Chapter 4: Financing

Mr. and Mrs. Smith are purchasing their
third property. The purchase price is
$250,000 and their intention is to rent this
property out. What is the minimum down
payment required for Mr. and Mrs. Smith if
they were to obtain financing?
a. $8,750
b. $25,000
c. $50,000
d. $12,500

Who is able to use a loan that is guaranteed
by the Veteran’s Administration Home Loan
Program?
a. a veteran and his spouse
b. a veteran’s child
c. the general public
d. both A & B

Joe is purchasing a home for $150,000. He
will be putting down $15,000 as his down
payment. What is Joe’s loan‐to‐value
ratio?
a. 95%
b. 90%
c. 80%
d. 96.5%

What types of loans cannot contain pre‐
payment penalties?
a. conventional
b. FHA
c. VA
d. both B & C

What information will you find in a
mortgage “note”?
a. the interest rate
b. the borrower’s previous address
c. the contract date
d. the company to which the loan has
been sold

The theory that states the mortgagor retains
legal and equitable title while the mortgagee
has only a lien on the property as security for
the debt, is known as a:
a. title theory state.
b. lien theory state.
c. both A & B
d. none of these

What does RESPA stand for?
a. Real Estate Settlement Process Act
b. Real Estate Supplemental Protection
Act
c. Real Estate Settlement Procedure
Act
d. Real Estate Settlement Protection
Action

The Truth in Lending Act requires that a
truth in lending form and a good faith
estimate must be issued to the borrower
within how many days of loan application?
a. 15
b. 5
c. 1
d. 3

When will a conventional loan have private
mortgage insurance included?
a. when the borrower is putting more
than 20% down
b. when the borrower is putting less
than 20% down
c. every conventional loan has private
mortgage insurance
d. both A & B

Which properties do not fall under
residential mortgage guidelines?
a. duplexes
b. condos
c. a 6‐plex apartment unit
d. single Family

What is the maximum loan amount FHA
will lend in a rural area?
a. $125,000
b. $217,500
c. $286,300
d. none of the Above

What determines if a loan is considered
first or second with respect to priority?
a. The larger amount is the first mortgage.
b. The order in which the loans were
funded will determine priority.
c. The order in which the notes and
mortgages were recorded will
determine priority.
d. The one with the higher interest rate
will be the second

What does FHA stand for?
a. Fair Housing Administration
b. Federal Housing Association
c. Frequent Housing Acquisition
d. Federal Housing Administration

Impounds for a home loan serve what
purpose for the lender?
a. assure the taxes and insurance are
paid
b. to avoid the borrower having to
make lump sum payments for
insurance or property taxes
c. establish a reserve in the event of
foreclosure.
d. penalize the borrower for
delinquent payments

Which loans are defined as conventional
loans?
a. federally insured loans
b. government guaranteed loans
c. non‐FHA or VA loans
d. loans with mortgage insurance
premium (MIP)

Which of the terms below is considered a
“trigger” term per Regulation Z?
a % down payment
b. interest rate
c. loan amount
d. All of the Above

What law provided financing to all
qualified Americans and prohibited
discrimination in lending practices?
a. ECOA
b. RECD
c. RESPA
d. MGIC

What is the maximum loan amount as
established by the VA?
a. $60,000
b. $120,000
c. $240,000
d. VA does not set a maximum loan
amount.

When the loan closing costs are factored in
with the interest rate as if the costs were
being paid over the life of the loan, lenders
refer to a(n):
a. ARM
b. APR
c. AARP
d. ACT

Budget loans are loans that:
a. are at a discounted interest rate.
b. are specially designed for low income
families on a tight budget.
c. require impounded payments for taxes
and insurance.
d. all of these