Deck 8: Underwriting and Financing Residential Properties

Question 1

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

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

The calculated APR usually represents the true costs of financing.

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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 15

FTL and RESPA essentially say the same things.

Question 16

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

Question 17

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 18

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

Question 19

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

Question 20

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 21

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 22

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 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 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 24

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 25

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 26

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

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

Question 27

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 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

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 30

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

Question 31

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 32

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