Mortgage and Real Estate Terms Glossary, Exams of Banking and Finance

Download Mortgage and Real Estate Terms Glossary and more Exams Banking and Finance in PDF only on Docsity! Texas Real Estate Finance Exam Latest Update 2024-2025 200+ Questions and Verified Correct Answers 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: ; ; CORRECT ANSWER: provision of a mortgage providing the holder with the right to demand that the entire outstanding balance is immediately due and payable in the event of a default. Alienation clause - CORRECT ANSWER: The clause in a mortgage that stipulates that when the property is sold, the entire blanace of the loan is due and payable (and not able to be assumed) is theclause. A) Deprecation clause B) Amortization clause C) Alienation clause D) note alienation clause - CORRECT ANSWER: The opposite of an assumption clause would that if the property is sold, the entire balance of the loan must be paid off not allowing the loan to be assumed. All of the above (The term, The late charges, The promise to pay) - CORRECT ANSWER: Of the following items, which is (are) included in the note? A) The term B) The late charges C) The promise to pay D) All of the above Amortization - CORRECT ANSWER: : the systematic and continuous repayment of an obligation through periodic installments until the debt has been repaid in full. Amortization - CORRECT ANSWER: : the total payment is the same each month but the allocation of interest is different each month. Annual Percentage Rate (APR) - ( ) is the actual interest rate the borrower pays when all the costs of obtaining credit are included approval of the applicant, approval or the property, approval of the final closing statement known as the HUD-1 - CORRECT ANSWER: Underwriters have three main : is the commonCORRECT ANSWER:acceleration clause - be an . The , also known as the "Due on Sale" clause, st es jobs: , , _ _ _ _ _ CORRECT ANSWER: APR - The is the actual interest rate the borrower pays when all the costs of obtaining the credit included: A) Yield B) Underwriting C) Straight term mortgage CORRECT ANSWER: CORRECT ANSWER: D) APR APR; total payment ; late payment charges - CORRECT ANSWER: To comply with Regulation Z, the lender is required to disclose all of the following to the borrower: Assumption - CORRECT ANSWER: What is the opposite of an alienation clause? A) Amortization B) Escalation C) Assumption D) Acquisition Assumption clause: - CORRECT ANSWER: : The clause in the mortgage allowing the purchase to take over the owner's existing loan. the new owner does not necessarily take personal responsibility. back-end - VA uses only one ratio, the , to qualify veterans. That back-end ratio is 41% back-end ratios - mortgage payment, plus all recurring debt. Balloon mortgage - with a , the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end of the term. Bankers - originate. Mortgage can service the loans they A) Brokers B) Processor s C) Bankers Blanket mortgage - CORRECT ANSWER: : is normally used to finance the purchase of raw land. This mortgage allows the developer to include more than one property Blanket mortgage - CORRECT ANSWER: A form of mortgage covering several houses or number of lots is a: A) Package mortgage the- reflects their newCORRECT ANSWER: CORRECT ANSWER: 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 subject a financial institution to and or must obtain a ( ) to verify value of the property Texas Real Estate Finance Exam Latest Update 2024-2025 200+ Questions and Verified Correct Answers 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: ; ; CORRECT ANSWER: provision of a mortgage providing the holder with the right to demand that the entire outstanding balance is immediately due and payable in the event of a default. Alienation clause - CORRECT ANSWER: The clause in a mortgage that stipulates that when the property is sold, the entire blanace of the loan is due and payable (and not able to be assumed) is theclause. A) Deprecation clause B) Amortization clause C) Alienation clause D) note alienation clause - CORRECT ANSWER: The opposite of an assumption clause would that if the property is sold, the entire balance of the loan must be paid off not allowing the loan to be assumed. All of the above (The term, The late charges, The promise to pay) - CORRECT ANSWER: Of the following items, which is (are) included in the note? A) The term B) The late charges C) The promise to pay D) All of the above Amortization - CORRECT ANSWER: : the systematic and continuous repayment of an obligation through periodic installments until the debt has been repaid in full. Amortization - CORRECT ANSWER: : the total payment is the same each month but the allocation of interest is different each month. Annual Percentage Rate (APR) - ( ) is the actual interest rate the borrower pays when all the costs of obtaining credit are included approval of the applicant, approval or the property, approval of the final closing statement known as the HUD-1 - CORRECT ANSWER: Underwriters have three main : is the commonCORRECT ANSWER:acceleration clause - be an . The , also known as the "Due on Sale" clause, st es jobs: , , _ _ _ _ _ CORRECT ANSWER: APR - The is the actual interest rate the borrower pays when all the costs of obtaining the credit included: A) Yield B) Underwriting C) Straight term mortgage CORRECT ANSWER: CORRECT ANSWER: D) APR APR; total payment ; late payment charges - CORRECT ANSWER: To comply with Regulation Z, the lender is required to disclose all of the following to the borrower: Assumption - CORRECT ANSWER: What is the opposite of an alienation clause? A) Amortization B) Escalation C) Assumption D) Acquisition Assumption clause: - CORRECT ANSWER: : The clause in the mortgage allowing the purchase to take over the owner's existing loan. the new owner does not necessarily take personal responsibility. back-end - VA uses only one ratio, the , to qualify veterans. That back-end ratio is 41% back-end ratios - mortgage payment, plus all recurring debt. Balloon mortgage - with a , the amortized payment of a mortgage remains constant over the period of the loan but leaves an outstanding balance to be paid at the end of the term. Bankers - originate. Mortgage can service the loans they A) Brokers B) Processor s C) Bankers Blanket mortgage - CORRECT ANSWER: : is normally used to finance the purchase of raw land. This mortgage allows the developer to include more than one property Blanket mortgage - CORRECT ANSWER: A form of mortgage covering several houses or number of lots is a: A) Package mortgage the- reflects their newCORRECT ANSWER: CORRECT ANSWER: 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 subject a financial institution to and or must obtain a ( ) to verify value of the property sometimes called anCORRECT ANSWER: 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 : the process that brings the loan into legalCORRECT ANSWER:closing - are those loans that meet theCORRECT ANSWER: and CORRECT ANSWER: 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 CORRECT ANSWER: Estimated taxes - CORRECT ANSWER: To comply with the advertising portion of Regulation Z, if you advertised the monthly payment for the property you would also be required to advertise all of the following EXCEPT: A) Down payment B) Estimated taxes C) Amount of the loan D) APR Fair Credit Reporting Act - CORRECT ANSWER: In 1970, the first was passed. For the first time, this gave each individual the right to inspect his file, correct any errors and make explanatory statements to supplement the file. False - CORRECT ANSWER: A title policy guarantees that you will be able to sell your property. True or False? False - CORRECT ANSWER: Private Mortgage Insurance is insurance for the borrower. True or False? A) True B) False False - CORRECT ANSWER: VA loans require mortgage insurance if more than 80% is financed. A) True B) False Federal Deposit Insurance Corporation (FDIC) - CORRECT ANSWER: ( ) is a federal agency that insures deposits in commercial banks up to $250,000 and , along with the Federal Reserve System, regulates banks and banking procedures. Federal Reserve - The has two primary methods of controlling the flow of money in the United States. They control the flow of money by their availability to change the reserve requirements of the banks and/or changing the discount rate charged to banks. Federal Reserve - loan interest rate. The drives the mortgageCORRECT ANSWER: Federal Reserve Board - purposes of Regulation Z The carries out the FHA - CORRECT ANSWER: offered to insure lenders against losses due to non- repayment when they made loans on both new and resale homes. That is why the CORRECT ANSWER: CORRECT ANSWER: CORRECT ANSWER: lenders benefit from offering FHA loans to buyers. the money used by the Federal Housing Administration (FHA) loan is supplied by a qualified lending institution. First months payment - CORRECT ANSWER: Prepaids typically collected at closing include all the following EXCEPT: A) Two months insurance reserve B) Three months tax reserve C) Two months PMI reserve D) First months payment fixed interest rate loan - In a , the payment is the same each month but the allocation to interest is different each month. FNMA - CORRECT ANSWER: is the nation's largest investor in residential mortgages. FNMA - One of the primary responsibilities of is to maintain an active secondary money market for mortgages. FNMA - CORRECT ANSWER: Who is the largest investor of residential mortgages in the United States? A) FNMA B) FHLMC C) FHA D) GNMA FNMA (Fannie Mae) Federal National Mortgage Association - CORRECT ANSWER: exchanges mortgage back securities for a block or pool of mortgages. Forecloses in the event of default - CORRECT ANSWER: In a deed of trust, the trustee: A) Forecloses in the event of default B) Closes the real estate transaction C) Changes the legal status of the purchasers, if necessary D) Sells the loan to the secondary market Front end ratios - CORRECT ANSWER: : lenders use what is called a front-end ratio, which is reflected as a percentage of their gross 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: 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 Paid in Advance :; CORRECT ANSWER:Insurance; rent - are loans that are over theCORRECT ANSWER:Jumbo loans - where mortgage brokers bring together the lender and the borrower and "arrange" the loan. D) Collateral Origination Fee - lender for taking and processing the loan application Origination fee - CORRECT ANSWER: The fee charged by the lender for taking and processing the loan application is known as: A) Origination fee B) Discount fee C) Broker's fee D) Guarantee fee Package mortgage - CORRECT ANSWER: : permits a home buyer to borrow money from a single lender, not only on the value of the land and improvements, but also on the value of equipment, such as appliances PITI - CORRECT ANSWER: Principal, interest, taxes, insurance PMI - CORRECT ANSWER: Mortgage insurance for conventional loans is referred to as: A) GPI B) LTV C) PMI D) MIP PMI - CORRECT ANSWER: To figure out the PMI it is the loan amount x what ever the pmi factor is divided by 12 that =s the monthly premium. Principal - CORRECT ANSWER: calculating principal and interest: multiply x the loan amount by the factor then divide by 1000 this is the PI. To determine the interest only, multiply the loan amount by the interest rate. this is the annual interest. divide by 12 to get the monthly interest. subtract the I from the PI to get the processor - CORRECT ANSWER: : an individual who gathers the loan application and all of the required supporting documentation ( including the property appraisal, credit report history, income, and expenses) so that a lender can consider the borrower for a loan. Processor - CORRECT ANSWER: An individual who gathers the loan application and all of the required supporting documents to prepare the loan for approval is the: : the fee charged by theCORRECT ANSWER: A) Underwriter B) Loan officer C) Mortgage CORRECT ANSWER: CORRECT ANSWER: D) Processor Prorations - and income between the buyer and the seller in proportionate shares. purchase money mortgage - structured many ways. :fixed rate; adjustable rate; balloon Redlining - refuse or limit loans and mortgages within specific geographic areas, especially older or so-called "bad risk" neighborhoods, including inner-city neighborhoods. also when a lender has refused to make a loan to a potential buyer because of the location of the property. Redlining - CORRECT ANSWER: A lender has refused to make a loan to a potential buyer because of the location of the property. This is known as: A) Panic peddling B) Steering C) Blockbusting D) Redlining Regulation Z - Because of credit institutions are required by the federal government to inform borrowers of the true cost of obtaining credit. Regulation Z - CORRECT ANSWER: The federal regulation prescribed by the Federal Reserve Board to carry out the purposes of the Truth-in-Lending Act is: A) Recasting B) Regulation Z C) REO D) RAM REIT - To be a , a company must distribute at least 90 percent of its taxable income to shareholders annually in the forms of dividends. RESPA - CORRECT ANSWER: The "Good Faith Estimate" is required of lenders by the regulatory body: A) TREC B) Fair housing C) is a discriminatory practice by which banksCORRECT ANSWER: can beCORRECT ANSWER: : are defined as the dividing of expensesCORRECT ANSWER: 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 short, are; and 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 paid in arrears:; CORRECT ANSWER:Taxes ; Interest - : a loan where theCORRECT ANSWER:Term or straight loan - 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 to release the lien when the debt is paid, and foreclose in the event of default - _ _ _ _ _ True - CORRECT ANSWER: Texas is a lien theory state. A) True B) False Two years - CORRECT ANSWER: A veteran is able to qualify for a Texas Veteran loan after years as a resident of Texas? A) One year B) Two years C) Six months D) There is no requirement Underwriter - CORRECT ANSWER: : In mortgage lending, the person who is charged with approving or denying a loan Upon the occurrence of a certain event, the entire amount of the unpaid balance becomes due - CORRECT ANSWER: An acceleration clause found in a mortgage means that: A) Payments must be made more frequently at a future specified date B) The interest rate can increase C) Payments may not be made more frequently than specified D) Upon the occurrence of a certain event, the entire amount of the upaid balance becomes due Usuary laws - CORRECT ANSWER: put a cap on interest rate. Usuary laws - CORRECT ANSWER: are created to protect the borrower. Usury - CORRECT ANSWER: is the state law that prohibits the charging of an interest rate in excess of the legal limit. Usury - CORRECT ANSWER: A Texas state law that prohibits the charging of interest in excess of the legal rate is called: A) Usury B) Equity Duties of the trustee areandCORRECT ANSWER: C) Lien theory D) Yield VA - CORRECT ANSWER: Which type of loan uses only one ratio for qualifying? A) FHA B) Convention al C) Hard money D) VA Wraparound mortgage - around the existing mortgage. It is illegal for real estate agents to write contracts with this financing. zero down payment - CORRECT ANSWER: If a veteran has full VA entitlement, he/she may be able to purchase the property with . After analyzing the neighborhood, an appraiser will study all of the physical aspects of the specific property being appraised except for which of the following? - CORRECT ANSWER: Highway accessibility Al purchases a factory as an investment. He installs sprinklers in the building. What risk control technique is he practicing? - CORRECT ANSWER: Reducing Alex bought a property valued at $850,000 which has an annual net operating income of $102,500. What is the capitalization rate? - CORRECT ANSWER: 0.12 Before an option is exercised, which of these costs will the optionee incur? - CORRECT ANSWER: Option fee Bill bought a property for $270,000. The value of the building on the property is $220,000. If the building has an economic life of 50 years, what is the depreciated value of the building after 5 years? - CORRECT ANSWER: $198,000.00 Commercial banks participate in real estate finance though all but which of the following methods? - CORRECT ANSWER: Secondary mortgage market Fannie Mae and Freddie Mac are able to replenish their own funds by doing what? - CORRECT ANSWER: Selling mortgage-backed securities How is the payoff of a construction loan normally accomplished? - CORRECT ANSWER: With a takeout loan In Texas, what is the maximum late payment penalty allowed? - CORRECT ANSWER: no restrictions Investor Pete specializes in obtaining properties from investors in financial new financing is wrappedCORRECT ANSWER: 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