
A note is:
a. Document that coveys title
b. Pledge of the property as
collateral for the loan
c. Borrower’s IOU
d, Document that transfers
contractual rights to
another investor
c. Borrower’s IOU
A mortgage is the:
a. Document that conveys
title
b. Pledge of the property as
collateral for the loan
c. Borrower's IOU
d, Document that transfers
contractual rights to
another investor
b. Pledge of the property as
collateral for the loan
An adjustable-rate mortgage can adjust after 2 years with an adjustment cap of 3% per period and a lifetime cap of 7%. The starting interest rate is 4%. What is the maximum interest that can be charged at the time of the first adjustment
a. 5%
b. 7%
c. 10%
d, 11%
b. 7%
What is the FHA minimum down payment
a. $0
b. 3.5%
c. 5%
d, 10%
b. 3.5%
Which law is known as regulation C?
a. Real Estate Settlement
Procedures Act
b. Truth-in-Lending Act
c. Equal Credit Opportunity
Act
d. Home Mortgage
Disclosure Act
d, Home Mortgage Disclosure
Act
What is the minimum down payment for a USDA loan?
a. $0
b. 3.5%
c. 5%
d. 10%
a. $0
How many hours of continuing education are minimally required?
a. 8 hours every year
b. 14 hours every years
c. 14 hours every 2 years
d, 20 hours every 2 years
a. 8 hours every year
Who is responsible for completing the HUD-1/Loan Disclosure
a. The borrower
b. The closing agent
c. Loan originator
d, The Grantor
b. The closing agent
A mortgagor ‘s title insurance policy is:
a. Transferable
b. Required
c. Based on purchase price
d, Never used
b. Required
The assignee of a mortgage and note is participating in the
a. Primary lending market
b. Capital market
c. Secondary mortgage
market
d, Options market
c. Secondary mortgage
market
VA loans are:
a. Partially guaranteed
b. Insured
c. Exempt
d, Entitled
a. Partially guaranteed
The late fee for a VA loan is
a. 3% of principle and interest
b. 4% of principle and interest
c. 5% of principle and interest
d, 10% of principle and interest
b. 4% of principle and interest
The purchase price of a home is $375,000 and the appraisal price is $350,000. If the first mortgage is in the amount of $200,000 and the second mortgage is $60,000. What is the combined loan-to-value ratio
a. 74.3%
b. 80.0%
c. 86.7%
d, 92.3%
a. 74.3%
The purchase price of a home is $375,000 and the buyer will assume a $175,000 first mortgage. The loan-to-value cannot exceed 85%. What is the maximum amount of the new second mortgage
a. $130,000
b. $143,750
c.$162,030
d, $171,260
b. $143,750
What clause in a mortgage allows the lender to call the entire loan balance due?
a. Defeasance
b. Escalation
c. Acceleration
d, Exculpatory
c. Acceleration
Which clause in a mortgage prevents the lender from recovering additional assets from the mortgagor if there is a shortfall in the foreclosure proceeds?
a. Forbearance
b. Escalation
c. Acceleration
d. Exculpatory
d. Exculpatory
What term describes the intentional delay of action on the part of the lender upon a borrower’s default?
a. Forbearance
b. Escalation
c. Acceleration
d. Exculpatory
a. Forbearance
Which of the following does not appear in a lock-in-agreement?
a. Expiration date
b. APR
c. Lock-in-fee
d, Interest Rate
b. APR
Freddie Mac was originally known as:
a. Federal Home loan
Mortgage Corporation
b. Federal National Mortgage
Association
c. Fair Discount Interest
Rates
d, Free Certificate of Deposits
a. Federal Home loan
Mortgage Corporation
Fannie Mae allows what amount of fees to be charged to a credit card?
a. 1% of the loan amount plus
$500 for the appraisal and
credit report
b. 2% of the loan amount plus
$500 for the appraisal and
credit report
c. 3% of the loan amount plus
$500 for the appraisal and
credit report
d, 4% of the loan amount plus
$500 for the appraisal and
credit report
a. 1% of the loan amount plus
$500 for the appraisal and
credit report
Loan Prospector can NOT be used for which type of loan
a. Conventional
b. VA
c. FHA
d, Commercial
d. Commercial
A five bedroom, one bathroom house is an example of
a. Appreciation
b. Functional obsolescence
c. Economic obsolescence
d. Residential allowance
b. Functional obsolescence
Which of the following is NOT a benefit of a FHA loan?
a. Favorable interest rates
b. Low down payment
c. No monthly mortgage
insurance
d. Assumable
c. No monthly mortgage
insurance
A loan closes on May 14. When is the first mortgage payment due?
a. May 15
b. June 01
c. Jun 15
d. July 01
d. July 01
Alimony payments must continue to be received for how long after the application date if they are to be included as income?
a. 10 months
b. 2 years
c. 3 years
d. 4 years
b. 2 years
Credit reports are good for how many days after they are pulled for qualifying purposes?
a. 60
b. 90
c. 120
d. 180
c. 120
When title is transferred and the buyer assumes no liability for the note, this type of transference is known as:
a. Free and clear
b. Subject to mortgage
c. Assumption
d. Novation
c. Subject to mortgage
Which of the follwoing is correct for an adjustable-rate mortgage?
a. index - margin = fully
indexed rate
b. Margin - index = fully
indexed rate
c. Index + Margin = fully
indexed rate
d. Index - margin = fully
indexed rate
c. Index + Margin = fully
indexed rate
The maximum term for a FHA loan is:
a. 15 years
b. 30 years
c. 40 years
d. 50 years
b. 30 years
Which of the following is not an involuntary lien?
a. IRS lien
b. Judgement lien
c. Mortgage lien
d. Mechanic’s lien
c. Mortgage lien
The most comprehensive form of ownership is:
a. Real Estate Investment
Trust
b. Fee simple absolute
c. Tenants in common
d. Joint tenancy
b. Fee simple absolute
Which is NOT a component of a valid contract
a. Agreement
b. Consideration
c. Two Witnesses
d. Competent parties
c. Two Witnesses
Which type of co-ownership permits the property to pass to an heir?
a. Collaboration
b. Tenants in common
c. Joint tenancy
d. Subordination
b. Tenants in Common
The economic concept which state that a knowledgeable buyer will pay no more for one property than they would pay for an equally desirable comparable property is:
a. Principle of Substitution
b. Principle of Highest and
Best Use
c. Principle of Market Value
d. Principle of Intelligent
Purchases
a. Principle of Substitution
Which law requires the interviewer to complete the Government Monitoring section on the 1003
a. Homeowner's Protection
Act
b. The Fair and Accurate
Credit Transaction Act
c. Truth-in-Lending
d. The Equal Credit
Opportunity Act
d. The Equal Credit
Opportunity Act
Which law entitles an applicant to a copy of his property appraisal report?
a. Homeowner's Protection
Act
b. The Fair and Accurate
Credit Transaction Act
c. Truth-in-Lending
d. The Equal Credit
Opportunity Act
c. Truth-in-Lending
Opportunity Act
Which law is also known as Regulation X
a. Truth-in-Lending
b. Real Estate Settlement
Procedures Act
c. Homeowner’s Protection
Act
d. The Equal Credit
Opportunity Act
b. Real Estate Settlement
Procedures Act
Which law protects an individual confidential information?
a. Truth-in-Lending
b. Real Estate Settlement
Procedures Act
c. Homeowner’s Protection
Act
d. Gramm-Leach-Bliley Act
d. Gramm-Leach-Bliley Act
Who Enforces RESPA violations
a. FTC
b. CFPB
c. FHA
d. FCC
b. CFPB
Which law requires that the Special Information booklet be given to borrowers?
a. Truth-in-Lending
b. Real Estate Settlement
Procedures Act
c. Homeowner’s Protection
Act
d. The Equal Credit
Opportunity Act
b. Real Estate Settlement
Procedures Act (RESPA)What is the fine for violating the Federal Do Not Call rules
a. $5,000
b. $11,000
c. $42,350
d. $60,000
c. $42,350
