mortgage MCQs

Which of the following is NOT typically contained in the note with a mortgage?

Loan amount
Acceleration clause
Habendum clause
Amount of any late charge

The right of assignment by the lender

is a standard part of a mortgage.
is part of a lease, but not a mortgage.
is another name for the right of assumption.
eliminates the original buyer’s liability for the mortgage.

Which of the following does business in the secondary mortgage market?

Commercial bank
Portfolio lender
Credit unions
Private mortgage company

Which of the following programs allows homebuyers to buy a home without paying mortgage insurance even if the down payment is less than a certain pe...

FHA
VA mortgage
Fannie Mae
Freddie Mac

Who of the following people would obtain a conforming mortgage?

Person building a home
Person buying a home for $529,000
Person buying a home for $259,000
Veteran buying a home for $447,000

Not paying off the principal by the end of the term of an ARM is a risk that results from

the index used to compute the rate.
the rate itself.
the annual cap.
the payment cap

Seller financing of the loan secured by the buyer’s mortgage is a

purchase-money mortgage.
graduated payment mortgage.
swing loan.
package mortgage.

Ginnie Mae

insures mortgages.
provides mortgages directly to homebuyers.
guarantees mortgages insured by the FHA.
guarantees mortgages issued by GSEs.

An advantage of a VA-guaranteed mortgage is

no private mortgage insurance is required regardless of the amount of the down payment.
the down payment can be as low as 3 percent.
that it can be used to buy a rental property as well as a primary residence.
that credit rating is not considered by the lender in determining eligibility for a mortgage.

In order to make sure that the terms of the mortgage at the time of the closing are what the borrower understood them to be, a buyer should ask for...

Certificate of Torrens
Certificate of estoppel
Certificate of title
Abstract of title

Which of the following statements accurately describes subprime mortgages?

Subprime mortgages originate in the subprime mortgage market.
Subprime mortgages are taken out by borrowers with good credit ratings.
Subprime mortgages are more likely to go to foreclosure than other types of mortgages.
Subprime mortgages are fixed-rate mortgages only.

Which of the following loans is exempt from Regulation Z?

Commercial mortgages
VA-guaranteed mortgages
Mortgages on owner-occupied premises of 4 or fewer units
FHA-insured mortgages

A Mortgage Loan Disclosure Statement must be delivered to the borrower

within 48 hours of applying for the mortgage.
within 3 days of applying for the mortgage.
within 10 business days of applying for the mortgage.
the day before the closing

Keeshawn James has an FHA-insured mortgage, so he must have a

conventional mortgage.
conforming mortgage.
nonconforming mortgage.
fixed-rate mortgage.

Jumbo mortgages are loans that

are mortgages that permit the mortgagor to borrow additional money so that the mortgage can increase back to its original amount.
are above the limit on mortgages for securitization on the secondary mortgage market.
include senior and junior mortgages.
are the same as a 30-year, fixed-rate interest-only mortgage.

The MPI is

a form of private mortgage insurance.
a one-time insurance premium on FHA-insured mortgages.
equal to one point on a mortgage.
an abbreviation for mortgage, principal, and interest.

Which of the following must be given to mortgage applicants the day before the closing?

Uniform Residential Appraisal Report
Good Faith Estimate
Uniform Residential Loan Application
HUD-1, or Uniform Settlement Statement

A lender reserves the right to

hire an appraiser during the term of a mortgage to ensure that the mortgagor is maintaining the property.
approve any substantive changes to a property by the mortgagor during the term of the mortgage.
approve the sale of the property.
approve a lessee for the property during the term of the mortgage.

An escrow account for a mortgage

is regulated under the Truth-inLending Act.
may not keep in the account more than one-sixth of the total amount necessary to be paid out, or approximately two months of escrow funds.
is mandated by RESPA.
must pay interest to the borrower on the money in the account.

A residential mortgage transaction for purposes of the Homeowner’s Protection Act is one that

is a single-family dwelling.
has from 1 to 4 units.
has a VA-guaranteed or FHA-insured mortgage.
has a fixed rate mortgage.

A conforming mortgage is all of the following EXCEPT it

meets the criteria for sale to Fannie Mae and Freddie Mac.
is a conventional mortgage.
is a fixed rate mortgage.
is a jumbo mortgage.

Seller financing is also known as a

shared equity mortgage.
purchase-money mortgage.
package mortgage.
straight-term mortgage

“Subject to a mortgage”

is the same as assigning a mortgage.
occurs when a purchaser takes over liability for the entire unpaid balance of the mortgage from the original mortgagor.
occurs when a purchaser agrees to take over payments of a mortgage, but the original mortgagor remains responsible for the entire mortgage should the purchaser default.
is a contingency clause in a sales contract that allows the purchaser to cancel the contract if his or her home is not sold before the closing on the new purchase.

The Reynolds Homes Agency is buying up land to create a subdivision that will be built in phases. The best kind of mortgage for the developers to t...

blanket mortgage.
sale-and-leaseback.
open-end mortgage.
mortgage rate buydown

All of the following are sources of funds available for mortgage lending except:

Life insurance companies
Commercial banks
Credit unions
Federal Reserve System

A supported, defended estimate of the value of property is known as:

Comparative Market Analysis
Dedication
Appraisal
Mortgage

All of the following are services of real estate except:

Mortgaging
Buying
Renting
Exchanging

After a mortgage is paid in full, a mortgagor should request that the mortgagee sign and record a

promissory note
mortgage deed
satisfaction
estoppel certificate

A superior mortgagee voluntarily allows a subsequent mortgagee to assume a priority position under the principal of:

Assumption
Novation
Foreclosure
Subordination

The due-on-sale clause:

Accelerates the mortgage debt balance upon conveyance to a third party
Is contained on most mortgages
Prevents mortgage assumption
All of the above

Karen owns a house worth $250,000 with a mortgage debt of $200,000. What is her loan-to-value ratio?

20%
40%
75%
80%

Tara finances the purchase of a condominium with a $300,000 mortgage at 8% interest and a charge of 4 points. How much money will the points cost Ta...

$4,000
$6,000
$9,000
$12,000

Miranda works for a closing attorney and needs to verify the balance of an existing mortgage on the subject property so that the lender can be fully ...

Due on sale clause
Estoppel certificate
Mortgage deed
Exculpatory clause

A non-judicial proceeding that voluntarily transfers title to the mortgagee without the need for a foreclosure is known as:

Equity of redemption
Due on sale clause
Surrender of title
Deed in lieu of foreclosure

Which of the following is not an essential element of a mortgage?

The promise to pay taxes and insurance
The promise to maintain the property in good condition
The promise not to remove real property from the premises

Which of the following transactions will require a buyer to be liable for an existing mortgage?

Assumption
Subject to
Novation
All of the above

The market value of a property, less the value of existing mortgages, is known as:

Price
Cost
Value
Equity

In a fully amortized mortgage, although the monthly payment stays the same, the portion of each monthly payment that is applied to reduce the princip...

stays the same
increases each month
decreases each month
not enough information

The component of an adjustable rate mortgage that remains constant throughout the term of the loan is the:

Index
Margin
Calculated interest rate
None of the above

A below-market interest rate offered on adjustable rate mortgages utilized to attract new borrowers is known as the:

Teaser rate
Preferred rate
Calculated interest rate
Index rate

Which of the following applies to a biweekly mortgage? I. The loan is typically paid off faster II. Twenty-six payments are made annually III. The ...

I only
II only
I and III
I and II

Christina has entered into a mortgage for a condominium that she intends to rent on a weekly basis. The lender has accepted a mortgage which covers t...

Blanket
Bilateral
Package
Chattel

Which type of mortgage requires an upfront mortgage insurance payment plus a monthly mortgage insurance payment?

VA
FHA
Conventional
Rural Housing

The qualifying ratios for an FHA loan are:

28% housing expense ratio / 36% total obligations ratio
28% housing expense ratio / 43% total obligations ratio
36% housing expense ratio / 38% total obligations ratio
31% housing expense ratio / 43% total obligations ratio

Mortgage bankers are an example of:

Disintermediation
Intermediation
Package mortgage
Blanket mortgage

The amount of a VA guarantee on a mortgage loan depends on:

the credit rating of the borrower
the geographical location of the property
the amount of the loan
the amount of the down payment

A person who borrows money directly from the owner of the funds is an example of:

Capitalization
Intermediation
Disintermediation
Leverage

All of the following are sources of lendable funds for mortgages except:

Credit unions
Savings associations
Life insurance companies
Federal Reserve System

The association known as "Fannie Mae" is the:

Federal National Mortgage Association
Government National Mortgage Association
Federal Home Loan Mortgage Corporation
Federal Reserve System

Which of the following secondary mortgage market agencies is a government agency?

Federal National Mortgage Association
Government National Mortgage Association
Federal Home Loan Mortgage Corporation
Federal Mortgage Group

The Federal Truth in Lending Act is governed by Regulation:

S
T
X
Z

Buyer Bill is buying a new home for $150,000 and is getting a 95% loan. The lender is charging 1½ points to originate this loan. How much money will...

$2,137.50
$4,750
$7,500
$9,637.50

Shifty Savings and Loan is making a 90% loan with an annual interest rate of 7%. If the lender charges 3 discount points at closing to make the loan,...

7.25%
7.375%
7.5%
10%

What is the principal balance if the interest amount is $800 at 8% interest for six months?

$16,000
$20,000
$32,000
$40,000

Bob borrows $20,000 at 15% interest from Guido. When the loan has been paid in full, Bob has paid $2,250 in interest. How long did Bob owe Guido?

3 months
6 months
9 months
12 months

Steve borrows $30,000 at 8% interest for a period of 25 years. If monthly payments (P&I) were $231.54, what is the principal balance of the loan afte...

$29,968.46
$29,936.71
$29,904.75
$29,872.58

In a lien theory state, the mortgage:

Is a lien on the property and the mortgagee has title
Is an encumbrance on the property and the mortgagee has title
Is a lien on the property and the mortgagor has title
Is a deed restriction on the property and the mortgagor has title

A purchase money mortgage:

Is always a junior mortgage
Is often called a chattel mortgage
Is any mortgage used to finance the purchase of real property
Cannot include personal property

Which of the following mortgages accepts both real property and personal property as collateral?

Adjustable rate mortgage
Home equity loan
Package Mortgage
Purchase money mortgage

Which of the following documents can a Florida real estate licensee legally prepare?

Commercial leases, sales contracts, and deeds
Listing, sales contracts, and option contracts
Deeds, sales contracts, and residential leases
Mortgages, residential leases, and all types of listing and sales contracts

Florida operates under the idea that a borrower in a mortgage loan situation retains title to the property. This is known as the

mortgage theory.
lien theory.
title theory.
promissory note theory

The terms and conditions of the promise to pay back money borrowed to buy a house is found in the

mortgage.
trust deed.
promissory note.
deed of trust.

The process by which a mortgage loan is paid off in equal payments consisting of principal and interest is called

discounting.
amortization.
a term loan.
an equity loan.

What does a discount point do to the effective yield that a lender gets from a mortgage loan?

It raises it.
It has no effect.
It lowers it.
It lowers it, but only if the seller—not the buyer—pays it.

Equity is most accurately defined as the

sale price of the house minus the mortgage amount.
value of the house minus all liens and encumbrances.
value of the house minus the mortgage
amount of the down payment.

A mortgage lender requires a borrower to make monthly payments—in addition to the mortgage payments—to a special account to cover taxes and haz...

savings account.
tax account.
impound account.
takeout account.

Buyer A borrows money to buy a house. As part of the repayment plan, when he sells the house he will have to turn over a portion of the profit he m...

shared appreciation mortgage.
graduated payment mortgage
reverse annuity mortgage.
growing equity mortgage.

What is the loan-to-value ratio above which a borrower will typically have to purchase private mortgage insurance?

100%
95%
90%
80%

A conforming loan is defined as one

for an amount that meets Federal National Mortgage Association (FNMA) standards.
for a house in a neighborhood of conforming properties.
that is protected by private mortgage insurance (PMI).
that is fully amortized

An acceleration clause in a mortgage loan

allows the borrower to make advance payments on principal.
allows the borrower to renegotiate the interest rate.
allows the lender to sell the loan to another lender.
allows the lender to declare the entire loan amount due immediately

In a loan situation, what does a mortgage do?

It provides the lender with a promise to pay.
It sets the terms of the loan.
It turns over title to the property until the loan is paid off.
It acts as the security instrument for the loan.

A deed in lieu of foreclosure

will avoid a foreclosure sale.
is executed after the foreclosure sale.
benefits the beneficiary if the property is worth less than the amount owed on the mortgage
is the same as a reconveyance deed.

The secondary mortgage market includes all of the following except

FNMA.
FDIC.
GNMA.
FHLMC.

The state intangible tax applies to the recording of

deeds.
mortgages.
notes.
easements

A borrower obtains a fully amortized mortgage loan for $165,000 at an interest rate of 6.5% for 30 years. The monthly payments are $1,044.45. What ...

$164,849.30
$163,955.55
$107,250
$893.75

A real estate broker may arrange financing for a home sale and be paid for that service if

the sale was her listing.
she represented the buyer.
she holds a mortgage broker’s license.
the mortgage amount was less than $250,000.

What clause in the original mortgage loan or trust deed would prevent the use of a wraparound mortgage by a seller?

due-on-sale clause
acceleration clause
contingency clause
prepayment penalty clause

What is the difference between buying property and assuming an existing mortgage or buying the property subject to an existing mortgage?

There is no difference.
The seller is still liable to the lender under the subject to situation.
The seller is still liable to the lender under the assumed mortgage situation.
The buyer is liable to the seller under the subject to situation.

A loan arrangement that allows payments to be made to a seller who, in turn, continues to make payments on an existing loan is called a(n)

wraparound mortgage.
blanket mortgage.
package mortgage.
all of the above

In a case where a borrower pays 2 discount points on a mortgage loan, which of the following is true?

The nominal rate and the APR will be the same.
The nominal rate will be lower than the APR.
The nominal rate will be higher than the APR.
The nominal rate will be higher than the APR but only in an adjustable-rate mortgage loan.

Which of the following types of mortgage loans features a monthly payment that does not change throughout the life of the loan?

fixed rate; fully amortized
fixed rate; partially amortized
graduated payment; fully amortized
growing equity; fully amortized

The funds for a VA loan are received by the mortgagor from

the Veterans Administration.
the Federal Housing Administartion.
a primary lender
the Department of Housing and Urban Development.

Which of the following does not buy mortgages?

the secondary market
GNMA
FNMA
FHLMC

In seller financing of a home purchase, which of the following is correct?

The seller is the mortgagor; the buyer is the mortgagee.
The seller is the trustee; the buyer is the beneficiary.
The seller is the trustor; the buyer is the trustee.
The seller is the mortgagee; the buyer is the mortgagor.

In an adjustable-rate mortgage, the number that changes is the

index.
margin.
cap.
ceiling

What type of notice is provided by recording the deed after a closing?

actual notice
lis pendens notice
constructive notice
notice of lien

A new mortgage from a bank will appear

on the seller’s closing statement as a credit.
on the seller’s closing statement as a debit.
on the buyer’s closing statement as a debit to the buyer.
on the buyer’s closing statement as a credit to the buyer.

A mortgage satisfaction is provided by

the mortgagor to the mortgagee.
the mortgagee to the mortgagor.
the title company to the lender.
the office of public records to the lender

Which of the following is not true about a biweekly mortgage loan compared to a monthly payment loan?

The interest rate is lower.
The principal is paid back faster.
The total interest paid is less.
More payments per year are required

Banks who lend money for mortgage loans are practicing

disintermediation.
intermediation.
subordination.
amortization.

The right of equitable redemption in Florida ends

when mortgage payments have been missed for six months.
when foreclosure proceedings begin.
when the property is sold in foreclosure.
one year after the foreclosure sale

The higher the loan-to-value ratio,

the higher the interest rate.
the longer the term of the loan.
the higher the down payment.
the lower the down payment.

A foreclosure proceeding is stopped by payment of all the money due, and the loan resumes according to the original terms. The mortgage agreement m...

defeasance clause
due on sale clause
acceleration clause
right to reinstate clause

A seller takes back a mortgage on a property she sells. The buyer now wants to borrow money from a bank to build a house on the property. The bank, ...

borrower to execute a subordination agreement
original seller to execute a subordination agreement.
builder to execute a subordination agreement.
all of the above

An estoppel certificate

stops a foreclosure sale.
certifies the unpaid mortgage balance to the new mortgage holder.
requires immediate payment of the mortgage balance due.
stops the sale of a mortgage to another lender

Financing provided by the seller as part of the buyer’s purchase price is called a

purchase money mortgage.
blanket mortgage.
takeout loan.
package mortgage.

Which of the following charges would normally appear on both buyer and seller closing statements as a prorated item rather than on only one of the ...

broker’s commission
document preparation fees
recording fees
interest on an assumed mortgage

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mortgage MCQs