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WorksheetsReal Estate Unit 12 Quiz
Total questions: 87
Worksheet time: 44mins
What are some factors to consider when deciding to buy or rent property?
Length of stay, financial situation, housing affordability
Weather conditions, local cuisine, nearby schools
Proximity to shopping malls, nightlife, public transport
Local sports teams, cultural events, historical sites
What is mortgage fraud?
Exaggerating income or assets, minimizing debt, false employment history
Paying off a mortgage early
Applying for multiple loans at once
Using a mortgage for business purposes
What does PITI stand for in home ownership expenses?
Principal, Interest, Taxes, Insurance
Property, Investment, Taxes, Income
Payment, Interest, Taxes, Insurance
Principal, Investment, Taxes, Income
Which organizations provide free credit reports in the United States?
Equifax, Experian, TransUnion
Federal Reserve, IRS, Treasury Department
Google, Amazon, Facebook
State Department, Homeland Security, FBI
What is a credit score based on?
Consumer's past history of credit use
Consumer's age
Consumer's education level
Consumer's marital status
What is the range of the FICO® Score?
200 to 800
300 to 850
400 to 900
250 to 750
What percentage of the purchase price is a homebuyer expected to provide as a down payment?
At least 5%
At least 10%
At least 15%
At least 20%
What is the maximum percentage of gross monthly income that can be used for a monthly PITI payment?
20%
25%
28%
30%
What does LTV stand for in real estate financing?
Loan-to-value ratio
Loan-to-vehicle ratio
Lease-to-value ratio
Lease-to-vehicle ratio
What is a promissory note?
A borrower's personal promise to repay a debt
A type of insurance policy
A legal document for property ownership
A contract for employment
How can the payee transfer the right to receive payment on a note?
By signing the instrument over to a third party
By destroying the note
By notifying the lender verbally
By writing a new note
What is interest in the context of a loan?
A fee for early repayment
A charge for the use of money
A penalty for late payment
A reward for timely payment
What is usury?
Charging interest below the market rate
Charging interest in excess of the maximum rate allowed by law
Charging no interest on a loan
Charging a flat fee for loan processing
What is a loan origination fee typically charged for?
Prepaid interest
Loan officer's salary and expenses
Property taxes
Insurance premiums
What percentage of the loan amount is a typical loan origination fee?
0.5%
1%
2%
3%
What is the purpose of discount points in a loan?
To increase the lender's yield
To decrease the loan term
To reduce the borrower's interest rate
To cover closing costs
How much is one discount point typically worth?
0.5% of the loan amount
1% of the loan amount
1.5% of the loan amount
2% of the loan amount
What is a prepayment penalty?
A fee for late payments
A charge for paying off a loan early
A penalty for missing a payment
A fee for refinancing a loan
What are the two parts of a mortgage loan?
Interest and principal
Debt and security
Loan and interest
Principal and collateral
What is the process called where a borrower uses real property as security for a loan?
Foreclosure
Hypothecation
Amortization
Refinancing
What document is issued when a mortgage loan is paid in full?
Satisfaction of mortgage
Promissory note
Deed of trust
Mortgage agreement
Who retains the right of possession and control of the secured property in hypothecation?
Creditor
Lender
Debtor
Mortgagee
What is a mortgage considered in terms of lien?
Involuntary, general lien
Voluntary, specific lien
Involuntary, specific lien
Voluntary, general lien
In a mortgage or lien theory state, what does the mortgagor retain?
Legal and equitable title
Only legal title
Only equitable title
No title
What is the statutory right of redemption?
The right to buy back the property after foreclosure
The right to sell the property at any time
The right to increase the mortgage amount
The right to transfer the mortgage to another party
In a deed of trust, who holds the legal title on behalf of the lender?
The trustee
The borrower
The lender
The beneficiary
What happens to the legal title in a deed of trust or title theory state when the debt is paid in full?
It is returned to the borrower/trustor
It remains with the trustee
It is transferred to the lender
It is sold to a third party
What is the role of the trustee in a deed of trust?
To lend money to the borrower
To hold the title as security for the loan
To pay off the loan
To insure the property
What must a mortgage or deed of trust clearly establish?
The interest rate of the loan
The property as security for a debt
The borrower's employment history
The lender's profit margin
Which of the following is a duty of the borrower under a mortgage or deed of trust?
To lend money to other borrowers
To pay all real estate taxes on the property
To sell the property within a year
To increase the loan amount annually
What is required to protect the lender in the event that the property is destroyed or damaged?
A second mortgage
Maintenance of adequate insurance
A higher interest rate
A personal guarantee from the borrower
What is an acceleration clause in a mortgage or deed of trust?
A clause that allows the lender to increase the interest rate
A clause that allows the borrower to extend the loan term
A clause that allows the lender to accelerate the maturity of the debt
A clause that allows the borrower to decrease monthly payments
What happens when a borrower defaults on a mortgage with an acceleration clause?
The lender can sue the borrower immediately
The lender may declare the entire principal balance due and payable
The borrower can renegotiate the loan terms
The borrower is automatically given a grace period
What is a promissory note typically considered in real estate financing?
A non-negotiable instrument
A negotiable instrument
A security deposit
A mortgage lien
What is required for the release of a mortgage lien or deed of trust?
The borrower must refinance the loan
The lender must be divested of all rights conveyed under the mortgage
The borrower must sell the property
The lender must increase the interest rate
What is the purpose of a reserve fund required by many lenders?
To cover unpaid real estate taxes and insurance premiums
To pay off the mortgage early
To invest in property improvements
To cover personal expenses of the borrower
What is the National Flood Insurance Reform Act of 1994 known for?
Imposing mandatory obligations on lenders for flood insurance
Reducing property taxes for flood-prone areas
Providing grants for flood damage repairs
Eliminating the need for flood insurance
What happens if a borrower fails to procure flood insurance?
The lender must purchase the insurance on the borrower's behalf
The borrower is fined by the government
The property is automatically foreclosed
The borrower loses their insurance premium reserve
What does buying a property "subject to" a mortgage mean?
The buyer takes title but is not personally obligated to pay the debt
The buyer assumes the mortgage and agrees to pay the debt
The buyer pays off the mortgage immediately
The buyer receives a discount on the property price
What is a novation in real estate financing?
A new loan agreement that replaces the original loan
A clause preventing future purchase of property
A method of recording a mortgage
A type of lien on property
What does an alienation clause allow a lender to do when a property is sold?
Increase the interest rate
Declare the entire debt due immediately
Transfer the loan to another lender
Reduce the loan amount
Where must a mortgage document or deed of trust be recorded?
In the lender's office
In the borrower's personal records
In the recorder's office of the county where the real estate is located
In the national real estate registry
What determines the priority of mortgages and other liens?
The interest rate of the loan
The order in which they are recorded
The amount of the loan
The type of property
What is required for a subordination agreement to be valid?
Only the first lender must sign
Only the second lender must sign
Both lenders must sign the agreement
No signatures are required
What is another name for a straight loan?
Term loan
Amortized loan
Fixed-rate loan
Adjustable-rate loan
In an amortized loan, what does each payment include?
Only interest
Only principal
Interest and a portion of the principal
Only fees
What does the word "amortize" literally mean?
To increase
To pay off
To borrow
To invest
How long does the payment period usually range for an amortized loan?
1 to 5 years
5 to 10 years
10 to 30 years
30 to 50 years
What happens to the interest due as the unpaid balance of the loan is reduced in an amortized loan?
It increases
It remains the same
It declines
It doubles
What does ARM stand for in the context of mortgages?
Adjustable-rate mortgage
Annual-rate mortgage
Average-rate mortgage
Amortized-rate mortgage
How does an adjustable-rate mortgage (ARM) typically behave over time?
Begins at one rate of interest, then fluctuates
Remains constant throughout the term
Decreases steadily over time
Increases steadily over time
What is the interest rate factor for a 30-year loan at 6% according to the chart?
6.00
6.08
6.16
6.24
What is an index in the context of a mortgage loan?
A measure of the borrower's credit score
An economic indicator used to adjust the interest rate
A type of loan repayment plan
A fee charged by the lender
What is the purpose of a rate cap in an adjustable-rate mortgage (ARM)?
To increase the interest rate annually
To limit the amount the interest rate may change
To reduce the loan term
To adjust the principal amount
What is a growing-equity mortgage?
A mortgage with decreasing payments over time
A mortgage with a fixed interest rate and increasing principal payments
A mortgage with a variable interest rate and fixed payments
A mortgage with a balloon payment at the end
What is a balloon payment loan?
A loan with equal monthly payments
A loan with a final payment that is at least twice the amount of any other payment
A loan with decreasing payments over time
A loan with no interest charged
What is a reverse mortgage primarily used for?
To buy a new home
To borrow money against the equity built up in the home
To invest in the stock market
To pay off credit card debt
At what age can a homeowner typically qualify for a reverse mortgage?
50 years or older
55 years or older
62 years or older
70 years or older
What happens to the property in a foreclosure?
It is given to the borrower
It is sold to satisfy the debt
It is donated to charity
It is kept by the lender without sale
Who can initiate foreclosure proceedings?
Only the borrower
Any unpaid lienholder
Only the government
Only the original lender
What are the three general types of foreclosure proceedings?
Judicial, nonjudicial, and strict
Voluntary, involuntary, and strict
Public, private, and strict
Legal, illegal, and strict
In judicial foreclosure, what must the mortgagee provide before the property can be sold?
A court order and sufficient public notice
A private agreement and public notice
A court order and private notice
A private agreement and private notice
What is a key feature of nonjudicial foreclosure?
Court action is required
No court action is required
A public auction is mandatory
A private sale is mandatory
In strict foreclosure, what happens if the borrower does not pay off the loan by the court-established deadline?
The property is sold at auction
The court awards full legal title to the lender
The borrower is given an extension
The lender forgives the debt
What is a deed in lieu of foreclosure?
A legal process to evict a tenant
A voluntary agreement to transfer property to the lender
A method to increase property value
A type of insurance policy
What is the main disadvantage of a deed in lieu of foreclosure for the lender?
It eliminates all junior liens
It does not eliminate junior liens
It increases the property's value
It guarantees insurance coverage
What is the right of redemption?
The right to sell the property at a higher price
The right to reclaim property before foreclosure by paying the debt
The right to transfer property to a family member
The right to increase the loan amount
What happens if redemption is not made before the foreclosure sale?
The borrower retains ownership of the property
The successful bidder receives a deed to the real estate
The property is automatically insured
The borrower can extend the loan term
What is a deficiency judgment?
A judgment that increases the loan amount
A judgment against the borrower for the unpaid balance
A judgment that eliminates all debts
A judgment that transfers property to a new owner
What is a deficiency judgment in real estate financing?
A judgment allowing a lender to recover the remaining debt after foreclosure
A judgment that forgives all remaining debt after foreclosure
A judgment that increases the interest rate on a mortgage
A judgment that reduces the principal amount of a mortgage
What is a short sale in real estate?
Selling a property for more than the mortgage balance
Selling a property for less than the mortgage balance
Selling a property at the market value
Selling a property without lender approval
What is the Mortgage Forgiveness Debt Relief Act of 2007?
A law that taxes forgiven mortgage debt
A law that allows forgiveness of part of the mortgage debt without tax
A law that increases mortgage interest rates
A law that eliminates all mortgage debt
What does mortgage forbearance involve?
Forgiveness of the entire mortgage debt
Postponement of mortgage obligations without forgiveness
Reduction of the mortgage interest rate
Immediate repayment of the mortgage debt
When was the moratorium on foreclosures of government-backed mortgages extended to?
December 31, 2020
September 30, 2021
March 31, 2021
June 30, 2021
What is the purpose of Fannie Mae's website as mentioned in the document?
To provide information on real estate investments
To offer assistance to homeowners
To sell insurance policies
To advertise mortgage rates
According to the document, what did the Centers for Disease Control (CDC) announce regarding evictions?
A permanent ban on all evictions
A moratorium on evictions extended to July 31, 2021
A new policy for increasing rent
A reduction in eviction notices
What must a mortgage lender provide to the borrower according to the consumer protection pamphlet?
A free insurance policy
Contact information for complaints
A list of real estate agents
A detailed market analysis
What is one of the requirements for lenders regarding insurance as mentioned in the document?
Lenders must provide free insurance
Lenders must not charge for unnecessary insurance
Lenders must offer the cheapest insurance available
Lenders must insure all properties themselves
What is the main reason homeowners are encouraged to obtain insurance?
To increase the value of their property
To protect their investment
To comply with government regulations
To lower their mortgage rates
What is the most common homeowners policy called?
Comprehensive form
Basic form
Premium form
Standard form
Which of the following is NOT covered by the basic form homeowners policy?
Fire and lightning
Theft
Flooding
Vandalism and malicious mischief
What additional coverage does the broad-form homeowners insurance provide?
Damage from smoke
Falling objects
Damage by aircraft
Riot and civil commotion
What is the usual specified percentage for the coinsurance clause in homeowners insurance policies?
50%
60%
70%
80%
In the "IN PRACTICE" example, if a homeowner has insurance of only $70,000, what can they claim?
Full cost of repair without deduction
Only the cost of the land
Full cost of repair with deduction
No claim can be made
What is the purpose of the National Flood Insurance Program (NFIP)?
To provide health insurance
To offer car insurance
To provide flood insurance
To offer life insurance
Which type of insurance is not typically covered by a standard homeowners policy?
Fire insurance
Flood insurance
Theft insurance
Liability insurance
What does the acronym NFIP stand for?
National Fire Insurance Program
National Flood Insurance Program
National Financial Insurance Program
National Federal Insurance Program
