California Veterans Home Purchase Quiz
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Questions and Answers

What is the fee called when a buyer assumes an FHA loan by paying the seller’s equity and a $300 fee?

  • Discount points
  • A lock-in fee
  • An assumption fee (correct)
  • An origination fee

    • Which of the following considerations would be least important to a lender of real estate mortgage loans?

  • Present value of the subject property
  • Borrower's financial assistance needs
  • Borrower’s net worth
  • Attractiveness of investments in other sectors of the economy (correct)

    • What document does the broker need to arrange a loan secured by the home?

  • Real property security statement (correct)
  • Broker’s loan disclosure statement
  • Real property securities license
  • None of the above

    • Which of the following is not considered a cost of owning a home?

    <p>Property taxes</p> Signup and view all the answers

    In a fully amortized, long-term home mortgage loan with equal monthly payments, what happens to the principal and interest payments over time?

    <p>Interest payment will decrease as the principal payment increases</p> Signup and view all the answers

    What does amortization refer to in mortgage payments?

    <p>A method of structuring mortgage payments</p> Signup and view all the answers

    Who has the right of rescission when it comes to the Van Burens and the Harrisons in a real estate transaction?

    <p>Only the Van Burens have a right of rescission</p> Signup and view all the answers

    Under what circumstance does the right of rescission not apply to a loan?

    <p>When the loan is a purchase money loan</p> Signup and view all the answers

    As a loan is amortized, what happens to the principal and interest repayment amounts over time?

    <p>Principal repayment increases while interest amount decreases</p> Signup and view all the answers

    Which factor is a lender least concerned with when assessing the risk posed by potential borrowers?

    <p>Wife’s part-time income</p> Signup and view all the answers

    What is a distinguishing feature of VA-guaranteed loans?

    <p>VA-guaranteed loans do not require a downpayment</p> Signup and view all the answers

    What type of loan involves an interest rate that is periodically adjusted to reflect changes in the cost of money?

    <p>Adjustable-rate mortgage</p> Signup and view all the answers

    Which of the following items is not required to be disclosed as finance charges under the Truth in Lending Act?

    <p>Loan processing fee</p> Signup and view all the answers

    If a home sells for $290,000 and has been appraised at $286,000, what is the minimum amount of cash a buyer under a VA loan will need to pay at closing?

    <p>$0</p> Signup and view all the answers

    What is the fee charged to a buyer when assuming an FHA loan called?

    <p>An assumption fee</p> Signup and view all the answers

    In a fully amortized mortgage, how do the principal and interest payments change over time?

    <p>Interest payment will decrease while principal payment increases</p> Signup and view all the answers

    Which of the following statements regarding the right of rescission is accurate?

    <p>Only one party has a right of rescission</p> Signup and view all the answers

    Which of these options is not a typical consideration for lenders when assessing real estate mortgage loans?

    <p>The borrower's personal preferences</p> Signup and view all the answers

    Which factor would a lender be least concerned with when assessing the risk posed by potential borrowers?

    <p>Wife’s part-time income</p> Signup and view all the answers

    Which of the following characteristics is true for VA-guaranteed loans?

    <p>VA-guaranteed loans do not require a downpayment</p> Signup and view all the answers

    What typically happens when a home is bought through the California Veterans Farm and Home Purchase Plan?

    <p>The state purchases and holds legal title to the property.</p> Signup and view all the answers

    What type of loan involves an interest rate that is periodically adjusted?

    <p>Adjustable-rate mortgage</p> Signup and view all the answers

    Which item is not required to be disclosed as finance charges under the Truth in Lending Act?

    <p>Broker’s commission fee</p> Signup and view all the answers

    What does amortization in a mortgage context refer to?

    <p>A method of structuring mortgage payments.</p> Signup and view all the answers

    When will a borrower typically need to pay an assumption fee?

    <p>When assuming a FHA loan.</p> Signup and view all the answers

    In the context of loans, what is the distinguishing feature of a growth equity mortgage?

    <p>Payments increase over time</p> Signup and view all the answers

    For a home selling at $290,000 and appraised at $286,000, what is the minimum cash needed at closing under a VA loan?

    <p>$0</p> Signup and view all the answers

    Which of the following is true regarding the right of rescission?

    <p>It does not apply to purchase money loans.</p> Signup and view all the answers

    When comparing FHA loans with conventional loans, what is a common difference regarding interest rates?

    <p>Conventional loans offer lower interest rates</p> Signup and view all the answers

    What effect does amortization have on loan payments over time?

    <p>More of each payment goes toward principal over time.</p> Signup and view all the answers

    Which of the following types of loans is least likely to require a downpayment from a borrower?

    <p>VA-guaranteed loan</p> Signup and view all the answers

    Which of the following would be least relevant for a lender assessing a mortgage application?

    <p>The borrower's personal interests.</p> Signup and view all the answers

    What is generally expected of a buyer assuming an FHA loan?

    <p>Compliance with FHA underwriting standards.</p> Signup and view all the answers

    Study Notes

    Chapter 10 Quiz - Key Concepts

    • Veteran Home Purchases: California Veterans use a specific plan for home purchases (Cal-Vet). The plan involves a land contract where the state initially holds title.

    • Loan Approvals: Buyers assuming an FHA loan may have to pay an assumption fee and meet FHA standards, including intending to reside in the home as their primary residence.

    • Loan Costs: Costs of owning a home include things like amortization, deferred maintenance, depreciation, and loss of income from capital investment. Lenders are less concerned about a borrower's overtime or temporary income than their stable monthly income. Wife's credit history, in addition to total liabilities and part-time income, are crucial factors for lenders evaluating risk.

    • VA-Guaranteed Loans: A distinguishing feature of VA-guaranteed loans is that they typically don't require a down payment. However, if the loan exceeds the maximum guaranty amount, a downpayment may still be required.

    • Right of Rescission: If a loan is a purchase money loan (mortgages for purchasing a house), the right of rescission applies to the Truth in Lending Act. Rescission does not apply to business loans secured by a residence.

    • Mortgage Payments: In a fully amortized mortgage, the amount applied towards principal increases each month, while the interest portion decreases.

    • Loan Security: Federal notices of the right of rescission must be provided if the loan is secured by the borrower's residence, but not for commercial or agricultural loans.

    • Loan Types and Downpayments: Different types of loans (conventional, FHA, VA, Cal-Vet) have varying requirements regarding down payments. Conventional loans tend to require lower loan to value ratios compared to FHA loans. Cal-Vet loans are least likely to require a downpayment.

    Applying for a Residential Loan - Additional Concepts

    • Graduated Payment Mortgages (GPMs): Loans with interest rates and/or payments that adjust periodically based on market interest rates.

    • Truth in Lending Act (TILA) and Finance Charges: Finance charges include appraisal fees, origination fees, and discount points. These are required to be disclosed under TILA. Fees for an appraisal are not considered a finance charge.

    • VA Loan Appraisals: VA loans are guaranteed up to the appraised value of the property. Any difference between the appraised value and the sale price must be covered by the borrower.

    • Lender Considerations: A lender's primary concern is whether the loan will be a worthwhile investment, factoring in factors like present value of the property, borrower's financial stability, and attractiveness of other investments.

    • Real Estate Broker's Role in Loan Transactions: Real Estate brokers need to use a real estate property security statement document to complete a loan transaction when a home is used as collateral to secure a loan. A disclosure statement regarding all loan costs is also required when providing loan services.

    • Conventional Loans vs FHA Loans: Conventional loans generally have lower loan-to-value ratios relative to FHA loans. The latter has higher risks and requires more extensive borrower protections and guarantying.

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    Chapter 10 Quiz - California Real Estate

    Description

    Test your knowledge on the key concepts related to California veterans' home purchase plans, including VA-guaranteed loans, loan approvals, and associated costs. This quiz covers important factors that lenders consider when evaluating home loan applications. Enhance your understanding of the unique aspects of veteran home buying in California.

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