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SAFE > Week 1 Final > Flashcards

Week 1 Final Flashcards

1
Q

A property that a borrower resides in less than half the year but does not collect rent is better known as what?

Investment Residence
Secondary Residence
Primary Residence
Income-Producing Residence

A

Secondary Residence

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2
Q

When a borrower elects to refinance by pulling money from their equity, this is known as?

Balance Shift Transaction
Equity Conversion Transaction
Rate & Term Transaction
Cash Out Transaction

A

Cash out transaction

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3
Q

What monies are kept in a borrower’s escrow account?

Property Taxes and Health Insurance
Property Taxes and Hazard Insurance
Homeowner’s Insurance and Income Taxes
Income Taxes and Life Insurance

A

Property Taxes and Hazard Insurance

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4
Q

Who in the loan origination process has the responsibility of providing a value of a piece of real estate?

Evaluator
Real Estate Agent
Processor
Appraiser

A

Appraiser

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5
Q

What benefit(s) would a borrower gain from obtaining an Adjustable Rate Mortgage?

Lower initial interest rate in comparison to a fixed rate mortgage
The interest rate would never change
Cheaper closing costs
The possibility that their payment could increase

A

Lower initial interest rate in comparison to a fixed rate mortgage

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6
Q

Why is the application one of the first things MLOs complete with the borrower?

It’s there to help lenders profile who they want to lend money to based on a borrower’s geographical location
It’s the borrower’s formal request for financing
It’s a list of every loan the client has ever had
It’s there to help lenders profile who they want to lend money to based on a borrower’s race, ethnicity and gender

A

It’s the borrower’s formal request for financing

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7
Q

After speaking with an MLO, it is determined that a client is approved for a $200,000 loan amount. Their have a purchase contract listed for $215,000. The appraised value of that property comes in at $210,000. What is their down payment amount if they are putting 10% down?

$180,000
$21,500
$21,000
$20,000

A

21,000

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8
Q

A legal document that conveys real property after a sale.

Title
Note
Purchase Contract
Deed

A

Deed

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9
Q

A borrower is looking to get qualified for a loan. They have a purchase contract for $290,000. The lender has approved them for 85% LTV. What’s the loan amount?

$85,000
$285,000
$43,500
$246,500

A

$246,500

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10
Q

Why do lenders review a borrower’s credit report?

To examine their credit score and previous payment history
To confirm the borrower’s social security number
To confirm the amount of credit available to the borrower
To ensure the borrower has at least 1 credit card or auto loan

A

To examine their credit score and previous payment history

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11
Q

The document that outlines the terms under which real estate is to be sold

Purchase Contract
Mortgage
Transfer Tax
Note

A

Purchase Contract

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12
Q

Why would a borrower want to obtain a fixed rate mortgage?

They don’t mind the fluctuating interest rate
They have long term goals and want a consistent P&I payment
They have short term goals and know that fixed loans have lower rates
They have long term goals and want a consistent PITI payment

A

They have long term goals and want a consistent P&I payment

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13
Q

Which option best describes the title process?

Determining open liens and relevant ownership on a piece of real estate
Determining who should hold the deed in the event of an emergency
Determining how the ownership will be conveyed
Determining the value of the real estate in question

A

Determining open liens and relevant ownership on a piece of real estate

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14
Q

Why do lenders often require a borrower to provide a down payment at closing?

It’s used to show sellers that the borrower is interested in purchasing real estate
It has no purpose other than it’s a tradition
It’s required on all loans
It’s used to reduce the risk of the lender

A

It’s used to reduce the risk of the lender

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15
Q

Why is the statement of no obligation included on the LE & CD?

To inform the borrower that they have 3 business days to decide if they want to back out of the loan
To inform the consumer that they do not have to proceed with the loan simply because they were provided with disclosures and details
To ensure that borrowers work with specific lenders
To let the borrower know that the lender does not have to proceed with the loan

A

To inform the consumer that they do not have to proceed with the loan simply because they were provided with disclosures and details

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16
Q

A borrower has received several blank documents and has been instructed by their MLO to sign them. What should the borrower do?

Decline to sign, as they do not have the necessary information to make a decision
Ask the MLO if this is standard practice for all lenders
Decline to sign until they know exactly what their interest rate will be
Sign the documents, the MLO will explain everything later

A

Decline to sign, as they do not have the necessary information to make a decision

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17
Q

Of the following, which would NOT be needed to pull a client’s credit report?

The client’s social security number
The client’s name
The client’s address
The client’s purpose for the loan

A

The client’s purpose for the loan

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18
Q

What is the difference between the LE and the CD?

The LE contains an estimate of costs while the CD contains the final costs of the transaction
The major difference is that the LE is more helpful than the CD
There is no difference in these documents
The LE contains final costs of the transaction while the CD contains the estimate of costs

A

The LE contains an estimate of costs while the CD contains the final costs of the transaction

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19
Q

This type of insurance will protect the collateral from damage such as fire.

Hazard Insurance
Title Insurance
Flood Insurance
Mortgage Insurance

A

Hazard Insurance

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20
Q

What is the purpose of the confirm receipt on both the LE and the CD?

To have the client sign in order to commit to the closing of the loan
To confirm that the MLO has explained the LE/CD to the client
To have the client sign off on their understanding of all costs associated with the loan
To have the client acknowledge that he/she has received the disclosures

A

To have the client acknowledge that he/she has received the disclosures

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21
Q

Which of the following is a potential issue the title company would detect?

The client’s income cannot be verified
There’s a tax lien on the property
The value of the property appraised for less than expected
The client’s 4506-T was not signed

A

There’s a tax lien on the property

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22
Q

Why would a borrower choose to obtain a HELOC?

So that they can increase their HCLTV
To deplete all of the equity in their home
To receive their money in a lump sum
To have money available to them as needed

A

To have money available to them as needed

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23
Q

If your client currently has a lien on their property for $210,000 and they think their home is worth $240,000, yet the appraisal reads $225,000, what is their loan to value?

7%
12%
88%
93%

A

93%

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24
Q

Why do we use the median credit score when qualifying a borrower?

Because we don’t want to only consider their lowest credit score
Because we don’t want to only consider their highest credit score
Because the median score is the most conservative of the 3 scores
Because it provides a more fair look at the borrower’s credit profile

A

Because it provides a more fair look at the borrower’s credit profile

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25
Q

The form a client fills out as part of their loan application process is also known as?

URAR
1004
URLA
4056-T

A

URLA

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26
Q

As an MLO, what would you call the amount of money your client needs to close their transaction?

Lender Funding
Reserves
Seller Concessions
Funds to Close

A

Funds to Close

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27
Q

Why was the CFPB created?

To regulate the financial industry and empower the informed choices of consumers
To protect lenders from unqualified borrowers
To protect mortgagees from predatory mortgagors
To ensure loans are being made to all applicants

A

To regulate the financial industry and empower the informed choices of consumers

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28
Q

This action solidifies the real estate transaction as being final and official.

Funding
Recording
Consummation
Closing

A

Recording

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29
Q

You are speaking with your client and they tell you they have been at their position for the past 4 years and they receive $3,300 bi-weekly. Upon receiving their pay stubs, you realize that they earn $3,250 bi-weekly. What is your client’s qualifying gross monthly income?

$7,150
$7,041.67
$6,600
$6,800

A

$7,041.67

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30
Q

A main responsibility for this person is approving or denying the loan file.

Lender
MLO
Underwriter
Processor

A

Underwriter

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31
Q

When attempting to pull credit, a borrower forgets their social security number. What should you do?

Let the borrower know that you will need their SSN in order to proceed to verify that they meet minimum qualifications
Continue on with the application, they will remember it eventually
Let the borrower know that in order to proceed, you will need their SSN along with a convenience fee
Report the borrower to the CFPB for attempting to commit fraud

A

Let the borrower know that you will need their SSN in order to proceed to verify that they meet minimum qualifications

32
Q

A borrower can potentially avoid paying mortgage insurance by doing which of the following?

Adding a co-signer to the loan
Increasing their credit score
Buying discount points
Providing a larger down payment

A

Providing a larger down payment

33
Q

A client’s credit profile can also be referred to as?

Cause
Consideration
Capital
Character

A

Character

34
Q

A borrower calls in and wants the lowest rate available. In order to obtain the desired rate, the borrower will have to pay discount points. Which of these best describes the function of a discount point?

Fee paid to obtain a lower note rate
Fee paid to the MLO for originating the loan
Fee paid toward building equity in the home
Fee paid to obtain a rate above par

A

Fee paid to obtain a lower note rate

35
Q

What is the full name of the application?

Uniform Residential Loan Application
Uniform Request for Loan Application
Uniform Residential Loan Agreement
Uniform Residential Loan Addendum

A

Uniform Residential Loan Application

36
Q

All except which of the following are explained in the Home Loan Toolkit?

Negative Amortization
Prepayment Penalties
Points
Rate Lock

A

Negative Amortization

37
Q

Why is it important to have a clear title?

To make sure we contact all previous owners
None of the above
To make sure that there are no encumbrances
To make sure an appraisal can be done

A

To make sure that there are no encumbrances

38
Q

A processor will call to verify a borrower’s employment during processing. Why would they do this?

To find out if the borrower has any remaining PTO left
To confirm if the borrower has been reprimanded in the past 90 days based on their performance
To make sure the borrower has enough money for closing
To ensure the borrower has stable employment

A

To ensure the borrower has stable employment

39
Q

Why do we use gross monthly income instead of a borrower’s net income?

GMI is what the borrower actually takes home
GMI is the most fair way to qualify since net income will deduct any fees paid for benefits, retirement, taxes, etc.
Net income is what is used to qualify all borrowers, not GMI
Lenders want to inflate a borrower’s income in order to originate more loans

A

GMI is the most fair way to qualify since net income will deduct any fees paid for benefits, retirement, taxes, etc.

40
Q

What is the purpose of the CFPB’s Home Loan Toolkit?

To educate the borrower about requirements of PMI
To educate the borrower on what to expect in a refinance transaction
To educate the borrower about the home buying process and what to expect
To educate the borrower about their credit score

A

To educate the borrower about the home buying process and what to expect

41
Q

All of the following are documents typically requested by the processor, EXCEPT?

Pay Stubs
4506-T
IRS-F
W2’s

A

IRS-F

42
Q

The borrower’s Debt to Income ratio is used to assess what part of the borrower’s profile?

Capacity
Capital
Collateral
Credit

A

Capacity

43
Q

A client has a lien on the subject property for $38,000 and a car loan for $12,000. The appraisal finds their home is worth $110,000. What is their CLTV?

35%
55%
65%
45%

A

35%

44
Q

Which of these scenarios would allow a borrower the right to rescind?

A borrower moved into a new home and closed within the past 2 business days
A borrower moved into a new home 1 week ago and no longer wants the home or the mortgage
A borrower will be closing on a refinance on a secondary residence within the next 3 business days
A borrower closed on a refinance on their primary residence 2 business days ago

A

A borrower closed on a refinance on their primary residence 2 business days ago

45
Q

All of the following are credit reporting agencies except which?

Equifacts
Equifax
Experian
Transunion

A

Equifacts

46
Q

What is the primary role of the mortgage servicer?

To search the title for liens
To collect and process PITI payments
To originate the mortgage
To insure the lender in case of borrower default

A

To collect and process PITI payments

47
Q

Which of the following is a settlement service provider?

All of the above
Appraiser
Title Insurer
Pest Inspector

A

All of the above

48
Q

Which of the following would NOT be included in your client’s back-end calculation?

Homeowner’s Association Dues
Personal Loans made through a bank
Student loans
Cable Bill

A

Cable Bill

49
Q

Why does the Home Loan Toolkit want a borrower to understand affordability?

So that the mortgagee is not overwhelmed with their financial obligations
So that borrowers are not overwhelmed with taking care of their financial obligations
So that borrowers can make the decision if they are approved for the loan or not
So that the lender can decide what the borrower can afford

A

So that borrowers are not overwhelmed with taking care of their financial obligations

50
Q

Why is it important for borrowers to receive a loan estimate?

So that borrowers can understand the final costs of their loan transaction
So that the borrowers can compare LE’s from different lenders and pick which loan option is best for them
So that borrowers don’t get confused when looking at the cost of services
So that lenders can make sure they are giving the client multiple options

A

So that the borrowers can compare LE’s from different lenders and pick which loan option is best for them

51
Q

A client is going through the qualification process and has just been pre-qualified for a loan with a down payment of 5%. If the value of the home is $360,000, how much will the client’s loan amount be?

$360,000
$342,000
$18,000
$36,000

A

$342,000

52
Q

All of the following would normally work on behalf of the lender, EXCEPT?

Loan Originator
Processor
Closing Agent
Underwriter

A

Closing Agent

53
Q

Why would a servicer explore loss mitigation options for a borrower?

To make sure that the escrow account is handled properly
To ensure that the borrower defaults on their loan
To attempt to avoid foreclosure
To prevent any loss impacting the mortgage loan originator

A

To attempt to avoid foreclosure

54
Q

To calculate your client’s front-end debt ratio, you would use which of the following formulas?

Total debts divided by gross monthly income
Total debts divided by net monthly income
Housing debts divided by net monthly income
Housing debts divided by gross monthly income

A

Housing debts divided by gross monthly income

55
Q

This document pledges the collateral as security for repayment of a debt

Note
Title
Security Instrument
Purchase Contract

A

Security Instrument

56
Q

Jose currently works as an author and earns $5,000 monthly. He has a student loan payment of $432, a Discover card payment of $67, cell phone bill for $110, and a car payment of $325. Based on the Home Loan Toolkit, are Jose’s debts considered affordable?

No, he has too much debt at this time
Yes, only 10% of his income is tied to debt
Yes, he can easily afford an additional payment of $3,000 monthly
Yes, his debts are affordable

A

Yes, his debts are affordable

57
Q

This is when the mortgagor has paid their debt in full to the mortgagee, and as a result, the mortgagee releases their lien and the mortgagor obtains a clear title. The preceding definition is best defined as what?

Foreclosure
Conveyance
Reconveyance
Encumbrance

A

Reconveyance

58
Q

Why would a balloon payment be considered a risky feature for a loan?

It could cause a borrower to be unable to afford their monthly housing payment
It would require the borrower to pay additional loan costs
It could result in the borrower’s payment increasing by up to $50 each month
It would allow a lender to foreclose on the borrower’s home

A

It could cause a borrower to be unable to afford their monthly housing payment

59
Q

Why would a lender charge a prepayment penalty to a borrower?

To punish borrowers for late payments
To help more clients qualify for down payment assistance
To compensate for interest that the lender will not make off of the loan
To deter borrowers from paying off their loans

A

To compensate for interest that the lender will not make off of the loan

60
Q

What does a borrower’s monthly mortgage payment consist of?

Principal, Interest, Taxes, Insurance
Principal, Interest, Income Taxes, Insurance
Principal, Taxes, Insurance
Principal, Interest, Title, Insurance

A

Principal, Interest, Taxes, Insurance

61
Q

Who fills out or assists in filling out the URLA?

Borrower
Appraiser
Mortgage Loan Originator
The MLO and the Borrower

A

The MLO and the Borrower

62
Q

Who has the responsibility of qualifying a client for loan options?

Abstractor
MLO
Processor
Underwriter

A

MLO

63
Q

This person has the responsibility of bringing necessary parties of the real estate transaction together to execute documentation and finalize the loan process.

Processor
MLO
Settlement Agent
Underwriter

A

Settlement Agent

64
Q

A client is purchasing a home and their MLO has just informed them they’ll need to bring $28,500 to close for their down payment. If the negotiated sales contract is for $190,000, what percentage is the down payment?

20%
15%
12%
18%

A

15%

65
Q

In which of the following scenarios would you recommend a fixed rate to a borrower?

The borrower has a fixed income and wants the loan with the lower rates
The borrower has predictable income and wants a payment that won’t fluctuate
The borrower intends to flip the home for a profit within the next 3-6 months
The borrower has short term goals and does not plan to be in the home long term

A

The borrower has predictable income and wants a payment that won’t fluctuate

66
Q

What happens at closing?

All the parties to the transaction execute documentation
The loan is approved
The borrower fills out the application
The documents are recorded

A

All the parties to the transaction execute documentation

67
Q

A mortgagee electing to cover some or all of the borrower’s closing costs in return for the borrower taking a higher interest rate is known as?

A Point
A Lender Rebate
A Lender Buydown
A Seller Concession

A

A Lender Rebate

68
Q

Your client is currently paying $800/month for principal and interest, $230/month for their taxes and insurance escrow, $210/month for a car payment, $120/month for a credit card, and $100/month for their cell phone bill. If your client makes $2700 semi-monthly, what is their total debt ratio?

23%
25%
27%
24%

A

25%

69
Q

A client recently paid off their home and opted to get a home equity line of credit with a limit of $40,000. They currently have a balance on their HELOC of $12,000 and their home is worth $95,000. What is their HCLTV?

13%
42%
55%
28%

A

42%

70
Q

The moment where a consumer’s inquiry turns to a request for credit

Request
Application
Consummation
Verification

A

Application

71
Q

Which of the following is not a reason a borrower is unable to choose their own appraiser?

The appraiser might only look at homes that are similar to the borrower’s home
The appraiser could be biased towards the borrower
The URAR could be falsely completed
It could lead to collusion between the two parties

A

The appraiser might only look at homes that are similar to the borrower’s home

72
Q

What must be reviewed when determining if a borrower’s capacity qualifies for a loan?

Loan to Value
Credit Score
Front End Ratio/Back End Ratio
Gross Monthly Income

A

Front End Ratio/Back End Ratio

73
Q

What are the main characteristics of an ARM?

The margin is the lender’s minimum profit on the loan
All of the above are true
The index will adjust based on the market
The initial interest rate is initially lower compared to a fixed rate

A

All of the above are true

74
Q

Paying discount points would result in an increase in which of the following?

Credit Score
Interest Rate
Closing Costs
Equity

A

Closing Costs

75
Q

The amount of money a client must show in a verified account prior to the loan closing in addition to the funds to close is known as what?

Funds to Close
Sellers Concessions
Down Payment
Reserves

A

Reserves

SAFE (6 decks)

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