Deck 8: Underwriting and Financing Residential Properties

Question 1

Title insurance protects the buyer from title claims against the property.

Answer 1

True

Question 2

A borrower who was required to purchase private mortgage insurance as a condition of their mortgage should be able to eliminate that requirement if the loan-to-value ratio of a home is proven to have dropped to less than 85%.

Answer 2

False

Question 3

Financing costs are usually paid by the lender to either the borrower/buyer or the seller.

Answer 3

False

Question 4

The FTL Act and RESPA essentially say the same things.

Question 5

General industry standards for a conventional loan specify a maximum LTV of 60 percent.

Question 6

A conforming mortgage is one for which the US Treasury will provide credit backing through the GSEs.

Question 7

Proration involves a professional who rates the quality of the property.

Question 8

The Federal Housing Administration (FHA)provides mortgage insurance,but does not make loans.

Question 9

The FTL act requires that the lender provide a financing statement of the exact closing costs within three days of loan application.

Question 10

RESPA requires a lender to disclose good faith estimates of closing costs within three days of loan application.

Question 11

For a loan with an LTV greater than 80 percent,the costs of mortgage insurance always exceed the costs of second lien financing.

Question 12

The calculated APR usually represents the true costs of financing.

Question 13

The APR for an adjustable rate mortgage loan is an accurate measure of the actual cost of funds to the borrower.

Question 14

One of the objectives of RESPA was to disclose kickbacks and unearned fees on the settlement sheet.

Question 15

In some cases,lenders require that borrowers obtain default insurance.The purpose of such insurance is to:

A)Decrease the effective interest rate on the loan
B)Increase the value of the underlying property
C)Protect the borrower from defaulting on the loan
D)Protect the lender from losses associated with borrower default on the loan

Question 16

Determining the APR for federal truth-in-lending purposes is more complicated for an adjustable rate mortgage loan than it is for a fixed rate mortgage loan.

Question 17

In order to avoid the requirement to purchase private mortgage insurance when the loan-to-value is greater than 80%,a buyer may be able to take out a first mortgage for 80% or less and couple it with a second mortgage to account for the remainder of the necessary funds.

Question 18

To protect themselves from loss due to default,most lenders require borrowers to acquire hazard insurance policies.

Question 19

A residential real estate closing involves two actual closings: the loan closing and the sales transaction closing.

Question 20

Someone with a credit score of 900 is likely to only qualify for a subprime loan.

Question 21

Which of the following is typically NOT one of the financing costs associated with the financing of real estate?

A)Mortgage insurance fees
B)Loan application and credit report fees
C)Property inspection and appraisal fees
D)Loan discount and prepaid interest fees

Question 22

A conforming loan:

A)Exceeds the loan limits of loans that Fannie Mae and Freddie Mac can buy
B)Meets loan limits of loans that Fannie Mae and Freddie Mac can buy
C)Cannot be purchased by GSEs such as Fannie Mae and Freddie Mac
D)Is another term for a fixed-rate mortgage loan

Question 23

Payment to income ratio is BEST described as:

A)The factor used to determine if interest on mortgage loans is tax deductible
B)The only measure of a borrower's ability to fulfill his or her loan obligations
C)The ratio of the estimated rental income to the expected payments on a rental property
D)The ratio of the expected payments on a property to the income of the borrower

Question 24

RESPA requires lenders to disclose to buyers a uniform settlement statement detailing all closing costs within:

A)One day before the real estate closing
B)Three days before the real estate closing
C)One day after loan application
D)Three days after loan application

Question 25

Which of the following is NOT one of the essential aspects of RESPA?

A)Advance disclosure of settlement costs
B)Limitations on the cost of mortgages
C)Prohibition of kickbacks and unearned fees
D)Limitations on escrow deposits

Question 26

A self-employed borrower who has documentable assets but is not able to provide adequate documentation for his income may be eligible for this type of loan:

A)FNMA
B)FHLMC
C)Conforming
D)Alt-A

Question 27

An escrow account:

A)Ensures that a default insurance policy does not lapse if a borrower is in danger of default
B)Ensures that sufficient funds are collected to make annual hazard insurance and property tax payments
C)Is a non-interest-bearing account into which a borrower prepays certain fees and taxes
D)All of the above

Question 28

What document usually summarizes the sources,disbursements,charges and credits associated with a real estate closing?

A)The purchase contract
B)The deed of trust
C)The listing agreement
D)The settlement statement

Question 29

The APR estimate must be accurate to the nearest ________ percent.

A)1/2
B)1/4
C)1/8
D)1/16

Question 30

A jumbo loan:

A)Is another term for an adjustable-rate mortgage loan
B)Meets loan limits of loans that Fannie Mae and Freddie Mac can buy
C)Tends to have a higher interest rate than conforming loans
D)Has lower LTV requirements than conforming loans

Question 31

GSE is the abbreviation for:

A)Government-sponsored entity
B)Government-specific entity
C)Government-sponsored enterprise
D)Government-specific enterprise

Question 32

Which of the following is typically NOT one of the settlement costs that are escrowed over the life of the loan?

A)Property taxes
B)Mortgage insurance
C)Selling commissions
D)Hazard insurance

Question 33

RESPA requires lenders to disclose to buyers a good faith estimate of certain closing costs within:

A)One day before the real estate closing
B)Three days before the real estate closing
C)One day after loan application
D)Three days after loan application

Question 34

Which of the following is NOT typically included in housing costs used to calculate a borrower's payment-to-income ratio?

A)Principal and interest on the mortgage applied for
B)Mortgage insurance
C)Property taxes
D)Utilities
E)All of the above are included in the housing costs

Question 35

The uniform settlement statement displays settlement summaries for which of the following parties to the closing?

A)Borrower and seller
B)Borrower and broker
C)Borrower,seller,and broker
D)Borrower,seller,and lender

Question 36

Which of the following organizations provides lenders with complete protection against default losses:

A)FHA
B)FNMA
C)FHLMC
D)VA

Question 37

Which of the following is the main objective of the FTL legislation?

A)More effective advance disclosure of settlement costs
B)More informative disclosure of the cost of credit
C)Elimination of kickbacks and unearned fees
D)A reduction in the amount of escrow placed in accounts for homeowners

Question 38

Which of the following groups customarily does NOT attend real estate closing?

A)The buyer and seller
B)The buyer's and seller's immediate families
C)Real estate broker(s)
D)Settlement agent(s)