Deck 9: Financing Sources in Real Estate Transactions

Question 1

The Veterans Administration guarantees loans made by private lenders.

Answer 1

True

Question 2

The Veterans Administration makes direct loans to home buyers.

Answer 2

False

Question 3

Mortgage loans are closed in the secondary market and are bought and sold in the primary market.

Answer 3

False

Question 4

Private mortgage insurance guarantees that the borrower owns the property.

Question 5

The ratio of a borrower's assets to their debts is known as the loan -to-value ratio.

Question 6

One major underwriting concern for a permanent lender is the estimate of the cost of construction.

Question 7

Construction loans are generally amortized loans.

Question 8

A loan made to fund construction of a bridge is known as a bridge loan.

Question 9

Once a mortgage loan is closed in the primary market, the loan can be bought and sold in the secondary market.

Question 10

A short-term loan made for acquisition of property is generally referred to as a bridge loan.

Question 11

Fannie Mae is involved in the secondary mortgage market.

Question 12

The FHA makes direct loans to home buyers.

Question 13

The term of repayment on a construction loan is generally longer than that on a permanent loan.

Question 14

One major concern for a construction lender is the market value of the real property given as security for the loan.

Question 15

The risk of repayment of a conventional loan depends upon the ability of the borrower to pay and the value of the security provided by the mortgage.

Question 16

The term of repayment on a permanent loan is generally longer than that on a construction loan.

Question 17

A savings bank may make only residential loans.

Question 18

A savings bank may make only commercial loans.

Question 19

Government-guaranteed loans are called conventional loans.

Question 20

The FHA does not make direct loans to borrowers but instead guarantees loans made by approved lenders.

Question 21

Interest on most mortgage loans is paid in arrears.

Question 22

Construction loans are generally straight or term loans.

Question 23

A fully amortized loan will always have a balloon payment.

Question 24

The payment of principal and interest on a loan is called "debt service."

Question 25

Payments under a straight-line amortized plan become smaller each month.

Question 26

Payment of principal and interest on a loan is called the "loan-to-value ratio."

Question 27

Interest on most mortgage loans is paid in advance.

Question 28

A subprime loan is a loan that requires the payment of interest only.

Question 29

The payment under a fully amortized loan payment is constant and does not vary from month to month.

Question 30

A subprime loan is a loan with very low interest rates (less than the bank's prime lending rate).

Question 31

A loan in which the borrower makes periodic payments of interest, and principal becomes payable in full in one installment at the end of the loan, is known as a negative amortized loan.

Question 32

A fully amortized loan should never have a balloon payment.

Question 33

Subprime loans generally involve residential loans made with high interest rates or high up- front fees.

Question 34

The last payment on a partially amortized loan will always be a balloon payment.

Question 35

Interest payable at the beginning of each payment period is known as "payment in arrears."

Question 36

The principal balance of the loan may increase as payments are made under a negative amortization loan.

Question 37

Interest due at the end of each payment period is known as "payment in arrears."

Question 38

Payments under a fully amortized loan payment plan decline each month.

Question 39

An interest-only loan means that so long as interest is being paid on the loan, the loan never has to be repaid.