Font size
WorksheetsReal Estate Finance Study Guide Questions - AI
Total questions: 88
Worksheet time: 47mins
What is the first step in determining "how much house" the buyer can afford?
Pre-approval
Final approval
Pre-qualification
Mortgage application
What is required for a mortgage application?
Only a credit report
Only financial documentation
A mortgage application, credit report, and supporting financial documentation
Only a mortgage application
What happens during the final approval step in the loan approval process?
The lender evaluates the borrower's financial situation
The lender evaluates the exact loan for a specific property
The lender charges fees
The lender evaluates the borrower's credit report
Who is responsible for bringing together a borrower and a lender to create a mortgage?
Mortgage banker
Real estate agent
Mortgage broker
Financial advisor
What is the role of a mortgage banker?
To evaluate the borrower's credit report
To provide mortgage financing using their own funds
To bring together a borrower and a lender
To charge fees for loan processing
What is the primary difference between a correspondent lender and a mortgage banker?
Correspondent lenders use their own money at their own risk.
Mortgage bankers use their own money at their own risk.
Correspondent lenders work on a larger scale than mortgage brokers.
Mortgage bankers work on a smaller scale than mortgage brokers.
What is the first step in the creation of a new mortgage?
Loan processing
Underwriting
Origination
Closing
Which of the following is NOT a factor that lenders consider when processing a loan?
Borrower's income
Borrower's credit
Borrower's net worth
Borrower's age
What is the process of deciding the level of risk a lender would take by giving a loan to a certain borrower for a specific property called?
Loan processing
Underwriting
Funding
Closing
What does loan servicing typically include?
Collecting information from the buyer
Deciding the level of risk for a loan
Collection of monthly payments
Providing the cash in the amount of the approved loan
What should a buyer do when purchasing a home subject to the existing mortgage?
Consult an attorney
Change the title immediately
Pay off the seller's old mortgage
Avoid controversial sales
What is the term for the consummation of a real estate transaction when all necessary contracts are signed and the lender disburses the funds of the mortgage loan?
Funding
Closing
Origination
Pre-approval
Who is a lender that offers loans using their own money at their own risk, generally on a smaller scale than mortgage brokers and bankers?
Mortgage banker
Correspondent lender
Mortgage broker
Loan processor
What is the process called when the lender collects information and an application from the buyer that will help determine the loan type and amount they will qualify for?
Pre-qualification
Pre-approval
Loan processing
Origination
Who brings together a borrower and a lender in order to create a mortgage?
Mortgage banker
Correspondent lender
Loan processor
Mortgage broker
What is the term for the creation of a new mortgage?
Funding
Origination
Pre-qualification
Closing
What is the first step in determining "how much house" the buyer can afford and which type of loan might be best?
Pre-approval
Loan processing
Pre-qualification
Origination
What is the official process of being approved by a lender to borrow a specified amount at an interest rate within a small range?
Pre-qualification
Pre-approval
Loan processing
Origination
What is the ongoing collection of monthly payments and maintenance of records by a loan servicer called?
Underwriting
Servicing
Loan origination
Loan processing
What is the process of determining the level of risk a lender is willing to take in extending a loan to a borrower called?
Servicing
Loan origination
Underwriting
Loan processing
What is collateral in real estate finance?
A. A type of insurance policy
B. A promise to repay a loan
C. A form of government bond
D. A type of investment fund
What is the primary market in mortgage lending?
A. Where mortgages are bought and sold
B. Where mortgages are first created by connecting lenders to borrowers
C. Where loans and servicing rights are sold to investors
D. Where real estate properties are auctioned
Which of the following is NOT a primary market institution?
A. Credit unions
B. Commercial banks
C. Life insurance companies
D. Fannie Mae
What is the purpose of the secondary market in mortgage lending?
A. To create new mortgages
B. To package and offer up mortgages to investors
C. To provide loans directly to borrowers
D. To manage escrow accounts
Which of the following is NOT part of the secondary market?
A. Fannie Mae
B. Freddie Mac
C. Commercial banks
D. Ginnie Mae
What happens to the borrower's ownership of the property in hypothecation?
A. The lender takes full ownership
B. The borrower maintains ownership
C. The property is sold to a third party
D. The ownership is transferred to the government
What is leverage in the context of mortgages?
A. The use of a large amount of money for purchasing real estate
B. The use of a relatively small amount of money to get a much bigger loan
C. The process of selling mortgages to investors
D. The method of repaying a loan in small installments
Match the following responsibilities with their descriptions:
Collects the homeowner's payments every month
Mortgage servicer's primary task
Determines the value of the property
Appraiser's role
Provides home insurance
Insurance company's service
Sells the property
Real estate agent's job
What does the escrow account contain?
Money for the homeowner's monthly payments
Money for the home insurance and property taxes
Money for the property's valuation
Money for the property's sale
Why might a lender require a homeowner to maintain home insurance?
To ensure the property is protected against damage
To increase the property's value
To reduce the homeowner's monthly payments
To facilitate the sale of the property
What does the sales comparison approach determine?
The value of a property by comparing it to similar properties that have been sold recently
The cost of replacing the property
The potential income from the property
The depreciation value of the property
What is the purpose of making comp adjustments?
To assign a dollar value to certain features and qualities of properties
To determine the cost of replacing the property
To estimate the potential income from the property
To calculate the depreciation value of the property
Which approach is most appropriate for public or commercial properties that aren't commonly seen in the open real estate market?
Cost approach
Sales comparison approach
Income approach
Market approach
What does the income approach determine?
The value of a property by paying attention to the amount of income it could produce for its owner
The cost of replacing the property
The value of the property by comparing it to similar properties
The depreciation value of the property
Which type of loan is insured by the government?
Conventional loans
FHA loans
Non-conforming loans
Private loans
What is the minimum down payment required to avoid private mortgage insurance (PMI) on a conventional loan?
3.5%
10%
20%
25%
Which type of loan allows homebuyers to put down a smaller down payment as low as 3.5%?
VA loans
Conventional loans
FHA loans
Non-conforming loans
What does MIP stand for in the context of FHA loans?
Mortgage Insurance Premium
Monthly Insurance Payment
Mortgage Interest Payment
Monthly Interest Premium
Which type of loan can be guaranteed for 100% of the loan amount for qualifying veterans?
FHA loans
Conventional loans
VA loans
Non-conforming loans
What is the main difference between conforming and non-conforming conventional loans?
Conforming loans are insured by the government.
Non-conforming loans are eligible to be sold on the secondary market.
Conforming loans follow guidelines to be sold on the secondary market.
Non-conforming loans have lower interest rates.
Which type of mortgage is not backed by the government and requires a 20% down payment or PMI?
Conventional
FHA Loan
VA Loan
USDA Loan
Which type of loan meets Fannie Mae and Freddie Mac guidelines and can be sold to GSEs on the secondary market?
Non-conforming
FHA Loan
Conforming
USDA Loan
Which type of loan is insured or guaranteed by the government?
Conventional
Non-conforming
Conforming
Government-backed
Which type of government-backed loan is specifically for veterans?
FHA Loan
VA Loan
USDA Loan
Conventional Loan
In seller financing, who makes the mortgage payments directly to the seller?
The lender
The buyer
The government
The bank
What is a key characteristic of interest-only loans?
The borrower pays down the principal amount monthly.
The borrower pays only the interest for a set period.
The borrower pays both interest and principal from the start.
The borrower does not pay any interest.
What is the first step in finding the cost of an interest-only loan?
Calculate the monthly payment.
Find the total annual interest.
Divide the total annual interest by 12.
Subtract the interest rate from the loan amount.
In an assumption transaction, what does the buyer assume?
The seller's credit score
The existing mortgage on the property
The property's insurance policy
The property's market value
What happens when a loan is in default?
The borrower has made all payments on time.
The borrower has failed to make one or more payments.
The mortgage servicer ignores the property.
The borrower receives a reward.
What is the primary responsibility of the mortgage servicer when a loan is in default?
To ignore the property.
To look out for the property.
To sell the property immediately.
To reward the borrower.
What does the SAFE Act stand for?
Secure and Fair Enforcement for Mortgage Licensing Act
Secure and Fair Employment Act
Safe and Fair Employment Act
Secure and Fair Education Act
What is the purpose of the SAFE Act?
To protect mortgage loan originators from fraud.
To protect consumers across the country from fraud.
To protect real estate agents from fraud.
To protect banks from fraud.
What must all mortgage loan originators (MLOs) be licensed in accordance with?
Local standards
National standards
International standards
Company standards
What is collateral?
A. A method of estimating the value of a property
B. Something of value that is pledged to a lender as a promise to repay a loan
C. Required insurance to protect the lender in the event of borrower default
D. A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market
What is a conforming loan?
A. A loan that does not follow Fannie Mae and Freddie Mac guidelines
B. A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market
C. Insurance that protects the lender if a borrower defaults on a conventional loan
D. A method of estimating the value of a property based on the amount of income it could produce for its owner
What is the cost approach?
A. A method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself
B. A method of estimating the value of a property based on the amount of income it could produce for its owner
C. The use of a relatively small amount of money in order to get a much bigger loan for purchasing real estate
D. Property valuation method that determines value by comparing the subject property to the sales prices of similar properties that have sold recently
What is the income approach?
A. A method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself
B. A method of estimating the value of a property based on the amount of income it could produce for its owner
C. The use of a relatively small amount of money in order to get a much bigger loan for purchasing real estate
D. Property valuation method that determines value by comparing the subject property to the sales prices of similar properties that have sold recently
What is leverage in real estate?
A. A method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself
B. A method of estimating the value of a property based on the amount of income it could produce for its owner
C. The use of a relatively small amount of money in order to get a much bigger loan for purchasing real estate
D. Property valuation method that determines value by comparing the subject property to the sales prices of similar properties that have sold recently
What is a mortgage insurance premium (MIP)?
A. Required insurance to protect the lender in the event of borrower default on an FHA loan
B. Insurance that protects the lender if a borrower defaults on a conventional loan
C. A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market
D. A method of estimating the value of a property based on the amount of income it could produce for its owner
What is a non-conforming loan?
A. A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market
B. A loan that does not follow Fannie Mae and Freddie Mac guidelines and thus will not be purchased by them on the secondary market
C. Insurance that protects the lender if a borrower defaults on a conventional loan
D. A method of estimating the value of a property based on the amount of income it could produce for its owner
What is the primary market in real estate?
A. Market in which mortgages are first created by connecting lenders to borrowers
B. A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market
C. Insurance that protects the lender if a borrower defaults on a conventional loan
D. A method of estimating the value of a property based on the amount of income it could produce for its owner
What is private mortgage insurance (PMI)?
A. Required insurance to protect the lender in the event of borrower default on an FHA loan
B. Insurance that protects the lender if a borrower defaults on a conventional loan; usually required when the borrower has less than 20% equity
C. A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market
D. A method of estimating the value of a property based on the amount of income it could produce for its owner
What is the sales comparison approach?
A. A method of estimating the value of a property by determining how much it would cost to replace the building or other improvements, minus the cost of depreciation, plus the value of the land itself
B. A method of estimating the value of a property based on the amount of income it could produce for its owner
C. The use of a relatively small amount of money in order to get a much bigger loan for purchasing real estate
D. Property valuation method that determines value by comparing the subject property to the sales prices of similar properties that have sold recently
What is the definition of a secondary market in real estate finance?
A) A market where new loans are originated.
B) A market where loans and servicing rights are sold to investors.
C) A market where real estate properties are bought and sold.
D) A market where real estate agents are licensed.
What are the four major phases of the real estate market cycle?
Recovery, Expansion, Hyper Supply, Recession
Growth, Decline, Stability, Recovery
Expansion, Contraction, Peak, Trough
Boom, Bust, Recovery, Stability
Which phase of the real estate cycle is characterized by high unemployment and lots of home foreclosures?
Expansion
Recovery
Hyper Supply
Recession
During which phase of the real estate cycle do rent and home prices rise, and construction for new homes and commercial buildings start?
Recovery
Expansion
Hyper Supply
Recession
What is one common theory about the duration of the complete real estate cycle?
Three to five years
Five to seven years
Seven to nine years
Nine to eleven years
What happens to market activity during the expansion phase of the real estate cycle?
It decreases
It remains stable
It picks up
It fluctuates unpredictably
What is the first warning sign of entering the hyper supply phase in the real estate market?
Decreased interest rates
Increase in vacant or unsold property
High unemployment
Decreased spending by consumers
Which of the following is NOT a symptom of a recession?
High unemployment
Increased spending by consumers and businesses
Less investment in new buildings, factories, and equipment
Land prices at their lowest
What is a recession often caused by?
High interest rates
Economic shock
Increased consumer spending
High employment rates
What does the Housing Affordability Index gauge?
The affordability and demand of housing in the real estate market
The number of vacant properties
The interest rates on mortgages
The employment rates in the economy
What does the term "hyper supply" in the real estate market refer to?
A period of low supply and high demand
A period when supply catches up with and surpasses demand
A period of high unemployment
A period of decreased interest rates
What is the main factor that determines supply in the real estate market?
Employment rates
Number of properties that are vacant or available for sale or rent
Interest rates
Wages
What is the general effect of inflation on the dollar's purchasing power?
It increases the dollar's purchasing power.
It has no effect on the dollar's purchasing power.
It results in a decrease in the dollar's purchasing power.
It results in an increase in the dollar's purchasing power.
Which of the following is a strong indicator of high inflation risk?
Appreciation of the dollar
Depreciation of the dollar
Stability of the dollar
Increase in the dollar's value
What can strong economic growth indicate?
Future deflation
Future inflation
Decrease in aggregate demand
Decrease in GDP
Match the following economic conditions with their likely outcomes.
Economic recession
Rising unemployment and lower consumer spending
Economic growth
Falling unemployment and higher consumer spending
Decrease in disposable income
Higher taxes or increased cost of living
Decrease in demand and higher prices
Supply constraints and inflation
What is the relationship between high inflation and interest rates?
High inflation and low interest rates go hand in hand.
High inflation and high interest rates go hand in hand.
High inflation and stable interest rates go hand in hand.
High inflation and decreasing interest rates go hand in hand.
What is a tax exemption?
A dollar-by-dollar increase in the appraisal value of a property
A dollar-by-dollar reduction in the appraisal value of a property
A percentage reduction in the appraisal value of a property
A percentage increase in the appraisal value of a property
Which type of property is considered a homestead for tax exemption purposes?
Second homes
Vacation homes
Permanent residence occupied by its owner
Unoccupied investment properties
What is the tax exemption amount for senior citizens in Texas?
$5,000
$10,000
$15,000
$20,000
What is the capital gains tax exemption amount for married couples who sell their principal residence?
Up to $250,000
Up to $300,000
Up to $400,000
Up to $500,000
What is the primary difference between a tax credit and a tax deduction?
A tax credit lowers taxable income.
A tax deduction takes money off the tax bill.
A tax credit is applied before you get the bill.
A tax deduction is non-refundable.
Which of the following is true about tax deductions?
They lower the total taxes paid.
They are non-refundable.
They are transferrable.
They take money off the tax bill.
What is the formula to determine taxable income?
Which step involves adding the gross annual income and the capital gains income to get the homeowner's total income?
Step 1
Step 2
Step 3
Step 4
