TEXAS REAL ESTATE FINANCE EXAM Questions and Verified Correct Answers Latest Update 2024 G, Exams of Business Ethics

Download TEXAS REAL ESTATE FINANCE EXAM Questions and Verified Correct Answers Latest Update 2024 G and more Exams Business Ethics in PDF only on Docsity! TEXAS REAL ESTATE FINANCE EXAM Questions and Verified Correct Answers Latest Update 2024 Guaranteed A+ $1352.47 - CORRECT ANSWER: The sales price is $325,000 with a loan-to-value of 85%. The interest rate is 5 7/8%. The term is 30 years. What is the amount of interest the buyer will pay the first month of the loan? Use an actual year. A) $1592.50 B) $1565.42 C) $1330.60 D) $1352.47 $2548.87 - CORRECT ANSWER: Calculate the montly payment on an 80% loan with a sales price of $350,000 for 30 year term at 6.75%. The annual taxes are $7300 and the annual insurance premium is $1480. The loan factor is 6.49 per $1000. A) $2548.87 B) $3003.17 C) $2668.18 D) $2945.20 $4250.00 - CORRECT ANSWER: The Smiths have long-term debts of $365 and you have estimated their monthly mortgage payment to be $1250 with lender ratios of 33%/38%. How much income must they earn monthly to qualify? A) $4250.00 B) $2984.85 C) $2592.10 D) $4151.52 $4560 - CORRECT ANSWER: The lender is charging 2 discount points on a home that is priced at $285,000. The buyers are obtaining 80% financing. What would be the dollar amount of the discount? A) $4625 B) $925 C) $4560 D) $2700 2 mths insuance reserve; 3 mths tax reserve; 2 mths PMI reserve - CORRECT ANSWER: Prepaids are items that are typically collected at closing: ; ; 3 - CORRECT ANSWER: Regulation Z is the Truth in Lending Act (TILA). it provides a day right or rescission. The purchaser may rescind the transaction within _ days after the date of consummation of the transaction. 3a + 3b = 3c - equal ! No exceptions!! In the contract remember + must always 80% - CORRECT ANSWER: Calculate the loan-to-value if a borrower is purchasing a house for $125,000 and is putting down $25,000 as a down payment. A) 100% B) 80% C) 85% D) 90% 80% - CORRECT ANSWER: PMI is generally required on a conventional loan with a loan-to-value ratio in excess of: A) 75% B) 80% C) 70% D) Determined by the lender 90 - CORRECT ANSWER: To qualify for the Texas Veterans Land Fund, the Texas Veteran must have served consecutive days active duty since September 16, 1940 and be a resident of Texas at the time of entry into the service, or at least two consecutive years prior to filling out the application. A single number used by the lender to predict the likely future perfomance of a person's loan - CORRECT ANSWER: What is credit scoring? A) Underlying items of importance on your credit report B) The federal legislation that prevents discrimination regarding credit applicants C) The score you receive when you open a revolving charge card D) A single number used by the lender to predict the likely future perfomance of a person's loan AAA Credit - CORRECT ANSWER: Lenders will look at all of the following credit reporting agencies for the credit rating of the buyer EXCEPT: A) Equifax B) Trans Union C) Experian D) AAA Credit CORRECT ANSWER: CORRECT ANSWER: Borrower - CORRECT ANSWER: Usury laws put a cap on interest rates. These laws protect the: A) Seller B) Borrower C) Broker D) Lender bought and sold - CORRECT ANSWER: The secondary market is a national market in which mortgages secured by real estate in all parts of the United States are . budget mortgage - The requires equal payments to be made by the borrower to cover principle and interest for the life of the loan. Budget mortgage - CORRECT ANSWER: The type of mortgage that requires equal payments of principal and interest to be made for the life of the loan by the borrower is a(n): A) Blanket mortgage B) Construction mortgage C) Budget mortgage D) Package mortgage buying loans, issuing mortgage backed securities - CORRECT ANSWER: Secondary market agencies have two main activities: 1) and 2) . Cap - CORRECT ANSWER: : A limit placed on payments, interest rates and/or the balance of a loan. Certificate of Reasonable Value - CORRECT ANSWER: To determine the value of a property on a VA loan, the lender uses: A) An appraisal B) Comparable market analysis C) Certificate of Reasonable Value D) Broker price opinion CERTIFICATE OF REASONABLE VALUE(CRV) - CORRECT ANSWER: the lender civil liability for actual and punitive damages in individual or class actions. - CORRECT ANSWER: Failure to comply with the Equal Credit Opportunity Act's Regulation B can must obtain a ( ) to verify value of the property subject a financial institution to and or CORRECT ANSWER: existence Community property and joint tenancy - are not the same thing. Conforming loans - loan purchase requirements of both Fannie Mae and Freddie Mac. Construction mortgage - 'interim loan' or interim financing' Construction mortgage - CORRECT ANSWER: What type of mortgage is sometimes referred to as "interim financing?" A) Wraparound mortgage B) Package mortgage C) Construction mortgage D) Blanket mortgage Deceptive Trade Practice Act (DTPA) - CORRECT ANSWER: Under the ( ) licensees can still be held liable if they committed an unconscionable act, misrepresented a material fact, or failed to disclose information with the intention of inducing a consumer into a transaction. Deed of Trust - The allows for non-judicial foreclosure in Texas, that is, the lender does not have to go to court to foreclose on the property. default, security - CORRECT ANSWER: the note must include: borrower, lender, promise to pay, original principal balance, interest, term, periodic payment (including late charge), , Deficiency judgment - CORRECT ANSWER: When property is sold in a foreclosure proceeding and the sale does not bring sufficient funds to cover the senior mortgage, the original mortgagor may be subject to a: A) Foreclosure B) Lien C) Default agreement D) Deficiency judgment deficiency judgment - CORRECT ANSWER: When property is sold in a foreclosure proceeding and the sale does not bring sufficient funds to cover the senior mortgages, the original mortgagor(borrower) may be subject to a : the process that brings the loan into legal CORRECT ANSWER: closing - and CORRECT ANSWER: are those loans that meet the CORRECT ANSWER: sometimes called an CORRECT ANSWER: CORRECT ANSWER: DIRECT ENDORSEMENT - CORRECT ANSWER: Some lenders have the authority to approve FHA loans in-house without submitting the file to the FHA regional office. This directing consumers toward a particular title company for a fee - CORRECT ANSWER: RESPA restricts or prohibits: kickbacks or fees charged for services not performed during the closing process; the amount of reserves a lender can require for taxes and Disability - CORRECT ANSWER: The Federal Equal Credit Opportunity Act prohibits lenders from discriminating against potential borrowers on the basis of all of the following EXCEPT: A) Sex B) National origin C) Source of income D) Disability discount point - A is an amount equal to 1% of the principle amount of the note(loan). Loan discount pts are a one-time charge assessed at the closing by the lender to increase the yield on the mortgage loan (and buy the interest rate down for the mortgagor(borrower)) Discount rate - CORRECT ANSWER: is the rate the Federal Reserve charges its member bank to borrow money Discount rate - CORRECT ANSWER: The rate the Federal Reserve charges its member banks to borrow money is called the: A) Discount rate B) Prime rate C) T-bill rate D) Usury rate encumbrance - CORRECT ANSWER: : A right , lien, or claim attached to real property that passes with the title (i.e. easements, judgment liens, mortgage liens). These may reduce the value of the property. Equal Credit Opportunity Act (ECOA) - CORRECT ANSWER: The ( ) states it shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction-- on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); because all or part of the applicant's income derives from any public assistance program;etc.. process is called , or an in-house approval. insurance in a mortgage escrow, and _ government guaranteed loan - CORRECT ANSWER: The VA loan is a . Basically the lenders like making VA loans because there is very limited risk for the lender since the loan is guaranteed by the federal government. Gross income - CORRECT ANSWER: The amount the borrower makes prior to any deductions for taxes or insurance is: A) Guaranteed income B) Net income C) Gross income D) Gross margin have at least 75% or its total assets invested in real estate; derive at least 75% of its gross income from rents or mortgage interest; have no more than 20% of it's assets invested in taxable RIETs subsidiaries - CORRECT ANSWER: A REIT must: be structured as a corporation, trust, or association; be managed by a board of directors or trustees; have transferable shares or transferable certificates of interest; otherwise be taxable as a domestic corporation; not be a financial institution or an insurance company; be jointly owned by 100 persons or more; have 95 percent of its income derived from dividends, interest, and property income; pay dividends of at least 90% of the REIT's taxable income; have no more than 50% of the held by five or fewer individuals during the last half of each taxable year (5/50 rule); _ _ Homestead - CORRECT ANSWER: : In the Texas Constitution, a principle residence of a family or adult single person is protected from forced sale for all debt except: property taxes; federal tax liens of both spouses; a home equity lien.....etc... HUD-1 - CORRECT ANSWER: : a settlement statement form required by HUD. HUD-1 - CORRECT ANSWER: What form is used at closing to show the fees paid by the buyer and seller in a One-to-Four Family Residential Contract? A) Commitment Letter B) Corporate declaration C) HUD-1 D) Escrow agreement Insurance on an FHA loan - CORRECT ANSWER: MIP refers to: A) VA's guaranty program B) Private mortgage insurance on a conventional loan C) Mutual insurance premium D) Insurance on an FHA loan _ _ _ _ _ _ ; _ _ _ _; _ _ _ _ _ _ _ CORRECT ANSWER: are loans that are over the CORRECT ANSWER: Jumbo loans - conforming loan limit. Lien - CORRECT ANSWER: A legal encumbrance of one person on the property of another as security for a debt or charge is called: A) Leverage B) Lease C) Lien D) Loan-to-value lien theory - Texas is a state. loan amount - CORRECT ANSWER: A discount point is 1% of: A) market value B) sales price C) cost D) loan amount Loan Portfolio - CORRECT ANSWER: is the total of all the loans that a financial institution or other lender holds at a given time. A list, distribution, or grouping of mortgage loans. LTV - CORRECT ANSWER: The amount of money the lender will loan in comparison to the price of the property is called: A) MIP B) APR C) FHA D) LTV Meets the underwriting standards of the Federal National Mortgage - CORRECT ANSWER: To a lender, a "conforming loan" is one that: A) Meets the underwriting standards of the Federal National Mortgage B) Is made in compliance with the generally accepted guidelines C) Is expected to be held in the portfolio of the lender who is making the loan D) Is made in even on hundred dollar increments Mortgage bankers - CORRECT ANSWER: originate loans where mortgage brokers bring together the lender and the borrower and "arrange" the loan. Paid in Advance : ; CORRECT ANSWER: Insurance; rent - CORRECT ANSWER: servicing of mortgage loans by a firm or individual. Mortgage Insurance Premium (MIP) - ( ) Mortgage-backed securities - CORRECT ANSWER: What type of investment is an undivided interest in a pool of mortgages that is sold on the secondary market? A) Stock B) Mutual fund C) Municipal bond D) Mortgage-backed securities mortgager(borrower), mortgagee(lender) and Trustee - CORRECT ANSWER: In a Deed of trust there are 3 parties involved: Mortgagor - CORRECT ANSWER: Who must sign the mortgage and the note? A) Mortgagee B) Mortgagor C) Trustee D) Beneficiary National banks - CORRECT ANSWER: must belong and any state banks that wish may join the Federal Reserve System. Non-payment of a mechanics and material men's lien - CORRECT ANSWER: In Texas, the principle residence of a family or single person is protected from forced sale by certain creditors by the Homestead Law EXCEPT: A) Non-payment of revolving dept B) Non-payment of a mechanics and material men's lien C) Principal residence in a townhome or condominium D) Non-payment of child support note - The is the contractual agreement to repay the debt. In other words, it is the promise to repay the loan. The debt is evidenced by the promissory note. The mortgager(borrower) must sign the note. Note - CORRECT ANSWER: The instrument that the mortgagor gives as evidence of the loan and promises to repay the loan is a: A) Note B) Lien C) Mortgage :the origination, sales and CORRECT ANSWER: mortgage banking - FHA has CORRECT ANSWER: CORRECT ANSWER: not commercial properties. Reverse annuity mortgage - homeowner over the age of 62 to borrow against the equity in his home and not repay the loan until he no longer occupies the property Reverse annuity mortgage - CORRECT ANSWER: What type of loan allows a homeowner over the age of 62 to borrow against the equity in his home and not repay the loan until he no longer occupies the home? A) Adjustable rate mortgage B) Reverse annuity mortgage C) Graduated payment mortgage D) Shared appreciation mortgage seasoned mortgage - CORRECT ANSWER: One function of FNMA is selling seasoned mortgages and trust deeds to individual investors and financial institutions. A is one that has been in existence for some time and that shows a good record of repayment by the mortgagor (borrower) secondary - The market refers to the selling and purchasing of closed real estate mortgage loans. Short sale - CORRECT ANSWER: is the sale of a property where the lender agrees to settle for less than the amount owed on the property Standardized Good Faith Estimate (GFE) - CORRECT ANSWER: RESPA requires disclosures among them the ( ) Subordination clause - CORRECT ANSWER: : The clause that allows the lender to alternate a second mortgage to the first position and a first mortgage to a second position Subordination clause - CORRECT ANSWER: What clause allows a lender to alternate a second mortgage to the first and a first mortgage to a second position? A) Defeasance clause B) Deficiency clause C) Subordination clause D) Alternate clause supply reserve funds when needed and control bank and consumer credit. - CORRECT ANSWER: The two major purposes of the Federal Reserve System, called the FED for The provisions of are for residential properties, CORRECT ANSWER: RESPA - short, are; and :a loan that allows a CORRECT ANSWER: : a loan where the CORRECT ANSWER: Term or straight loan - borrower pays interest only for a limited amount of time and at the end of the term, the principle is due. Term or straight term mortgage - CORRECT ANSWER: What type of loan do you get when you pay interest only for a limited amount of time and then at the end of the term the principal is due A) Wraparound mortgage B) Open-end mortgage C) Balloon loan D) Term or straight term mortgage That credit institutions are required by the federal government to inform borrowers of the true costs of obtaining credit. - CORRECT ANSWER: What does Regulation Z mean? A) That all lenders treat their customers fairly and equally B) The federal government can "take over" any primary lender they find insolvent C) A regulation which states that lenders are not allowed to make loans on any property larger then six lots D) That credit institutions are required by the federal government to inform borrowers of the true costs of obtaining credit. That expires three business days after the date of consummation of the transactions - CORRECT ANSWER: Regulation Z provides a right of rescission: A) To first mortgages to finance the purchase of a residential condominium unit B) To all residential loans on real estate C) That expires upon default of the loan D) That expires three business days after the date of consummation of the transactions The buyer's credit history - CORRECT ANSWER: To comply with Regulation Z, the lender is required to disclose all of the following EXCEPT: A) Annual percentage rate B) Total payment C) The buyer's credit history D) Late payment charges the deferred payment price or total payments - CORRECT ANSWER: The Truth-in- Lending Act requires that five disclosures are required if certain "Trigger Terms" are used in advertising: the cash price or the amount of the loan; the amount of the down paid in arrears: ; CORRECT ANSWER: Taxes ; Interest - payment or a statement that none is required; the number, amount and frequency of The Federal Reserve - CORRECT ANSWER: What drives the mortgage loan interest rate? A) Mortgage B) The Federal Reserve C) Prices of mortgage-backed securities D) Federal government The selling and purchasing of closed real estate mortgage loans - CORRECT ANSWER: The "secondary market" refers to: A) An institution that purchases second mortgages B) Any lender that is a second lien holder C) The selling and purchasing of closed real estate mortgage loans D) An institution that makes second liens the settlement costs; the APR; provide the HUD-1 form to the buyers - CORRECT ANSWER: RESPA requires the following items to be disclosed to the buyers: The total payment is the same each month but the allocation to interest is different each month. - CORRECT ANSWER: With a fully amortized mortgage or deed of trust loan: A) The interest portion of each payment remains the same throughout the entire term of the loan B) Periodic payments are made the final payment is larger C) The total payment is the same each month but the allocation to interest is different each month. D) The total payment varies each month but a fixed amount is credited toward the principal. Third Party Financing Addendum - CORRECT ANSWER: The gives the details of the lender's loan to the borrower To maintain an active secondary money market for mortgages - CORRECT ANSWER: What is the primary responsibility of the Federal National Mortgage Association? A) To insure loans for qualified purchasers B) To determine the number of discount points charged on a loan C) To prohibit redlining D) To maintain an active secondary money market for mortgages repayments; the APR; and _ _ ; ; _ home and still be able to take the depreciation? - CORRECT ANSWER: 14 days or 10 percent of the time rented Mary is getting a $120,000 loan at 6.5 percent and will pay 3 discount points. What will the effective interest rate be? - CORRECT ANSWER: 0.06875 RESPA applies to which of these? - CORRECT ANSWER: First mortgage on a single- family home Sam Frank is a retired Army officer who wants to purchase a new home using a VA loan. In 2000, Sam used his VA guarantee of $36,000 when he purchased his current home. Based on the VA's maximum guarantee of $104,250 and his partial eligibility, how much of a loan can Sam get with no money down? - CORRECT ANSWER: $273,000 The Consumer Financial Protection Bureau (CFPB) requires the use of the Closing Disclosure (CD) for which types of transactions? - CORRECT ANSWER: Residential transactions financed by a federally-related loan The cost recovery period for land improvements is how long? - CORRECT ANSWER: 15 years The entity holding title to a property during the term of a deed of trust is called what? - CORRECT ANSWER: Trustee The successful bidder at a judicial foreclosure sale receives which of these documents? - CORRECT ANSWER: Certificate of Sale The Tax Reform Act of 1986 established an entity that can issue multiclass securities. What is this entity called? - CORRECT ANSWER: REMIC The type of estate that has a definite beginning and ending date is known as what? - CORRECT ANSWER: Estate for years Under which type of loan does the portion of payment that is applied to principal increase regularly over time? - CORRECT ANSWER: Growing Equity What are the steps in the sales comparison approach to estimating value? - CORRECT ANSWER: Choose appropriate comparable properties, adjust the comparables for the differences and estimate the value. What does the term "mixed-use development" mean? - CORRECT ANSWER: More than one use for a single building What is a disadvantage of a graduated-payment loan? - CORRECT ANSWER: This plan could result in negative amortization. What is a leasehold mortgage called that is based mostly upon a well-known tenant's financial strength? - CORRECT ANSWER: Credit loan What is one of the primary purposes of the secondary mortgage market? - CORRECT ANSWER: Cycle back money to primary lenders. What is the main advantage of a single-family home investment over other real estate investments? - CORRECT ANSWER: Liquidity What is the maximum annual amount a single taxpayer can give to a person without incurring a gift tax liability? - CORRECT ANSWER: $15,000.00 What is the most important aspect of a credit report? - CORRECT ANSWER: It shows the borrower's attitude about handling credit and debt. What is the term used for an agreement between the borrower and a permanent lender relative to future delivery of a takeout loan upon completion of construction? - CORRECT ANSWER: Take-out commitment What is the term used to describe a loan that is not government-backed? - CORRECT ANSWER: Conventional What percent of the REIT's assets must be made up of cash, real estate, mortgage notes, or government securities? - CORRECT ANSWER: 75 Which of the following default types would be considered a technical default? - CORRECT ANSWER: Failure to keep property in good repair Which of the following is not a HUD responsibility? - CORRECT ANSWER: FDIC Which of the following is typically not a short-term mortgage loan? - CORRECT ANSWER: Single-family home loan Which of the following lease options would be the least favorable to the tenant? - CORRECT ANSWER: Tenant relocation Which of the following statements is FALSE about a life estate? - CORRECT ANSWER: The most complete form of ownership Which of the following statements is FALSE? - CORRECT ANSWER: Noninstitutional lenders are not subject to usury law. Which of the following statements is not true about a note? - CORRECT ANSWER: A note must be tied to a mortgage to be legal. Which of the following would not be an example of recasting a loan? - CORRECT ANSWER: Giving a voluntary conveyance Which of the following would probably not be a use of a junior loan? - CORRECT ANSWER: Purchase of property through the VA Which of these statements is TRUE about financing large apartment complexes? - CORRECT ANSWER: As the size of the building increases, the loan ratio is generally reduced. Which statement about syndication is FALSE? - CORRECT ANSWER: Most investors belonging to syndicates invest a lot of their own money. Which statement is not true about the Farm Credit System? - CORRECT ANSWER: FCS banks lend money from their deposits. Which Texas agency licenses, regulates, and examines the trust- and insurance- funded prepaid funeral contract sellers? - CORRECT ANSWER: Texas Department of Banking Which type of property is most benefited by the income capitalization approach to estimating value? - CORRECT ANSWER: Apartment building Who is responsible for ordering the preliminary title report? - CORRECT ANSWER: Escrow officer Who is the person who grants approval for the loan, rejects the loan, or in some cases, agrees to approve the loan if certain conditions are met? - CORRECT ANSWER: Underwriter Why do lenders collect reserve funds at the property closing? - CORRECT ANSWER: To be sure money will be available for tax and insurance payments With which kind of lease does the tenant not know the actual change in the rent amount in advance? - CORRECT ANSWER: Indexed