Deck 8: Underwriting and Financing Residential Properties

Question 1

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

Answer 1

Protect the lender from losses associated with borrower default on the loan

Question 2

Which of the following is NOT typically included in housing costs used to calculate a borrowers 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

Answer 2

Principal and interest on the mortgage applied for

Question 3

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

Answer 3

True

Question 4

The calculated APR usually represents the true costs of financing

Question 5

FTL requires that the lender disclose an estimated cost of financing within three days of loan application

Question 6

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

Question 7

Title insurance protects the buyer from title claims against the property

Question 8

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

Question 9

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

Question 10

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 fixed-rate mortgage loan

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

FTL and RESPA essentially say the same things

Question 13

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

Question 14

Pro-ration involves a professional who rates the quality of the property

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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 borrowers 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 22

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 23

A typical RESPA closing statement contains which of the following characteristics?

A)2 columns - summary of borrower's and seller's transactions
B)2 columns - summary of borrower's and broker's transactions
C)3 columns - summary of borrower's,seller's,and broker's transactions
D)3 columns - summary of borrowers,seller's,and lender's transactions

Question 24

RESPA has three specific objectives.Which of the following is NOT one of those objectives?

A)More effective advance disclosure of settlement costs
B)More informative 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 25

RESPA requires lenders to disclosure 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 26

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 brokers
D)Settlement agents

Question 27

The APR estimate must be accurate only to the nearest ___ percent.

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

Question 28

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

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

Question 29

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 30

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
E)None of the above

Question 31

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 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

Which of the following is the main objective of 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