12sect.unit3.CeSh.PreLic.Qonly.txt
Which of the following is an alternative to foreclosure?
Deed in lieu of foreclosure
Default
Deficiency judgment
Eviction
A buyer cannot afford the full 20% down payment required by their lender. The seller offers to finance the difference between the home’s price and the lender’s loan amount. What is this type of financing called?
Equity mortgage
Purchase agreement
Purchase money mortgage
Seller-insured loan
Assignment of mortgage
Contract for deed
Equity of redemption
Power of sale clause
Which method best describes the foreclosure process in Florida?
Caveat emptor
Judicial
Lis pendens
Non-judicial
Assignment of mortgage
Deed in lieu of foreclosure
Equity of redemption
Short sale
What is a short sale?
The borrower pays back the loan, thus avoiding foreclosure.
The borrower sells the property, but for less than the amount owed on the property
The borrower turns the deed over to the lender, rather than face foreclosure proceedings.
The lender receives the deed as a result of foreclosure proceedings.
Assignment of mortgage
Assumption of mortgage
Estoppel certificate
Novation
If a buyer assumes the seller’s mortgage, which of the following is a true statement?
The buyer is solely responsible for the mortgage.
The purchaser of a mortgage will receive a/n ____________________, which establishes the facts of the borrower’s financial obligations (unpaid balance, interest rate, and date to which interest has been paid).
Assignment of mortgage
Assumption of mortgage
Estoppel certificate
Novation
Fannie Mae recently purchased the mortgage that Tim obtained from his bank to buy his new condo. What legal document states Tim’s financial obligations for the record?
Assignment of mortgage
Contract for deed
Deed in lieu of foreclosure
Estoppel certificate
One way to avoid foreclosure is for the borrower to pay the amount owed. What’s this called?
Deed in lieu of foreclosure
Equity of redemption
Lis pendens
Short sale
Theo is a buyer who’s contemplating a land contract. Why might he choose this route over traditional financing?
He doesn’t qualify for traditional financing.
He gets financial protection if he can’t make the payments.
He intends to flip the property and resell it.
Land sales contracts offer lower insurance rates.
Allison is about to close on a house. She wanted to take advantage of the low interest rate on the FHA mortgage that seller Lawrence has, but interest rates have risen. So she got Lawrence’s lender involved and applied for his mortgage. What kind of sale is this?
A free and clear transaction
A jumbo loan
Sale subject to a mortgage
Sale with assumption of a mortgage
When a mortgage holder is released from liability for a mortgage, it’s also called ______________.
Clear title
Release clause reformation
Satisfaction of mortgage
Subordination
Marci obtained a mortgage from her credit union to purchase a new home. The credit union later sold the mortgage to Fannie Mae. What legal document best describes what happened?
Assignment of mortgage
Assumption of mortgage
Default
Novation
Mortgagee (the lender)
Mortgagor (the borrower)
The property owner
The property seller
What type of arrangement allows the buyer to retain title to the property, but places a security interest in the property on behalf of the seller?
A straight-term loan
Land contract
Purchase money mortgage
Wrap-around mortgage
Which right allows the borrower to prevent foreclosure by paying monies owed before the property is sold at foreclosure sale?
Assignment of mortgage
Deficiency judgment
Equity of redemption
Surplus funds
Which of the following kicks off events that could lead to foreclosure?
The borrower doesn’t make their mortgage payment
The borrower pays off their mortgage balance.
The borrower sells their home for less than the amount they owe.
The borrower sells their home for more than the amount they owe.
Which of these options best describes a sale subject to a mortgage?
The buyer takes over the seller’s mortgage payments and a lender isn’t involved.
The lender, buyer, and seller create a novation (an entirely new loan).
The lender qualifies the buyer, who must apply to take over the mortgage payments.
This is a cash-only transaction where the buyer pays off the seller and lender at once.
Deficiency
Equity of redemption
Foreclosure
Surplus
Two parties agree that the seller will finance part of the purchase price, with the buyer making payments to the seller while the seller keeps the property title. What is this an example of?
A land contract
An assumable mortgage
A straight-term loan
A wraparound mortgage
Which of the following is a risk that the seller assumes when agreeing to a sale subject to a mortgage?
If the seller’s lender learns of the arrangement, the seller will have to pay a fine.
In this scenario, the seller must pay an assumption fee.
The lender can get a deficiency judgment against the seller.
The seller can’t use this option if the property was purchased with a VA loan.
Under the terms of a land contract, who retains the title until the buyer pays the full purchase price to the seller?
A trustee
Buyer
Buyer’s beneficiary
Seller
What is a deed in lieu of foreclosure?
The borrower pays back their loan, thus avoiding foreclosure.
The borrower sells their property, but for less than the amount owed on their property.
The borrower turns the deed over to the lender rather than face foreclosure proceedings.
The lender receives the deed as a result of foreclosure proceedings.
What’s a deficiency judgment?
A judgment that allows the lender to collect the difference from the borrower if the foreclosure sale does not satisfy the debt.
The mortgage lien is enforced.
The net proceeds of a real estate transaction don’t satisfy the payoff amount of mortgages on the property.
What two legal documents will the purchaser of a mortgage receive when a mortgage is assigned to the purchaser?
Assignment of mortgage and estoppel certificate
Contract for deed and title
Deed in lieu of foreclosure and lis pendens
Jan obtained a mortgage from a savings and loan in order to buy a second home. The savings and loan later assigned the mortgage to Fannie Mae. In this scenario, which entity owns Jan’s mortgage?
Fannie Mae
Jan
The previous property owner
The savings and loan
A final judgment for foreclosure has been reached in the suit against Ben. If Ben doesn’t exercise his right to equity of redemption, what will happen next?
The foreclosure sale will be advertised and the property will be sold at auction to the highest bidder.
The property will be listed for sale and shown to buyers until an offer that will satisfy the debt is made and accepted.
The property will be sold for cash to satisfy the debt.
The title for the property will pass to the mortgagee.
What is lis pendens?
A financing device
A judgment in a foreclosure suit
A type of lien
Public notice of pending legal action involving real estate
With a land contract, who retains the title to the property?
Beneficiary
Buyer
Seller
Trustee
13sect.unit1.CeSh.PreLic.Qonly.txt
Which of the following statements is true about conventional loans?
Originators usually package and sell the loans on the secondary market.
They’re guaranteed by the U.S. Department of Veterans Affairs.
They’re insured by the Federal Housing Administration.
They’re provided by the U.S. Department of Agriculture.
A seller is lending a buyer the money for the down payment. What type of mortgage is this?
Package mortgage
Purchase money mortgage
Reverse mortgage
Wraparound mortgage
What’s the process of paying off a loan by making periodic payments?
Accession
Accretion
Acquisition
Amortization
Which of the following is true about loan assumptions under the VA program?
No VA approval is required to assume a VA loan.
The VA must approve loan assumptions on loans made after 1988.
VA loans are assumable only by other veterans.
VA loans aren’t assumable.
Which type of mortgage has an interest rate that remains constant over the life of the loan?
Adjustable-rate
Fixed-rate
Growing equity
Pledged account
An adjustable rate mortgage has an initial interest rate of 5%. When the first interest rate adjustment date arrives, the rate can be adjusted a maximum of 1%. At all subsequent adjustment dates, the interest rate can be adjusted a maximum of 2%. The highest rate of interest that may be charged at any given time is 9%. What does the 9% rate represent?
Initial cap
Lifetime cap
Maximum rate able to be charged
Periodic cap
Which of the following is a true statement about loan types?
A graduated payment is one where loan payments ratchet up at predetermined intervals.
An adjustable rate mortgage is similar to a straight mortgage in that only interest is paid on it until the end of the loan term.
A pledged account is a fixed-rate mortgage.
Growing equity means a fixed payment over time.
Which type of loan has a lump sum payment due at the end of the loan because the installment payments aren’t sufficient for paying off the principal and interest?
Balloon mortgage
Growing equity mortgage
Pledged account loan
Swing loan
A ______ is often used in commercial applications when two or more properties are pledged as security for repayment of the loan.
Blanket mortgage
Bridge loan
Swing loan
Wrap-around mortgage
Lauren obtained a loan that’s insured and that only required a down payment of 3.5%. Which of these is most likely the type of loan Lauren has?
Conventional
FHA
Home equity line of credit
VA
If a buyer puts the minimum 3.5% down on a $210,000 home and pays a MIP, what type of loan do they have?
Conventional
FHA
Standard
VA
With which type of mortgage does the interest rate vary according to a specified index?
Adjustable rate
Balloon rate
Fixed rate
Straight term
Rhonda and her husband filed for bankruptcy five years ago. They want to purchase a new house but don’t have the best credit score. They’ve decided to buy the home using an FHA loan. Which of these is a true statement?
A minimum down payment of 3.5% is required.
Mortgage insurance is not required.
The loan-to-value ratio must be less than 80%.
They must have PMI.
What type of loan is given based on the amount of equity a borrower has in the home?
Bridge loan
Home equity loan
Shared equity mortgage
Swing loan
The Baxters are looking at a $425,000 home. They have $90,000 in savings to use as a down payment. What loan type(s) would likely be the best option for them?
Conventional
Conventional, but with PMI
FHA
VA
A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What’s the total amount of interest he’ll pay over the course of the loan?
$1,108,292.40
$500,000
$608,292.40
$750,000
What is the total dollar amount that a borrower can borrow with an FHA-insured loan?
It depends on where the property is located
There is no limit
Up to 80% of the sales price
Up to the purchase price of the property
Under what conditions is a VA loan assumable?
Loans are assumable with VA approval (if the loan were made after 1988).
No restrictions apply to assumption of a VA loan.
VA loans are assumable only by other veterans.
VA loans are not assumable.
What are the main benefits to veterans of the VA-guaranteed loan program?
A VA guarantee of the property condition
Lower interest rates than are available on the open market
No down payment, no mortgage insurance, and no prepayment penalty
Reduced homeowner’s insurance requirements
What does the U.S. Department of Veterans Affairs assure when it guarantees a loan?
A home approved for a VA loan will be habitable and in like-new condition.
In the event of default, a portion of the loan will be repaid to the lender.
In the event of default, the entire loan amount will be repaid to the lender.
The borrower will not default on the loan.
Which loan is a type of gap financing that is used temporarily until the consumer can obtain permanent financing?
Blanket loan
Bridge loan
Reverse mortgage
Wrap-around mortgage
With this type of loan, personal property is included with the real property in the sale. It’s commonly seen in commercial real estate, but you may also see this in the sale of furnished condominiums.
Blanket mortgage
Package mortgage
Shared equity mortgage
Wrap-around mortgage
To which of the following borrowers might a lender be most likely to recommend an FHA loan?
An investor who intends to use equity in another investment property as his down payment
A retired couple interested in downsizing from a large four-bedroom house they own free and clear to a condominium
A single stockbroker with a $40,000 down payment and significant assets in a stock portfolio
A young couple with only a few thousand dollars saved for a down payment and relatively low credit scores
Which of the following is a characteristic of a U.S. Department of Veterans Affairs loan?
3.5% down
Borrower flexibility
PMI
Prepayment penalties
What’s it called when a number of percentage points is added to the index to determine the rate for an adjustable rate mortgage?
Initial cap
Lifetime cap
Margin
Usury
Which of these provides some protection to lenders when the borrower obtaining a conventional loan does not have a 20 to 25% down payment?
Acceleration clause
Mortgage insurance premium
Prepayment penalty
Private mortgage insurance
Goldie and Kurt are looking at purchasing their first home. Their credit history is a little shaky and they don’t have enough money saved to put down 20%. What type of loan seems most appropriate?
Conventional
FHA
FHA, VA, or conventional
VA
A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. How many payments will the borrower make over the course of the loan?
15
180
240
360
An adjustable rate mortgage has an initial interest rate of 5%. When the first interest rate adjustment date arrives, the rate can be adjusted a maximum of 1%. At all subsequent adjustment dates, the interest rate can be adjusted a maximum of 2%. The highest rate of interest that may be charged at any given time is 9%. What does the 2% rate represent?
Initial cap
Lifetime cap
Periodic cap
Usury
What are the VA’s requirements of a borrower should the borrower want to repay a loan early?
Apply to the VA for a waiver of loan services.
Forfeit any future use of VA benefits.
None—no prepayment penalty applies.
Pay a 1% prepayment penalty.
A borrower has a 30-year, $500,000 loan with an interest rate of 6.25%. His monthly principal and interest payment is $3,078.59. What’s the total amount he’ll pay over the life of the loan?
$1,108,292.40
$500,000
$608,292.40
$750,000
Recently retired Admiral Bongo and his wife, Lucy, contact you. They want you to help them purchase their dream house now that he’s retired, but one that has the necessary accommodations for the admiral’s disability. They also confide in you that they don’t have a lot of money saved up for a down payment. Which type of financing may work best for them?
A conventional loan combined with a seller carry back.
A conventional loan using the admiral’s retirement money as a down payment.
An FHA 203(k) loan to fix their new home up.
A VA loan, which requires no down payment.
An adjustable rate mortgage has an initial interest rate of 5%. When the first interest rate adjustment date arrives, the rate can be adjusted a maximum of 1%. At all subsequent adjustment dates, the interest rate can be adjusted a maximum of 2%. The highest rate of interest that may be charged at any given time is 9%. What does the 1% rate represent?
Initial cap
Lifetime cap
Periodic cap
Usury
A buyer with a 15-year, $250,000 loan at a 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What’s the total amount the borrower will pay back over the life of the loan?
$250,000.00
$30,640.65
$367,687.80
$735,375.60
Which of the following loan types involves a type of graduated payment?
Amortized
Fixed
Pledged account
Straight
A buyer with a 15-year, $250,000 loan at a fixed 5.5% interest rate has a monthly principal and interest payment totaling $2,042.71. What is the total amount of interest the borrower will pay over the course of the loan?
$117,687.80
$250,000.00
$367,687.80
$735,375.60
What kind of mortgage involves two or more properties pledged as security for repayment of a loan?
Adjustable
Blanket
Growing equity
Wrap-around
Which of the following items is a benefit of a U.S. Department of Veterans Affairs-guaranteed loan?
Lower interest rates available
Lower mortgage insurance premium
No down payment required
Repayment not required
Which of the following is a true statement about FHA financing?
An FHA loan is best for borrowers who have large down payments.
An FHA loan is usually more attractive to borrowers who have lower credit scores and down payments.
FHA loans are available to all borrowers, regardless of credit history.
FHA loans have more stringent requirements than conventional loans do.
Your clients, the Schwans, are financing their home purchase. They want to obtain a conventional loan directly from a bank and to put down at least 20% of the home price. They will most likely get their loan from ______.
A primary lender
A secondary lender
A subprime lender
A supra-prime lender
Which loans involve increased risk for the lender and therefore usually come with a higher rate?
Construction
Land contract
Reverse
Shared equity
The Janssens qualify for an FHA-insured loan. Which of the following can they expect to be added to their closing costs?
HER
PITI
PMI
UFMIP
The Johnsons are shopping for a mortgage loan and are attracted to the below-market interest rate offered for the first year of an adjustable-rate mortgage (ARM). They notice that the rate increases sharply after the first adjustment period. What’s another term for this type of interest rate?
Bait and switch
Balloon payment
Fixed rate
Teaser rate
How can lenders offer mortgage loans with down payments as low as 3.5%?
If the loan is FHA-approved, the lender is protected by mortgage insurance, paid by the borrower.
They can’t.
They might if the interest rate is high enough to make up the difference.
This can only be done if the lender is a government agency.
What type of loan is neither guaranteed nor insured by government agencies?
Conventional
Federal Housing Administration (FHA)
U.S. Department of Agriculture (USDA)
U.S. Department of Veterans Affairs (VA)
Robin has great credit and was able to secure a loan for her ocean-side dream home. Her 30-year, fixed-rate loan is for an amount that’s above conventional loan limits. What type of loan does Robin have?
A conforming Freddie Mac loan
A government loan
An FHA loan
A non-conforming loan
An adjustable rate mortgage has an interest rate of 5% and a lifetime cap of 6%. What’s the maximum rate that may be charged at any point during the life of the loan?
11%
30%
5%
6%
Melissa is applying for a loan that she qualifies for based on her military service. What type of loan is this?
A balloon loan
A conventional loan
A loan guaranteed by the VA
A loan insured by the FHA