Determine the value of the loan that the VA will guarantee
The CRV is used to determine a property's value, which dictates the value of the loan that the VA will guarantee.
With a VA loan, the certificate of reasonable value is used to ______.
Determine the amount of entitlement the veteran borrower has available
Determine the value of the loan that the VA will guarantee
Negotiate with sellers when the buyer wants a
lower sale price
Restore entitlement for a veteran who has used the VA loan before
Purchase money mortgage
A purchase money mortgage is a type of seller financing in which the buyer gives a mortgage to the seller. It's put toward the purchase price.
Tom, the seller, is financing his buyer Jerry's mortgage. Jerry will give this mortgage to Tom, which will go toward the purchase price. Jerry will use this mortgage for his down payment. What kind of mortgage is this?
Package mortgage
Purchase money mortgage
Reverse mortgage
Wrap-around mortgage
Adjustable rate mortgage
ARM stands for adjustable rate mortgage. The adjustment period is established in the loan documents.
What does ARM stand for?
Adjustable rate mortgage
Adjustable renewal mortgage
Amortized rate mortgage
Annual
renewal mortgage
$117,687.80
First, multiply the monthly payment [$2,042.71] by the total number of payments [180 = 12 payments/year for 15 years]. The total paid back is $367,687.80. Then subtract the original loan value: $367,687.80 ‒ $250,000 = $117,687.80.
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 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
To detail the estimated closing costs for Lawrence's loan
The Loan Estimate, which the lender must provide within three days of loan application, provides an estimate of mortgage loan costs.
Lawrence is a buyer closing on a home purchase for which he's obtaining financing. He receives a Loan Estimate from his lender. What's the purpose of this document?
To detail the amount Lawrence needs to bring to closing
To detail the estimated closing costs for Lawrence's loan
To disclose the interest rates available on this lender's various loan programs
To disclose the lender's source of loan funds
Educating the public about the benefits and responsibilities of having a mortgage
The FHA introduced the long-term amortized loan, which significantly improved the ability of prospective homeowners to purchase a home.
The FHA has helped to significantly improve the mortgage market through ______.
Educating the public about the benefits and responsibilities of having a mortgage
Setting standards for interest rates on mortgage loans
The establishment of the home inspection industry
The introduction of the long-term amortized loan
Informs the prospective borrower about the terms of the loan being offered
The Mortgage Loan Disclosure Statement informs the borrower about the terms of the loan being offered. The licensee must deliver this disclosure to the prospective borrower within three business days of receiving a loan application.
Brittany is a real estate licensee with a mortgage loan originator endorsement. When she acts as an MLO, the California Real Property Loan Law requires her to give her clients a disclosure that ______.
Informs the prospective borrower about the terms of the loan being offered
Makes the loan effective, without their signature
She is acting as both a real estate licensee and an MLO
The consumer has a right to approach a lender directly, without the aid of an MLO
Savings and loan
Thrifts, or savings and loan associations, specialize in taking in savings deposits and then lending money out to consumers through mortgages and other loans.
Rachel loves convenience. As you can imagine, she was thrilled when she was able to finance her mortgage through the same institution where she deposits her payroll checks. Which of these most likely financed Rachel's mortgage?
Insurance company
Investment group
Mortgage broker
Savings and loan
Using a house as security on a mortgage
Collateral is an item used as security when obtaining a loan. If the borrower defaults on the loan, the lender can take ownership of the collateral [item used as security].
Which of the following best describes collateral?
Signing over the title to a car to a family member
Taking of a property by the government for the greater good of the public
Using a house as security on a mortgage
Using a small amount of
cash to obtain a loan of a larger amount
Owner-occupied
Borrowers must certify that they will occupy the residence purchased with the VA loan.
Which occupancy type is eligible for a VA loan?
All occupancy types
Investment property
Owner-occupied
Second home
It creates a lien on the property, and the borrower, not the trustee, holds legal title.
California is a lien theory state, and state law has made the mortgage and the deed of trust functional equivalents.
In California, how has state law modified the way the deed of trust works?
If the lender forecloses, the buyer is given a statutory right of redemption, regardless of the foreclosure process chosen.
It creates a lien on the property, and the borrower, not the trustee, holds legal title.
Legal title to the property stays
with the seller until the borrower has 50% equity in the property.
The deed of trust may not include a power of sale clause.
$1,108,292.40
To find the total amount paid back, multiply the monthly payment by the total number of payments: $3,078.59 x 360 = $1,108,292.40.
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 back over the life of the loan?
$1,108,292.40
$500,000
$608,292.40
$750,000
By requiring appraisers to be state licensed or certified to evaluate property for FHA-insured loans
The FHA established a requirement for appraisers to be state licensed or certified in order to appraise property for an FHA loan, creating a higher standard for appraisals that reduces the risk for borrowers and lenders.
What is one way that the FHA has helped to stabilize and improve the mortgage market?
By educating the public about the benefits and responsibilities of having a mortgage
By protecting borrowers from predatory lending practices through federal legislation
By requiring appraisers to be state licensed or certified to evaluate property for FHA-insured loans
By setting standards for interest rates on FHA-insured mortgage loans
Reduce lender risk by establishing borrower qualification standards
The FHA set standards for borrower qualification and required FHA-approved lenders to use them to approve loans, helping to reduce lender risk.
Since the FHA was established, it has taken strategic action to stabilize the mortgage market. Which of these items is one of the FHA's strategies?
Educate the public about the benefits and responsibilities of having a
mortgage
Establish the home inspection industry
Protect borrowers from predatory lending practices through federal legislation
Reduce lender risk by establishing borrower qualification standards
Recreational vehicles
FHA-insured loan programs cover all of the following EXCEPT ______.
Four-plexes
Manufactured housing
Recreational vehicles
Reverse mortgages
Monthly gross
The housing ratio identifies the borrower's monthly housing costs as a percentage of pre-tax monthly income.
The housing ratio is the borrower's monthly housing obligation as a percentage of ______ income.
Monthly gross
Net
Residual
Taxable
No down payment is required.
The USDA loan program doesn't require a down payment for the loan.
Which is one of the benefits of the USDA loan program?
Farmers don't pay interest rates.
It provides rural home financing for low-income borrowers.
No down payment is required.
There's no limit to the loan amount.
Used as an open-end account similar to the revolving credit of a credit card from which borrowers can take advances, repay money, and even borrow money again
A HELOC is similar to a home equity loan because the borrower uses the home's equity to secure a credit line. A HELOC isn't a lump-sum loan; it's a line of credit that continues as the borrower makes regular payments.
Which of the following best describes a home equity line of credit?
A loan in which the lender makes payments to the homeowner for a specified period of time and gains equivalent ownership
A temporary [usually 90-day] loan that provides funds in addition to an existing loan
until permanent financing can be obtained
Funds received in one lump sum and frequently used for home renovations, to fund a college education, or for other major purchases
Used as an open-end account similar to the revolving credit of a credit card from which borrowers can take advances, repay money, and even borrow money again
Reverse annuity mortgage
This is a reverse annuity mortgage, or RAM.
A loan that's offered based on a homeowner's equity in which funds are drawn over time and the bank gains corresponding property ownership is called a ______.
Home equity line of credit
Home equity loan
Renewed annual mortgage
Reverse annuity mortgage
$783.05
A buyer with a 30-year, $750,000 loan at a 5.75% interest rate has a monthly principal and interest payment totaling $4,376.80. If $3,593.75 is interest, how much is applied to principal?
$251.66
$3,593.75
$4,376.80
$783.05
$3,200
An 80% LTVR means the buyer is financing 80% of the purchase price. Eighty percent of the purchase price is $320,000, and one point, or 1%, of this amount is $3,200.
A buyer is purchasing a property for $400,000. His loan-to-value ratio is 80%. The lender also charges a one-point loan origination fee. How much is the loan origination fee?
$3,200
$3,600
$4,000
$800
0.8
Margo is purchasing a home for $520,000. The property appraised at $550,000 and Margo is financing $416,000. What's the loan-to-value ratio?
0.65
0.72
0.75
0.8
$2,333.33
$400,000 × 0.07 = $28,000; then $28,000 ÷ 12 = $2,333.33
A buyer has a 30-year, $400,000 loan with a 7% interest rate. How much of the first month's mortgage payment is interest?
$2,333.33
$28,000
$3,100
$933.33
There is no mortgage insurance requirement for a VA loan.
One big benefit of a VA loan is that it doesn't require mortgage insurance even though the borrower is placing less than 20% down [in most cases borrowers make no down payment].
When does the need for mortgage insurance end for a borrower who has a VA loan?
It ends after three years of steady payments.
It ends once 20% of the loan has been repaid.
It remains for the life of the loan term.
There is no mortgage insurance requirement for a VA loan.
Reverse annuity mortgage [RAM]
This is a reverse annuity mortgage, where the lender makes payments to the homeowner for a specified period of time and gains collateral ownership. The home is used as collateral and the borrower receives the loan funds.
Monty retired 10 years ago and would like to see the world, but his retirement account won't support his desire to travel. Monty heard of a loan that would allow him to take advantage of the equity in his home by getting monthly payments from the bank by using his house as collateral. What is this type of loan called?
Adjustable rate
mortgage [ARM]
Home equity line of credit [HELOC]
Home equity loan
Reverse annuity mortgage [RAM]
The sale of debt securities and international money markets
The Farm Credit System funds are acquired from __________.
Local lenders
Mortgage-backed securities
Private investors
The sale of debt securities and international money markets
Residential mortgage
California law regulating the MLO endorsement for real estate licensees defines a residential mortgage loan to include loans used to purchase residential real estate upon which a dwelling will be built, or is intended to be built.
Seth is purchasing a vacant piece of land, on which he'll build a new single-family home for his growing family. His real estate agent, Dani, is authorized to assist him with the loan he uses to buy the property because Dani has her MLO endorsement and this is a ______ loan.
Conforming
Construction
Nonconforming
Residential mortgage
One that may involve seller financing
A wrap-around mortgage is one where the buyer's new loan wraps around the seller's existing financing. The seller uses a portion of the buyer's payments to the seller to pay on the original loan.
What is a wrap-around mortgage?
One that involves more than one property
One that involves personal property in addition to real property
One that involves unqualified borrowers
One that may involve seller financing
Certificate of eligibility
The COE is the final word on how much entitlement the veteran has available.
The ______ tells the lender how much entitlement the veteran has available under the VA loan program.
Certificate
of eligibility
Certificate of entitlement
Funding entitlement certificate
Loan guarantee eligibility calculation
Multiply the number of thousands in the loan by the number.
When using an amortization chart, you use the interest rate and the loan term to arrive at a number, such as 5.17808. Now what do you do?
Divide the loan amount by the number.
Divide the sales price by the number.
Multiply the number of thousands in the loan by the number.
Multiply the number of thousands in the sales price.
2%
Which of the following percentages is an allowable loan origination fee?
2%
4%
6%
8%
One that meets certain lending standards
A qualified mortgage meets certain lending standards, allowing it to be resold on the secondary market.
A qualified mortgage is ______.
Offered by a credit union
Offered by a savings and loan institution
One in which the borrower has a credit score of 780 or higher
One that meets certain lending standards
To hold legal title to the property on behalf of the beneficiary until the loan is repaid
When a deed of trust is used in a title theory state, the trustee holds legal title to the property on behalf of the beneficiary.
What is the trustee's role when a deed of trust is used to secure property for a loan?
To collect payments and service the loan
To hold funds in escrow
To hold legal title to the property on behalf of the beneficiary until the loan is repaid
To hold the note to the property on behalf of the trustor until the loan is repaid
The ad is in compliance with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms.
Regulation Z requires all financing terms to be included in an ad only if certain trigger terms are present, but "low down payment and easy financing" are not triggers.
A "homes for sale" magazine contains the following ad: "Cozy two-bedroom starter home, neat and clean, ready for move-in. $140,000. Low down payment and easy financing!" Which of these statements is true?
The ad is in compliance with TILA because it doesn't contain any of the trigger terms that require full disclosure of all financing terms.
The ad is in compliance with TILA because the sales price is below the minimum that triggers full disclosure.
The ad is not in compliance with TILA because financing terms must be provided on any residential real estate ad.
The ad is not in compliance with TILA because it mentions financing without including all of the
terms of the financing.
$8,000
$400,000 × 2% [or $400,000 × .02] = $8,000
Backyard Bank charges a 2% loan origination fee. Mavis is buying a home for $500,000 and financing $400,000 of it. How much will Mavis pay as a loan origination fee?
$1,000
$2,000
$5,000
$8,000
$3,600
$400,000 x .90 x .01 = $3,600
David is buying a home for $400,000 and financing 90% of it. If his lender charges a 1% loan origination fee, how much will the lender charge to originate the loan?
Pay the difference between CRV and sale price in cash
When the CRV is less than the sales price, the buyer can pay the difference between the CRV and the sale price in cash in order to get the VA loan.
Rhoda is a first-time homebuyer. She has applied for a VA loan to buy a house from Phyllis. When the CRV values the home at less than the sale price, Phyllis refuses to come down on the sale price, so Rhoda must either ______ or find a different home to buy.
Ask the VA for an increase in her entitlement
Negotiate with the lender
Obtain a second loan to make up the difference between CRV and sale price
Pay the difference between CRV and sale price in cash
Lower than
Initially, most ARMs will offer a lower interest rate than a fixed-rate mortgage. This rate applies to the introductory period, before the first adjustment kicks in.
An ARM usually offers an initial interest rate that's ______ a fixed rate mortgage for a period of time.
Different in nature from
Equal to
Higher than
Lower than
$1,110.64
If $1,483.95 of the total payment is interest, that leaves $1,110.64 to be applied toward principal.
A buyer with a 20-year, $419,000 loan at a 4.25% interest rate has a monthly principal and interest payment totaling $2,594.59. If $1,483.95 is interest, how much is applied toward principal each month?
$1,110.64
$1,246.10
$1,578.57
$1,780.75
An assumption
When a buyer takes over the seller's original loan with the lender's permission, this is called ______.
Have a minimal down payment and less-than stellar credit
FHA insures lenders against borrower default for accepting higher risks due to lower down payments and lower qualifying standards.
The FHA loan program is designed for borrowers who ______.
Have a minimal down payment and less-than stellar credit
Have nothing saved for a down
payment
Have stellar credit
Need their loan guaranteed
The VA appraiser completed the CRV and it is less than the sale price
A buyer request to lower the sale price when the property is already under contract likely means that the VA appraiser has valued the home lower than the sale price, which puts the VA loan in jeopardy.
Bart is selling his home and has accepted an offer from a buyer, who's obtaining a VA loan. The sale price is agreed upon and is in the purchase contract. Then Bart receives a call from his agent, explaining that the buyer is hoping that Bart will lower the sale price because ______, and there is a risk the buyer will not be able to get the VA loan as a result.
The closing costs are excessive for the VA loan
The lender has reviewed the buyer's credit score, which is low
The VA appraiser completed the CRV and it is less than the sale price
The VA
requests that buyers always try to get a sale price that is 5% lower than the asking price
$7,000
The minimum down payment on an FHA loan is 3.5%. Additional closing costs apply.
Your client, Judy, with a credit score of 620, has been approved for an FHA loan for a home with a sales price of $200,000. What is the minimum down payment that will apply?
$100
$1,000
$2,500
$7,000
Nationwide Mortgage Licensing System and Registry
Any person who acts as an MLO must obtain the endorsement and register with the Nationwide Mortgage Licensing System and Registry.
Taylor Bank and Trust is a Federal Reserve Member bank. It has several employees who act as mortgage loan originators. With which entity do these employees need to register?
Nationwide Mortgage Licensing System and Registry
Office of
the Inspector General
State real estate commission or bureau
U.S. Treasury
Mortgage-backed securities
Mortgages that are packaged together and sold on the secondary market, often to investors, are called mortgage-backed securities.
In the secondary market, mortgages are grouped together and sold as ______.
Collateral
Equitable titles
Leverage
Mortgage-backed securities
$749,216.95
If $3,593.75 of the total payment is interest, that leaves $783.05 to be applied to principal. Subtract this amount from the original loan value, and we have a new principal loan balance of $749,216.95.
A buyer with a $750,000 loan has a monthly principal and interest payment of $4,376.80. If $3,593.75 is interest, what is the new principal balance after the first payment is applied?
$745,623.20
$746,406.25
$749,216.95
$750,000.30
Loan amount and schedule of repayment
What information is listed on the promissory note?
180
The borrower will have 180 payments [assuming the loan isn't paid off early]. This is 12 monthly payments per year for 15 years: 12 x 15 = 180.
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
They sell packaged loans to investors.
National lending institutions package loans and sell them to investors. This creates additional funds to purchase more loans from the primary market.
Which of the following statements is true about national lending intuitions?
Mortgage-backed securities are offered by credit unions.
They control the flow of the local money supply.
They fund loans to borrowers.
They sell packaged loans to investors.
Closing costs aren't considered a seller concession.
If the seller pays the buyer's closing costs, other than prepaid items or the funding fee, it isn't counted as seller concessions.
Fatima is using a VA loan to purchase a home from Sue. Sue agrees to pay Fatima's closing costs. Which of the following statements is true?
Closing costs aren't considered a seller concession.
Sue can increase the sale price of the property by the same amount she is paying for Fatima in closing costs.
Sue is allowed to pay no more than 50% of Fatima's closing costs.
This would be a seller concession, and would be included within a 4% limit on seller
concessions.
Home equity
If the property is owned free and clear, the home equity loan is a first mortgage. Otherwise, it becomes a second, or junior, mortgage.
With this common loan type, the home is used as collateral and the loan creates a second mortgage if the first mortgage hasn't been paid off.
Bridge
Home equity
Reverse mortgage
Straight
Debt that's paid off by making periodic payments
These periodic payments consist of both principal and interest.
Which of the following describes amortized debt?
Debt that increases over time, but allows early payments to remain low
Debt that's paid off by making periodic payments
Debt with an amortized interest feature
Debt with an amortized principal feature
USDA Rural Development Single Family Housing Program
USDA's Single Family Housing Programs will make direct loans [as well as loan guarantees] to help low- and moderate-income rural Americans buy safe, affordable housing in rural areas.
Sylvia is a single mother living in a small town surrounded by ranch and farm land. She would like to buy a house there, but her income level and her status as an independent contractor makes it hard for her to qualify for a conventional loan. What government program might provide her with a direct loan to purchase a home?
Farm Credit Administration Rural Loan Program
Farmer Mac Direct Loan Program
Small Town America Residential Loan Program
USDA Rural Development Single Family Housing Program
The trustee holds the deed, and the lender holds the note.
When a deed of trust is used as a security instrument, who holds the deed and the note?
The lender holds the deed and the note
The lender holds the deed, and the trustee holds the note.
The trustee holds the deed, and the lender holds the note.
The trustee holds the mortgage and the note.
To ensure that all parties are educated about loan terms and about who will be compensated for arranging credit
The purpose of the Seller Financing Disclosure Law is ______.
To ensure that all
parties are educated about loan terms and about who will be compensated for arranging credit
To modify the timing of TILA and RESPA disclosures in a seller carry-back transaction
To prohibit usurious loan terms in a privately funded real estate transaction
To require institutional lenders to allow a buyer to assume a loan from a seller
Mortgage Loan Broker Law
The California Real Property Loan Law is also known as the Mortgage Loan Broker Law, the Necessitous Borrower Act, and Article VII of the Real Estate Law
Which of these names is also known as the California Real Property Loan Law?
California Finance Lenders Law
California Residential Mortgage Loan Act
Mortgage Loan Broker Law
Mortgage Loan Origination Law
Length of the loan
The length [or term] of the loan and interest rate are needed to find the factor on an amortization chart.
To find a factor on an amortization chart, you need to know the interest rate and the ____________.
Length of the loan
Loan amount
Origination fee
Sales price
A wrap-around mortgage
Seller Jerome found financing that would include his current mortgage inside the buyer's mortgage. What type of mortgage is this?
A blanket mortgage
A construction mortgage
A package mortgage
A wrap-around mortgage
5%
Subprime loans can have interest rates 1% to 5% over the current market rate. Anything over 5% is an indication of predatory lending.
In the residential mortgage market, charging borrowers more than ______ over market rate for interest is considered a predatory lending practice.
10%
3%
5%
8%
Credit union
Credit unions are member-based cooperatives that provide credit for auto loans and home loans, and also take deposits and offer things like savings vehicles and money markets.
Which type of lender is a member-based cooperative that provides credit for auto loans and home loans, takes deposits, and offers savings vehicles and money markets?
Credit union
Mortgage banker
Mortgage broker
Savings and
loan association
22%
The automatic cancellation is 22%, but homeowners can petition for removal once their equity position reaches 20%.
According to the PMI Act of 1998, at what percentage of equity position does personal mortgage insurance automatically cancel for homeowners?
20%
21%
22%
25%
Package mortgage
A package mortgage is a mortgage in which personal property or business assets are included with the real property in the sale.
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
The loan that's guaranteed will be based on either 100% of the sales price or 100% of the CRV, whichever is less.
Which of the following is a true statement about U.S. Department of Veterans Affairs loans?
All properties are eligible.
All veterans are eligible.
The loan that's guaranteed will be based on either 100% of the sales price or 100% of the CRV, whichever is less.
They're insured for either 100% of the sales price or 100% of the CRV, whichever
is less.
Because California foreclosure laws allow a statutory right of redemption of up to one year with a judicial foreclosure.
Which of these is a reason that the deed of trust is the standard security instrument used in California real estate transactions?
Because California foreclosure laws allow a statutory right of redemption of up to one year with a judicial foreclosure.
Because California is a
lien theory state.
Because California is a title theory state.
Because California laws don't allow judicial foreclosure.
$854.17
$205,000 × 0.05 = $10,250 ÷ 12 = $854.17.
A buyer obtained a 30-year, $205,000 loan with a 5.0% interest rate. How much of the monthly payment is interest?
A home equity line of credit
According to rules regulating mortgage loan originators, loans to purchase a residential property, refinance an existing residential real property loan, or a home equity line of credit are considered residential mortgage loans.
In relation to the work of an MLO, which of the following is an example of a residential mortgage loan?
A home equity line of credit
A loan taken by a developer to build a home
A loan taken to purchase a business
A loan taken to purchase an
office building
Subject to existing financing
When the buyer is paying on the existing loan and the lender hasn't agreed to a transfer or assumption, the purchase is made subject to existing financing.
When a buyer takes over payments on a loan without telling the lender, this is called a purchase _____________.
According to existing agreements
On behalf of lender
Subject to existing
financing
Upon assumption
Secondary mortgage market
Institutions that purchase loans that have already been originated and that continue to service the loan operate in the secondary mortgage market.
Amy purchased a new home and obtained financing through Natula Bank, a regional bank located in her city. Natula originated the loan, but before Amy's first mortgage payment was due, it sold her loan to CitiMortgage. What market is CitiMortgage operating in?
Federal Reserve System
Primary mortgage market
Secondary mortgage market
Stock market