Mortgage Loan Brokering Quiz Notes

Questions and Answers

What is the primary purpose of the course Mortgage Loan Brokering and Lending?

To fulfill licensing requirements for real estate brokers. (correct)

To educate clients about mortgage options.

To teach real estate sales strategies.

To provide optional continuing education for real estate professionals.

What role does a broker typically play in a mortgage transaction?

They function solely as the borrower.

They serve as a regulatory authority for lenders.

They act as the principal in the loan agreement.

They facilitate transactions between lending and borrowing parties. (correct)

Which of the following is NOT considered an institutional lender?

Commercial bank.

Government chartered corporation.

Private individual investor. (correct)

Credit union.

An institutional lender might decline a loan application due to which factor?

The borrower's lack of prior credit history. Signup and view all the answers

What does the front-end ratio assess?

The relationship of housing costs to income. Signup and view all the answers

The back-end ratio evaluates which aspect of a borrower's finances?

Total monthly housing costs plus long-term debt in relation to income. Signup and view all the answers

Why are private lenders more inclined to issue higher risk loans?

They anticipate higher returns to compensate for increased risk. Signup and view all the answers

Which option is an example of a soft money loan?

Seller financing for purchasing property. Signup and view all the answers

Which is a reason institutional lenders might decline a loan?

The property is located in a high-risk area. Signup and view all the answers

What does a back-end ratio indicate?

Monthly housing costs in relation to total debt. Signup and view all the answers

Study Notes

Mortgage Loan Brokering and Lending Quiz Notes

Mortgage Loan Brokering: Necessary course for real estate broker licensing; optional for real estate salesperson licensing.
Brokers' Role: Act as third parties who arrange transactions between principals, not as the borrower or lender directly.
Institutional Lenders: Examples include commercial banks, savings banks, and government-chartered corporations like FNMA and FHMLC.
Loan Denial Factors: Institutional lenders may refuse loans based on property type, lack of credit history, or high debt-to-income ratios.
Front-End Ratio: Measurement of the borrower's capacity to pay based on income vs. housing costs.
Back-End Ratio: Evaluates monthly housing costs plus other long-term debts against total monthly income.
Private Lender Risk: Willing to take on higher-risk loans due to potential for greater returns, not necessarily due to government insurance or sale to Fannie Mae.
Soft Money Loans: Typically involve seller financing or are arranged through mortgage brokers, different from institutional loans.
Equity Loans: Based on the difference between a property's fair market value and outstanding loans, rather than solely on the borrower's credit score or interest rate.
Characteristics of Brokered Loans: Loans through mortgage brokers from private lenders may lack longer terms, lower interest rates, or reduced fees compared to institutional lender loans.

Mortgage Loan Brokering and Lending Quiz Notes

Mortgage Loan Brokering: Necessary course for real estate broker licensing; optional for real estate salesperson licensing.
Brokers' Role: Act as third parties who arrange transactions between principals, not as the borrower or lender directly.
Institutional Lenders: Examples include commercial banks, savings banks, and government-chartered corporations like FNMA and FHMLC.
Loan Denial Factors: Institutional lenders may refuse loans based on property type, lack of credit history, or high debt-to-income ratios.
Front-End Ratio: Measurement of the borrower's capacity to pay based on income vs. housing costs.
Back-End Ratio: Evaluates monthly housing costs plus other long-term debts against total monthly income.
Private Lender Risk: Willing to take on higher-risk loans due to potential for greater returns, not necessarily due to government insurance or sale to Fannie Mae.
Soft Money Loans: Typically involve seller financing or are arranged through mortgage brokers, different from institutional loans.
Equity Loans: Based on the difference between a property's fair market value and outstanding loans, rather than solely on the borrower's credit score or interest rate.
Characteristics of Brokered Loans: Loans through mortgage brokers from private lenders may lack longer terms, lower interest rates, or reduced fees compared to institutional lender loans.

Description

Explore the essential concepts of mortgage loan brokering and lending with this comprehensive quiz. Understand the roles of brokers and institutional lenders, learn about loan denial factors, and dive into the ratio measurements that influence borrower capacity. Perfect for those preparing for real estate licensing exams.