Question 1

A mortgage applicant who is turned down for a mortgage application should find out why by requesting the

Accepted Answer

A mortgage applicant who is turned down for a mortgage application should request an adverse action notice to find out why they were denied. This notice provides information on the reasoning behind the decision and informs the applicant of their right to obtain their credit report for free from the credit bureau. It also provides information on how to dispute any inaccuracies on the credit report. Therefore, option D is the most appropriate choice.

Question 2

Which of the following documents outlining all of the costs associated with closing on the sale of a home must the purchaser receive at least 1 business day prior to the closing?

Accepted Answer

The uniform settlement statement must be provided to the purchaser at least 1 business day prior to closing and outlines all of the costs associated with closing on the sale of a home, including the loan terms, closing costs, and other financial details. The deed is the legal document transferring ownership of the property from the seller to the purchaser, but its delivery is not time-sensitive. A good-faith estimate is an estimate of the buyer's closing costs and is usually provided earlier in the process, and an abstract is a historical summary of the ownership and transfer of the property and is not directly related to the closing costs.

Question 3

Which of the following documents outlining all of the costs associated with closing on the sale of a home will the borrower receive within 3 days after applying for a mortgage?

Accepted Answer

The borrower will receive a good-faith estimate within 3 days after applying for a mortgage, which outlines all of the costs associated with closing on the sale of a home. The other options (deed, uniform settlement statement, abstract) are documents related to the transfer of ownership or title, but are not necessarily provided within the first 3 days of applying for a mortgage.

Question 4

Sellers of homes generally set a sales asking price ____ percent higher than what they expect to get for it.

Accepted Answer

Studies have shown that sellers typically set their asking price 5% to 15% higher than what they expect to sell their home for. This is because they want to leave room for negotiation and to account for potential market fluctuations.

Question 5

Lenders use ____ ratios when setting limits on how much a home buyer can borrow.

Accepted Answer

Lenders typically use both front-end and back-end ratios when evaluating a borrower's ability to repay a mortgage loan. The front-end ratio looks at the borrower's monthly housing payments compared to their monthly income, while the back-end ratio considers the borrower's total monthly debt payments (including the mortgage payment) in relation to their monthly income. This helps ensure that the borrower is not taking on more debt than they can afford to repay.

Question 6

The person assigned to manage your loan application through the process is the

Accepted Answer

A loan officer is the individual responsible for managing your loan application from start to finish. They are the primary point of contact for borrowers and work with them throughout the loan process. The loan processor and mortgage server may be involved in the process, but they are not primarily responsible for managing the application. The real estate agent's role is to help you find a property to purchase, but they are not involved in the loan application process.

Question 7

________ clauses specify that certain conditions must be satisfied before a home purchase contract is binding.

Accepted Answer

Contingency clauses are added to a home purchase contract to specify that certain conditions must be met before the contract is binding. Common examples of contingency clauses include the buyer obtaining financing or the home passing inspections. A contingency clause allows either party to back out of the contract if the specified conditions are not met, without penalty.

Question 8

The dollar value of the home in excess of the outstanding mortgage debt is called

Accepted Answer

Homeowner's equity is the dollar value of the home in excess of the outstanding mortgage debt. It represents the amount of ownership the homeowner has in the property. Choices A, C, and D are not correct because asset value refers to the total value of all assets owned by an individual or company, amortization refers to the process of paying off a loan over time, and collateral refers to property that is pledged as security for a loan.

Question 9

Lenders in the sub-prime market offer loans

Accepted Answer

Lenders in the sub-prime market specifically target higher-risk applicants who have a greater likelihood of defaulting on their loans, and therefore charge higher interest rates to offset the increased risk.

Question 10

Which real estate agent works solely for the home buyer?

Accepted Answer

A Buyer's Agent works solely for the home buyer and represents their best interests throughout the home buying process. They are responsible for finding suitable properties, negotiating offers, and assisting with the overall transaction. Dual agents represent both the buyer and the seller, while listing agents work for the seller and selling agents work for the buyer's agent or the seller.

Question 11

A real estate broker has a legal obligation to the

Accepted Answer

A real estate broker's primary legal obligation is to the party who is paying him or her, which could be the buyer, the seller, or both in different circumstances. This is because the broker's duty is to represent the interests of their client, who is the one compensating them for their services.

Question 12

Mortgage lenders charge interest rates based on your

Accepted Answer

Mortgage lenders typically use credit scores to determine the interest rate they will charge borrowers. A higher credit score can result in a lower interest rate, while a lower credit score can result in a higher interest rate. Front-end ratio, liability, and escrow are factors used to qualify borrowers for a mortgage, but they are not directly related to the interest rate.

Question 13

Mortgage lock-ins have a 30- or 60-day limit.For a fee you can buy more time through a

Accepted Answer

The answer of Mortgage lock-ins have a 30- or 60-day...

Question 14

A mortgage lock-in is the lender's promise to

Accepted Answer

A mortgage lock-in refers to the lender's promise to hold a certain interest rate for a specific period of time, typically 30-60 days. This is done to protect the borrower from a rise in interest rates before the loan is closed.

Question 15

Earnest money is the sum of money the home buyer pays to

Accepted Answer

Earnest money is the sum of money paid by the home buyer to hold the house while negotiating the sale. It demonstrates the buyer's seriousness in purchasing the property and is typically held in escrow until the sale is completed.

Question 16

Aaron Jefferies has located a condominium he would like to buy,and he would like the current owners to leave all window coverings in the condo.This condition should be included in the

Accepted Answer

The condition of leaving window coverings in the condo should be included in both the purchase offer and the purchase contract to ensure that it is legally binding and enforceable. The warranty deed is a document that transfers ownership of the property from the seller to the buyer and does not include any conditions or agreements between the parties.

Question 17

Stefan and Patricia would like to buy a home,but they aren't sure how large a house payment they can afford.Their combined gross monthly income is $5,000,and they have a $425 education loan payment.Assuming a 38 percent back-end ratio,Stefan and Patricia qualify for a maximum total house payment of

Accepted Answer

The back-end ratio is calculated by dividing the total monthly debt payments by the gross monthly income. In this case, the total monthly debt includes the house payment and the education loan payment. With a 38 percent back-end ratio, the maximum amount they can allocate to monthly debt payments is 38% of $5,000, which is $1,900. Subtracting the $425 education loan payment from this amount leaves $1,475 for the house payment.

Question 18

If you borrow money from a family member at a below market interest rate for the down payment on a mortgage,the lender must pay income taxes on the ____ that would have been earned had the market interest rate been assessed.

Accepted Answer

The term used for interest that is not explicitly stated but is implied by the transaction is imputed interest. The lender must pay income taxes on the imputed interest that would have been earned had the market interest rate been assessed.

Question 19

The formal legal document that outlines the actual agreement to buy a house is called a(n)

Accepted Answer

The purchase contract is the formal legal document that outlines the actual agreement to buy a house. This document outlines the terms of the agreement, including the purchase price, closing date, contingencies, and other important details. The purchase contract is signed by both the buyer and seller and serves as the basis for the transfer of the property.

Question 20

A mortgage applicant who anticipated increasing interest rates would be most interested in

Accepted Answer

A mortgage lock-in is an agreement between the borrower and the lender to guarantee a specific interest rate for a certain period of time, typically between 30 and 60 days. This ensures that the borrower will be protected from any rate increases during the lock-in period. Therefore, a mortgage applicant who anticipates increasing interest rates would be most interested in obtaining a mortgage lock-in. Choice A) a settlement statement is a document that outlines all the costs associated with obtaining a mortgage loan and is typically reviewed at closing. Choice B) refinancing a mortgage involves paying off an existing mortgage with a new one, and it may or may not result in a lower interest rate. Choice D) a due-on-sales clause is a provision in a mortgage that requires the borrower to pay the full balance of the loan if the property is sold, which is unrelated to interest rate fluctuations.

Quiz 9: Obtaining Affordable Housing