Real Estate Finance Practice Test
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A biweekly mortgage requires
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Monthly payments to increase by predetermined steps each year
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Payments every two weeks
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That the lender share profits from resale
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None of the above
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This Real Estate Finance Practice Test focuses on key mortgage concepts, including reverse mortgages, conventional and chattel mortgages, usury, and points. Designed for professionals, it enhances understanding of finance regulations and practices in real estate.
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- 2.
When a borrower is required to maintain an escrow account with the lending institution, money in the account may be used to pay the homeowner's
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Realtor
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Utility bills
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Property taxes or insurance
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Life insurance
Correct Answer
A. Property taxes or insuranceExplanation
When a borrower is required to maintain an escrow account with the lending institution, the money in the account is set aside to cover expenses related to the property. This includes paying property taxes or insurance. The purpose of the escrow account is to ensure that these expenses are paid on time and in full, reducing the risk for both the borrower and the lender. The money in the account is not used for other purposes such as paying utility bills or life insurance.Rate this question:
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- 3.
A large final payment on a mortgage loan is
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An escalator
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A balloon
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An amortization
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A package
Correct Answer
A. A balloonExplanation
A large final payment on a mortgage loan is commonly referred to as a balloon payment. This type of payment is typically much larger than the regular monthly payments made throughout the loan term. It is called a balloon payment because it "inflates" the total amount owed on the loan, similar to a balloon expanding in size. This type of payment structure is often used in certain types of mortgages, such as balloon mortgages, where the borrower makes smaller monthly payments for a set period of time and then pays off the remaining balance in one lump sum at the end.Rate this question:
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- 4.
P&I in real estate finance stands for
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Property and investments
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Property of inventory
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Principle and interest
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Principle and inventory
Correct Answer
A. Principle and interestExplanation
P&I in real estate finance stands for principle and interest. This refers to the monthly mortgage payment that includes both the repayment of the loan amount (principle) and the interest charged by the lender. It is a common term used in real estate financing to indicate the total amount that needs to be paid each month towards the mortgage.Rate this question:
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- 5.
In general, the lien with the first claim on the real estate is the
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Largest one
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One that is singed
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One that was recorded first
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One that is foreclosed
Correct Answer
A. One that was recorded firstExplanation
The lien with the first claim on the real estate is the one that was recorded first. This means that it was officially documented and registered with the appropriate authorities before any other liens. Recording a lien first gives it priority over other liens, ensuring that it has the first right to the property's assets in case of foreclosure or sale.Rate this question:
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- 6.
A first-time buyer's down payment source may be
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Savings
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A gift from a relative
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A personal loan
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Any of the above
Correct Answer
A. Any of the aboveExplanation
The correct answer is "any of the above" because a first-time buyer's down payment source can come from savings, a gift from a relative, or a personal loan. There are no restrictions on where the down payment can come from, as long as the buyer is able to secure the necessary funds for the down payment.Rate this question:
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- 7.
Most investors principal motivation is
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Income tax shelter
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Housing the needy
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Increasing prestige
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Making profit
Correct Answer
A. Making profitExplanation
Most investors' principal motivation is making a profit. This is because investing involves putting money into assets or ventures with the expectation of receiving a return or profit in the future. Investors aim to generate income and grow their wealth through various investment opportunities such as stocks, bonds, real estate, or businesses. While some investors may have other goals or motivations, such as housing the needy or increasing prestige, the primary objective for most investors is to make a profit from their investments.Rate this question:
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- 8.
A type of mortgage in which the lender makes periodic payments to the borrow, who is required to be age 62 or older in the FHA program, is called
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Opposite
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Accelerate
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Reverse
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Deficit
Correct Answer
A. ReverseExplanation
A reverse mortgage is a type of mortgage in which the lender makes periodic payments to the borrower, who is required to be age 62 or older in the FHA program. This is the opposite of a traditional mortgage where the borrower makes payments to the lender. The purpose of a reverse mortgage is to allow older homeowners to convert a portion of their home equity into cash without having to sell their home or make monthly mortgage payments. The lender makes payments to the borrower based on the equity in the home, and the loan is typically repaid when the borrower no longer lives in the home.Rate this question:
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- 9.
The use of reverse annuity mortgages
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Is widespread because of inflation
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Helps elderly people who are house rich but cash poor
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Is losing importance with inflation
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None of the above
Correct Answer
A. Helps elderly people who are house rich but cash poorExplanation
Reverse annuity mortgages are widely used because they provide a solution for elderly individuals who own valuable homes but have limited cash flow. These mortgages allow them to convert a portion of their home equity into regular payments, providing them with much-needed income to cover their expenses. This option is particularly beneficial for elderly individuals who may not have other sources of income or savings and are struggling to meet their financial needs.Rate this question:
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- 10.
Which of the following participate(s) in the secondary loan market?
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Fannie Mae
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Freddie Mac
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Ginnie Mae
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All of the above
Correct Answer
A. All of the aboveExplanation
Fannie Mae, Freddie Mac, and Ginnie Mae all participate in the secondary loan market. The secondary loan market is where mortgage loans are bought and sold after they have been originated by lenders. Fannie Mae and Freddie Mac are government-sponsored enterprises that buy mortgages from lenders, providing liquidity to the market. Ginnie Mae, on the other hand, guarantees mortgage-backed securities issued by approved lenders, which also helps to provide liquidity in the secondary market. Therefore, all three entities participate in the secondary loan market.Rate this question:
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- 11.
The function of the Federal Housing Administration (FHA) is to
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Lend money
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Insure loans
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Guarantee loans
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Buy loans
Correct Answer
A. Insure loansExplanation
The Federal Housing Administration (FHA) is responsible for insuring loans. This means that if a borrower defaults on their loan, the FHA will reimburse the lender for their losses. By insuring loans, the FHA helps to mitigate the risk for lenders, making it easier for individuals to obtain mortgages and promoting homeownership.Rate this question:
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- 12.
A mortgage has a rate that may change every six months depending on changes in the rate of Treasury bills. This is
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An adjustable-rate mortgage
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A capped loan
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Ab adjustable-payment mortgage
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An indexed loan
Correct Answer
A. An adjustable-rate mortgageExplanation
An adjustable-rate mortgage is the correct answer because it states that the rate of the mortgage may change every six months based on the fluctuations in the rate of Treasury bills. This means that the interest rate on the mortgage is not fixed and can go up or down, making it adjustable. The other options do not specifically mention the potential for rate changes based on Treasury bills, making them incorrect choices.Rate this question:
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- 13.
Private mortgage insurance protects the
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Buyer's heirs
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Lender
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Buyer's income
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Investment value
Correct Answer
A. LenderExplanation
Private mortgage insurance protects the lender. When a borrower takes out a mortgage loan and makes a down payment of less than 20% of the home's value, the lender may require them to have private mortgage insurance. This insurance is designed to protect the lender in case the borrower defaults on the loan. It provides coverage to the lender, reimbursing them for a portion of the outstanding loan balance if the borrower is unable to make their mortgage payments. This insurance does not protect the buyer's heirs, buyer's income, or investment value.Rate this question:
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- 14.
In the absence of an agreement to the contrary, the mortgage normally having priority will be the one
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For the greatest amount
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That is a permanent mortgage
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That was recorded first
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That is a construction loan mortgage
Correct Answer
A. That was recorded firstExplanation
The correct answer is "That was recorded first." In the absence of an agreement stating otherwise, the mortgage that was recorded first will typically have priority over other mortgages. This means that in case of foreclosure or other legal actions, the first recorded mortgage will be paid off before any subsequent mortgages.Rate this question:
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- 15.
Two months in a row a homeowner failed to make payments on his trust deed, so the lender recorded a notice of default. The borrow
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Cannot stop foreclosure
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Must repair his credit report
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May walk away
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May request reinstatement
Correct Answer
A. May request reinstatementExplanation
The homeowner, after failing to make payments on his trust deed for two consecutive months, has received a notice of default from the lender. In this situation, the homeowner has the option to request reinstatement, which means they can make arrangements with the lender to bring their loan current and avoid foreclosure. This allows the homeowner to catch up on missed payments and continue with their mortgage as usual.Rate this question:
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- 16.
Leverage is
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A brokers employ,ent of a salesperson
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Using cash for all purchase
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Using credit cards
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Using borrowed money to compete an investment purchase
Correct Answer
A. Using borrowed money to compete an investment purchaseExplanation
Leverage refers to the practice of using borrowed money to finance an investment purchase. It allows individuals or businesses to amplify their potential returns by using other people's money to make investments. By leveraging, investors can increase their purchasing power and potentially generate higher profits. However, it also comes with increased risk, as any losses incurred will also be magnified.Rate this question:
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- 17.
An owner who seeks a mortgage loan and offers three properties as security will give
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A blanket mortgage
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An FHA mortgage
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A conventional mortgage
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A chattel mortgage
Correct Answer
A. A blanket mortgageExplanation
A blanket mortgage is the correct answer because it allows the owner to use multiple properties as collateral for the loan. This type of mortgage is beneficial for owners who own multiple properties and want to use them to secure a loan, rather than offering just one property as collateral. With a blanket mortgage, the lender has a claim on all the properties listed as security, providing more flexibility for the owner.Rate this question:
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- 18.
Which of the following types of first mortgage loans is typically described as “conventional”
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80% loan from mortgage banker
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97% FHA loan
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100 VA loan
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Contract to deed
Correct Answer
A. 80% loan from mortgage bankerExplanation
A conventional first mortgage loan is typically described as a loan from a mortgage banker that covers 80% of the total loan amount. This means that the borrower is responsible for providing a 20% down payment. Conventional loans are not insured or guaranteed by the government, unlike FHA loans and VA loans. FHA loans are backed by the Federal Housing Administration and allow borrowers to secure a loan with a down payment as low as 3.5%. VA loans are offered to veterans and are guaranteed by the Department of Veterans Affairs, allowing eligible borrowers to obtain a loan with no down payment. A contract to deed is a different type of financing arrangement and does not fall under the category of conventional first mortgage loans.Rate this question:
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- 19.
Because of its illiquidity, large seize, and lack of portability, investors expect ommercial real estate to provide _____________ return, compared to marketable securities
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A higher
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A lower
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The same
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An unknown
Correct Answer
A. A higherExplanation
Commercial real estate is known for its illiquidity, large size, and lack of portability, which makes it less accessible and harder to convert into cash compared to marketable securities. Due to these factors, investors expect commercial real estate to provide a higher return than marketable securities, which are more liquid and easier to trade.Rate this question:
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- 20.
Which of the following it the least likely source of originating a home mortgage?
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Mortgage banker
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Commercial bank
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Life insurance company
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Savings and loan association
Correct Answer
A. Life insurance companyExplanation
A life insurance company is the least likely source of originating a home mortgage because their primary business is providing life insurance policies, not mortgage lending. Mortgage bankers, commercial banks, and savings and loan associations are all commonly involved in the mortgage industry and have a focus on providing mortgage loans to individuals and businesses. However, life insurance companies typically do not specialize in mortgage lending and are more focused on providing life insurance coverage and related financial products.Rate this question:
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- 21.
A requirement for a borrower under an FHA-insured loan is that he
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Not be eligible for a VA or conventional loan
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Have cash for the down payment and closing costs
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Have his wife sign as coborrower
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Certify that he is receiving welfare payments
Correct Answer
A. Have cash for the down payment and closing costsExplanation
The requirement for a borrower under an FHA-insured loan is to have cash for the down payment and closing costs. This means that the borrower must have the necessary funds to cover the initial payment and any additional costs associated with the loan. This is an important requirement as it ensures that the borrower has the financial means to fulfill their obligations and demonstrates their commitment to the loan. It also helps to mitigate the risk for the lender by providing a financial buffer for the borrower.Rate this question:
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- 22.
A person buys a furnished house and wishes to finance the purchase of both the house and the furniture through a mortgage loan. He tries to get
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A blanket mortgage
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A purchase-money mortgage
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A temporary loan
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A package mortgage
Correct Answer
A. A package mortgageExplanation
A package mortgage is the correct answer because it allows the person to finance both the house and the furniture through a single mortgage loan. This type of mortgage is designed to cover not only the purchase of the property but also any additional costs such as furniture or appliances. It offers convenience and simplicity by combining all the financing into one package, making it easier for the person to manage their payments and expenses.Rate this question:
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- 23.
After paying off a mortgage loan, the property owner should be sure that which of the following instruments is recorded?
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Relief of debt
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Novation
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Satisfaction of mortgage
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Burned mortgage
Correct Answer
A. Satisfaction of mortgageExplanation
After paying off a mortgage loan, the property owner should be sure to record the "satisfaction of mortgage" instrument. This document serves as proof that the mortgage has been fully paid and the lien on the property has been released. It is important to record this instrument to ensure that the property owner has clear title to the property and to avoid any future disputes or confusion regarding the mortgage status.Rate this question:
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- 24.
Which agency does not buy mortgage loans?
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Fannie Mae
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Freddie Mac
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Commercial banks
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Federal Emergency Management Agency
Correct Answer
A. Federal Emergency Management AgencyExplanation
The Federal Emergency Management Agency (FEMA) is not involved in buying mortgage loans. FEMA is a government agency that focuses on disaster response and recovery, providing assistance to individuals and communities affected by natural disasters. On the other hand, Fannie Mae and Freddie Mac are government-sponsored enterprises that buy mortgage loans from lenders, while commercial banks also engage in mortgage lending and may buy and sell mortgage loans as part of their business operations.Rate this question:
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- 25.
In an amortization mortgage, the
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Principal is reduced periodically along with the payment of interest for that period
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Principal is paid at the end of the term
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Lenders have greater security than in an unamortizing mortgage
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Loan to value ratio does not exceed 30%
Correct Answer
A. Principal is reduced periodically along with the payment of interest for that periodExplanation
In an amortization mortgage, the principal is reduced periodically along with the payment of interest for that period. This means that with each mortgage payment, a portion goes towards paying off the principal balance of the loan, while the remaining portion goes towards paying the interest. Over time, as more payments are made, the principal balance decreases, leading to a gradual reduction in the overall debt owed. This payment structure provides greater security for lenders compared to an unamortizing mortgage, where the principal is paid in a lump sum at the end of the term. Additionally, the loan to value ratio does not exceed 30%, indicating that the mortgage amount is limited to 30% or less of the property's appraised value.Rate this question:
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- 26.
The most important function of the FHA is to
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Make loans
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Insure loans
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Purchase loans
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Sell loans
Correct Answer
A. Insure loansExplanation
The Federal Housing Administration (FHA) primarily functions to insure loans. This means that the FHA provides mortgage insurance to lenders, reducing their risk in case the borrower defaults on the loan. By insuring loans, the FHA encourages lenders to offer mortgages to individuals who may not qualify for conventional loans, such as those with lower credit scores or smaller down payments. This helps promote homeownership and provides stability to the housing market.Rate this question:
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- 27.
The lending of money at a rate of interest above the legal rate is
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Speculation
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Usury
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Both and B
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Neither A nor B
Correct Answer
A. UsuryExplanation
Usury refers to the act of lending money at an interest rate that is higher than the legal limit. This practice is considered unethical and exploitative, as it takes advantage of borrowers who are in desperate need of funds. Speculation, on the other hand, involves making risky investments in the hopes of making a profit. Since the question specifically mentions lending money at a high interest rate, the correct answer is Usury.Rate this question:
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- 28.
A clause in a mortgage or accompanying note that permits the creditor to declare the entire principle balance due upon certain default of the debtor is
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An acceleration clause
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An escalation clause
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A forfeiture clause
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An excelerator clause
Correct Answer
A. An acceleration clauseExplanation
An acceleration clause is a provision in a mortgage or accompanying note that allows the lender to demand immediate repayment of the entire outstanding loan balance if the borrower defaults on certain conditions. This clause gives the lender the right to accelerate the repayment schedule and enforce the full repayment of the loan. It is commonly used in mortgage agreements to protect the lender's interests and ensure prompt repayment in case of default by the borrower.Rate this question:
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- 29.
A second mortgage is
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A lien on real estate that has a prior mortgage on it
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The first mortgage recorded
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Always made by the seller
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Smaller in amount than a first mortgage
Correct Answer
A. A lien on real estate that has a prior mortgage on itExplanation
A second mortgage is a type of lien that is placed on a property that already has a prior mortgage. This means that the property has already been used as collateral for a first mortgage loan. The second mortgage is subordinate to the first mortgage, meaning that if the property were to be sold, the first mortgage would be paid off before the second mortgage. Second mortgages are typically smaller in amount compared to first mortgages and are not always made by the seller, but can be obtained by the homeowner from a lender.Rate this question:
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- 30.
A state in which a mortgage conveys title to the lender is known as
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Lien theory state
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Title theory state
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Conveyance state
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Community property state
Correct Answer
A. Title theory stateExplanation
In a title theory state, a mortgage conveys title to the lender. This means that the lender holds the legal title to the property until the mortgage is fully paid off. The borrower, on the other hand, holds the equitable title and has the right to possess and use the property. This is different from a lien theory state, where the mortgage is seen as a lien on the property rather than a transfer of title. In a lien theory state, the borrower retains both legal and equitable title to the property.Rate this question:
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- 31.
Which of the following is an advantage of a biweekly mortgage payment plan?
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The borrower pays less per month in return for a longer term.
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It is equivakent to 12 monthly payments each year.
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There are lower interest rates.
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The loan is paid off sooner than it would be with 12 monthly payments
Correct Answer
A. The loan is paid off sooner than it would be with 12 monthly paymentsExplanation
The advantage of a biweekly mortgage payment plan is that the loan is paid off sooner than it would be with 12 monthly payments. This is because biweekly payments result in 26 payments per year, which is equivalent to making 13 monthly payments. By making more frequent payments, the borrower is able to reduce the principal balance of the loan faster, leading to an earlier payoff date.Rate this question:
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- 32.
A chattel mortgage is usually given in connection with
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Realty
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Farms
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Personal Property
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Commercial Property
Correct Answer
A. Personal PropertyExplanation
A chattel mortgage is a type of loan that is secured by personal property. Personal property refers to movable assets such as vehicles, equipment, or inventory. By granting a chattel mortgage, the borrower pledges their personal property as collateral for the loan. In the event of default, the lender has the right to seize and sell the personal property to recover the outstanding debt. Therefore, a chattel mortgage is typically given in connection with personal property rather than real estate, farms, or commercial property.Rate this question:
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- 33.
PMI stands for
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Public money interest
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Payments made on investments
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Principal and mortgage interest
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Private mortgage insurance
Correct Answer
A. Private mortgage insuranceExplanation
Private mortgage insurance (PMI) is a type of insurance that protects the lender in case the borrower defaults on their mortgage payments. It is typically required when the borrower has a down payment of less than 20% of the home's purchase price. PMI allows borrowers to obtain a mortgage with a lower down payment, but it adds an additional cost to the monthly mortgage payment. Therefore, the correct answer is "Private mortgage insurance."Rate this question:
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- 34.
Which of the following is not a lien?
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Mortgage loan
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Mechanic's lien
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Judgment
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Easement
Correct Answer
A. EasementExplanation
An easement is not a lien. A lien is a legal claim or right on a property as security for a debt or obligation. A mortgage loan, mechanic's lien, and judgment are all examples of liens because they involve a debtor owing a debt to a creditor and the creditor having a claim on the debtor's property. However, an easement is a right to use someone else's property for a specific purpose, such as a right of way or access, but it does not involve a debt or obligation.Rate this question:
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- 35.
A loan from the seller to the buyer is called a
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Bullet loan
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Home equity loan
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Junior mortgage
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Purchase money mortgage
Correct Answer
A. Purchase money mortgageExplanation
A loan from the seller to the buyer is called a purchase money mortgage. This type of loan is used when the seller provides financing to the buyer to help facilitate the purchase of the property. The seller essentially acts as the lender, and the buyer makes regular payments to the seller until the loan is fully repaid. This type of arrangement is common in real estate transactions, particularly when the buyer is unable to secure traditional financing from a bank or other financial institution.Rate this question:
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- 36.
A loan to be completely repaid, principal and interest, by a series of regular, equal installment payment is a
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Straight loan
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Balloon payment loan
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Fully amortized loan
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Variable rate mortgage loan
Correct Answer
A. Fully amortized loanExplanation
A loan to be completely repaid, principal and interest, by a series of regular, equal installment payments is known as a fully amortized loan. In this type of loan, the borrower makes consistent payments over the loan term, which includes both the principal amount borrowed and the interest charged. By the end of the loan term, the entire loan amount is paid off. This is in contrast to other types of loans such as balloon payment loans, where a large final payment is required at the end of the loan term.Rate this question:
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- 37.
Virtually all deeds of trust will have a clause that states that the full principal is due upon certain default. This is called a(n)
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Release clause
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Acceleration clause
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Novation clause
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Assignability clause
Correct Answer
A. Acceleration clauseExplanation
An acceleration clause is a provision in a deed of trust that states that the full principal amount of the loan becomes due immediately if the borrower defaults on certain conditions. This means that if the borrower fails to make their payments or violates any other terms of the loan agreement, the lender has the right to demand full repayment of the loan. This clause helps protect the lender's interests and allows them to take prompt action in case of default.Rate this question:
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- 38.
After a mortgage is paid off, most lenders are expected to
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Keep all records for five years
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Send a recorded satisfaction piece
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File a lien
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Refinance the loan upon request
Correct Answer
A. Send a recorded satisfaction pieceExplanation
After a mortgage is paid off, most lenders are expected to send a recorded satisfaction piece. This is a legal document that serves as proof that the mortgage has been fully paid and satisfied. It is typically recorded with the county or local land records office to ensure that the lien on the property is released. This document is important for the borrower as it provides evidence that the mortgage has been paid off and the lender no longer has any claim on the property.Rate this question:
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- 39.
A loan that is approved quickly and has a low down payment usually has
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Higher costs and interest rate
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Lower cost and interest rate
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A longer amortization period
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An adjustable rate
Correct Answer
A. Higher costs and interest rateExplanation
A loan that is approved quickly and has a low down payment usually has higher costs and interest rates. This is because lenders take on more risk when approving loans quickly and with a low down payment. To compensate for this increased risk, they charge higher costs and interest rates. This helps protect the lender in case the borrower defaults on the loan.Rate this question:
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- 40.
One discount point is equal to
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1% of the sales price
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1% of the interest sale
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1% of the loan amount
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None of the above
Correct Answer
A. 1% of the loan amountExplanation
A discount point is a fee paid by the borrower to the lender at closing in exchange for a lower interest rate on the loan. It is typically equal to 1% of the loan amount. This means that if the loan amount is $100,000, one discount point would be $1,000. By paying this fee upfront, the borrower can reduce their monthly mortgage payments over the life of the loan. Therefore, the correct answer is "1% of the loan amount."Rate this question:
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- 41.
The bank agreed to lend Ira $300,000 with his house as collateral. Of this amount, Ira received $200,000 immediately and could borrow the $100,000 balance in installment. This is called
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An open end mortgage
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A blanket mortgage
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An amortizing loan
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A P&I montage
Correct Answer
A. An open end mortgageExplanation
An open end mortgage is the correct answer because it allows the borrower to borrow additional funds in the future without needing to obtain a new loan. In this case, Ira received $200,000 immediately and can borrow the remaining $100,000 balance in installments, indicating that the loan has the flexibility to be extended. This type of mortgage is beneficial for borrowers who may need additional funds later on and eliminates the need for them to go through the loan application process again.Rate this question:
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- 42.
The main appeal of VA mortgages to borrowers lies in
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Low interest rates
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Minimum down payment
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An unlimited mortgage ceiling
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Easy availability
Correct Answer
A. Minimum down paymentExplanation
The main appeal of VA mortgages to borrowers lies in the minimum down payment. VA mortgages offer the benefit of allowing borrowers to purchase a home with little to no money down, which can be a significant advantage for those who may not have a large amount of savings for a down payment. This feature makes homeownership more accessible and affordable for many individuals and families.Rate this question:
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- 43.
A mortgage loan that included two or mormortgage priorities is
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An acquisition and development mortgage
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A total lien mortgage
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A blanket mortgage
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A participation mortgage
Correct Answer
A. A blanket mortgageExplanation
A blanket mortgage is a type of mortgage loan that includes two or more mortgage priorities. It allows the borrower to use one property as collateral for multiple loans. This type of mortgage is commonly used in real estate investments where the borrower wants to finance multiple properties with a single loan. With a blanket mortgage, the lender has a claim on all the properties included in the loan, providing them with a level of security.Rate this question:
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- 44.
A house is sold at foreclosure. Unpaid liens include property taxes, mechanic' lien, and first mortgage. Which is paid first?
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Taxes
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Mechanic's lien
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First mortgage
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Whichever gets to the closing first
Correct Answer
A. TaxesExplanation
In a foreclosure sale, the unpaid liens on a house, including property taxes, mechanic's lien, and first mortgage, need to be settled. The correct answer is taxes. Property taxes are typically considered a priority lien and are paid first in the foreclosure process. This is because property taxes are owed to the government and failure to pay them can lead to serious consequences, such as the government seizing and auctioning off the property to recover the unpaid taxes. Therefore, settling the outstanding property taxes is the first step in resolving the unpaid liens.Rate this question:
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- 45.
To secure a loan in some state, the borrower conveys title tot the property to a disinterested third party for safekeeping. In situation, the document required is a
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General warranty deed
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Deed of trust
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Involuntary conveyance
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Mortgage
Correct Answer
A. Deed of trustExplanation
In order to secure a loan in some states, the borrower transfers the title of the property to a disinterested third party for safekeeping. This third party, known as the trustee, holds the title until the loan is fully paid off. The document required for this situation is a deed of trust. This document serves as a security instrument and provides the lender with the right to foreclose on the property if the borrower fails to repay the loan. Unlike a mortgage, which involves a two-party agreement between the borrower and the lender, a deed of trust involves a third party trustee for added security.Rate this question:
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- 46.
The sellers of realty takes, as partial payment, a mortgage called
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Sales financing
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Note toting
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Primary mortgage
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Purchase money mortgage
Correct Answer
A. Purchase money mortgageExplanation
A purchase money mortgage refers to a type of mortgage that is taken by the seller of real estate as partial payment for the property. It is a form of financing where the seller provides a loan to the buyer in order to facilitate the purchase. This type of mortgage is often used when the buyer does not have enough funds to purchase the property outright and needs assistance from the seller. The seller holds a lien on the property until the loan is fully repaid by the buyer.Rate this question:
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- 47.
Thyme or mortgage loan that permits borrowing additional funds at a later date is called
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An equitable mortgage
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A junior mortgage
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An open end mortgage
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An extensible mortgage
Correct Answer
A. An open end mortgageExplanation
An open end mortgage is a type of mortgage loan that allows borrowers to borrow additional funds at a later date. This means that the borrower can access more money as needed without having to go through the process of applying for a new loan. This flexibility can be beneficial for borrowers who may need additional funds for home improvements, emergencies, or other expenses.Rate this question:
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- 48.
Lender A has a first mortgage but allows Lender B's loan to have priority. This is an example of
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Home equity swap
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Upside-down loan
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Subordination
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Deficiency judgment
Correct Answer
A. SubordinationExplanation
Subordination refers to the act of allowing one loan to take priority over another, even though the first loan has a higher claim to the collateral. In this scenario, Lender A, who holds the first mortgage, agrees to subordinate their loan to Lender B's loan, giving Lender B priority. This means that in case of default, Lender B would be paid first from the proceeds of the sale of the collateral. This arrangement is known as subordination.Rate this question:
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- 49.
In a fixed-rate fully amortized loan, which one of the following does not vary from month to month?
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Monthly principle and interest payment
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Interest paid
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Principle paid
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Remaining principle balance
Correct Answer
A. Monthly principle and interest paymentExplanation
In a fixed-rate fully amortized loan, the monthly principle and interest payment remains constant throughout the duration of the loan. This means that the borrower will pay the same amount every month towards both the principle (the original amount borrowed) and the interest (the cost of borrowing). The interest paid, principle paid, and remaining principle balance will vary from month to month as the loan is paid off, but the monthly payment amount will stay the same.Rate this question:
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Feb 06, 2024Quiz Edited by
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Feb 11, 2018Quiz Created by
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