Real Estate Finance

According to the formula for calculating the down payment on an FHA loan, what would be the minimum down payment for a $110,000 home? For an FHA loan, the minimum down payment you would need to buy a home is 3.5% down. $110,000 x .035 = $3,850
Which legislation requires lenders to provide relief when circumstances are beyond the borrower’s control? Housing Act of 1964
A property valued at $350,000 has an annual net operating income of $43,750. What is the capitalization rate? Rate = Income ÷ ValueRate = $43,750 ÷ $350,000 Rate = .125 = 12.5 percent
Which is not a valid instrument for transferring property from seller to buyer? a. Quitclaim deedb. General warranty deed**c. Deed of released. Special warranty deed
In which circumstance will an appraiser make adjustments when using the sales comparison approach?
When are funds dispersed on a construction loan? In stages as construction proceeds. Also known as “draws”.
Under which rights would a borrower be able to redeem their property after a foreclosure sale? Equitable Right of Redemption
Which document separates a regular real estate loan from a construction loan? Promissory note
Tim and Sue have the smallest home in a sought-after neighborhood. The value of their home is increased because of the higher value of the other homes in the neighborhood. This is an example of what principle? Progression
What portion of a loan is covered by private mortgage insurance? Upper
Jim and Sue have three children. What is the maximum amount they can give each year without having to pay a gift tax? $78,000.00
Which principle is the sales comparison approach based on? Substitution
What is the most common technique lenders use when dealing with an FHA loan in default due to circumstances beyond the borrower’s control? Loan recasting
ECOA requires the lender to send notice of denial within how long? 30 days
What is the borrower called on a deed of trust? Trustor
Amanda Green has invested in a real estate trust that will get income from mortgage interest, loan origination fees and buying and selling mortgages. Amanda has invested in what kind of trust? REMT (Real Estate Mortgage Trust)
If the Fed wants to expand the money supply using an open market operation, which of the following actions would it take? Buying securities
What is the cost recovery period for nonresidential buildings purchased after May 12, 1993? 39 years
Under which type of loan does the lender reduce the interest rate in exchange for part of the future profits? Shared appreciation
Which of the following is not a provision of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)?a. Placed the 12 district Federal Home Loan Banks under control of the Federal Housing Finance Boardb. Abolished the defunct Federal Savings and Loan Insurance Corporation (FSLIC)c. Established two new federal deposit insurance funds to be managed by the Federal Deposit Insurance Corporationd. Transferred the regulatory powers of the Federal Home Loan Bank Board to the Federal Reserve c. Established two new federal deposit insurance funds to be managed by the Federal Deposit Insurance Corporation
Which of the following would probably not be discovered through a property survey? Chain of title defect
What type of tenancy exists when a tenant wrongfully remains without the landlord’s consent after the expiration of a lease? Estate at sufferance
Gary compared estimates on a property using all 3 estimation approaches. Now he needs to analyze the data and determine the final estimate. What is this called? Reconciliation
Dallas County is issuing bonds to fund a new high school project. What kind of bonds are these? General obligation bonds
What is an abstract of title? A historical summary of a property’s title
Regulation Z applies to which of the following?a. $35,000 farm loanb. $50,000 restaurant loanc. $75,000 condominium loand. $85,000 warehouse loan $75,000 condominium loan
Jim got a $3,000 savings account at 5 percent interest compounded annually. What will his balance be after four years? $3,472.88
Which of the following is not a member of the Farm Credit System?
What is it called when a lender waives some or all defaulted mortgage payments?
What is the basic entitlement of a VA loan? $36,000
The highest price a buyer is willing to pay and the lowest price the seller will accept for a property is known as what? Market value
Who are the 3 main participants in the Secondary Mortgage Market? Ginnie Mae, Fannie Mae, Freddie Mac
How long does a life estate last? As long as the life of the owner or some other designated person.
Which of the following is not an institutional lender?a. mortgage company.b. commercial bank.c. savings bank.d. life insurance company. a. mortgage company.
When a borrower assumes a loan, he or she does all of the following except which?a. Maintains the propertyb. Makes payments on the propertyc. Becomes liable for the provisions of the loand. Relieves the original mortgagor of his or her liability for the loan d. Relieves the original mortgagor of his or her liability for the loan
Most mutual saving banks are located in what part of the country? Northeast
Financing for farms depends on all of the following except which?a. Land productivityb. County code restrictionsc. Weather conditionsd. Management skills County code restrictions
When calculating an interest rate, what is a lender’s “mark-up”? Margin
What happens after the underwriter approves a loan? The case file goes to the lender’s closing department.
Which of the following actions is a technical default that rarely results in a foreclosure?a. Failure to maintain the propertyb. Failure to pay hazard insurance premiumsc. Failure to pay taxesd. Failure to meet an installment payment b. Failure to pay hazard insurance premiums
When an income property investor’s debt is very high, what is the most likely financial impact? Negative cash flow
Which item would typically not be part of a loan that is seller financed? Lower interest rate
Developer Pete is working on a plan for a new subdivision. In which case will it be subject to the Interstate Land Sales Full Disclosure Act? The subdivision will be marketed out of state.
Amanda and Ralph Halpern have lived in their current home for over 35 years. They are in their 70s and Ralph has had some medical problems that have caused them to incur some very high medical bills. Which type of loan could be a viable solution for them? ARM
What is the primary role of Fannie Mae? To guarantee all FHA and VA loans
Which of the following items would not be considered a red flag on the Verification of Employment form gathered by an underwriter?a. Three-month time gap between current and previous employmentb. Income out of line with type of employmentc. No prior year earningsd. Most income comes from gambling d. Most income comes from gambling
Which of the following would probably not be discovered through a property survey? Chain of title defect
After a foreclosure sale, who would receive any surplus proceeds after payment of costs, fees, expenses, and liens? Trustee
All of the following factors will affect the market rent on an office building except which one?a. How likely it is that new firms will locate to the areab. Median income of families in the building’s locationc. Number of employees that are currently employed or will be employed in the near futured. Amount of space the firm needs for its employees to do their job d. Amount of space the firm needs for its employees to do their job
When using the sales comparison approach to estimating value, the appraiser will make an adjustment in which of the following circumstances?a. The comparable sold within the past two weeks.b. The seller is offering market-rate owner-financing.c. The subject property was closer to the mall.d. The subject property has a lesser effective age than a comparable. a. The comparable sold within the past two weeks.
Which of the following statements is FALSE about a combination construction loan?a. It requires only one closing.b. The lender advances one lump sum payment at the start of the construction.c. The permanent loan will take over at a time specified in the loan document.d. The permanent loan start should coincide with the completion of the construction. b. The lender advances one lump sum payment at the start of the construction.
What is the most significant financial feature of a REIT?a. Ownership by at least a dozen investorsb. Guaranteed growth in valuec. Potential for tax-free statusd. Fiduciary relationship to its investors c. Potential for tax-free status
FIRTPA allows an exception of its withholding rule in all of the following cases except which?a. The property is worth less than $300,000 and the purchasers are buying it as personal residence.b. The transaction is not subject to tax because of a US tax treaty with another country, and the buyer and seller are not related.c. The seller or buyer gets a “withholding certificate” from the IRS, which decreases the amount to be withheld.d. The seller is not a US citizen. d. The seller is not a US citizen.
A provision in a real estate loan that prohibits any prepayment is called what? Prepayment penalty
Mortgage brokers generally do all but which of the following?a. Collect a placement fee.b. Service the loan.c. Check the soundness of the investment.d. Bring borrowers and lenders together. b. Service the loan.
Which of the following would not be considered a junior loan?a. First deed of trustb. Second deed of trustc. Equity loand. Home improvement loan a. First deed of trust
Freddie Mac was originally charted to create a secondary market for which type of mortgage loans? Conventional
Which of these items would not need to be prorated on the day of closing?a. Property taxesb. Homeowner’s association feesc. Rents for investment propertyd. Attorney fees d. Attorney fees
What is the most common technique lenders use when dealing with an FHA loan that is in default due to circumstances beyond the borrower’s control? Loan recasting
Building owner Carl has entered into a lease agreement with retail shop owner Sara that says Carl will pay all operating expenses up to a certain amount and then Sara will be responsible for anything over that amount. What is this called? Pass-through
Paul and Jenny purchased a home from Fernando and Kris. The closing is set for September 2. The real estate taxes of $1,575 will be due at the end of the year. Using the 12-month/30-day method, what will be Fernando and Kris’s share of the taxes? $1,181.25
Harry Samson wanted the purchaser of his property to assume his loan, but the lender refused. The lender was exercising his rights under what clause? Due-on-sale clause
Sally and Dan Monroe are applying for a mortgage. They have selected Tim Steele to work with. Tim will prequalify the Monroes, find an appropriate loan product for them, and work with them through loan approval. After settlement, Tim’s company will service the loan. What is Tim? Mortgage banker
Which of the following is TRUE about Ginnie Mae’s fully modified pass-through securities?a. They guarantee principal and interest payments to the investors regardless of the actual payments collected.b. They vary the yields to the investors as the market interest rates fluctuate.c. They maintain constant yields by paying only the interest to the investors.d. They are no longer viable options and have been eliminated. a. They guarantee principal and interest payments to the investors regardless of the actual payments collected.
The type of appraisal that uses comparable properties as a basis and is the primary approach used for resale homes is known as which? Sales comparison approach
What law says that borrowers must receive a good faith estimate of the closing costs within three business days of the loan application? Real Estate Settlement Procedures Act
If a developer has signed a blanket deed of trust covering all lots of the subdivision, what is true about partial releases? A partial release cannot be required, unless it’s provided for specifically in the deed of trust.
Which of the following is not a procedure for controlling risk?a. Careful selectionb. Refinancingc. Hedgingd. Diversifying b. Refinancing

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