Real Estate Financing Concepts

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Questions and Answers

Which document is necessary for a veteran purchasing a home through the California Veterans Farm and Home Purchase Plan?

Mortgage

Special warranty deed

Deed of trust (correct)

Land contract of sale

What is the $300 fee paid when a buyer assumes an FHA loan known as?

Discount points

An origination fee

An assumption fee (correct)

A lock-in fee

Which of the following is NOT considered a cost of owning a home?

Amortization (correct)

Depreciation

Loss of income from investment of capital

Deferred maintenance

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

Interest payment decreases as principal payment increases Signup and view all the answers

Who possesses the right of rescission in the Van Burens and Harrisons scenario?

Both have a right of rescission Signup and view all the answers

Which factor is least likely to concern a lender when assessing risk posed by potential borrowers?

Wife’s part-time income Signup and view all the answers

Which distinguishing feature typically applies to VA-guaranteed loans?

VA-guaranteed loans do not require a downpayment Signup and view all the answers

What type of loan adjusts the interest rate periodically based on changes in the cost of money?

Adjustable-rate mortgage Signup and view all the answers

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

Settlement fees Signup and view all the answers

If a home sells for $290,000 and appraises at $286,000, what is the minimum cash payment a buyer under a VA loan needs at closing?

$0 Signup and view all the answers

Which consideration is least important to a lender of real estate mortgage loans?

Attractiveness of investments in other sectors of the economy Signup and view all the answers

What document is required by a broker when arranging a loan secured by a home?

Real property security statement Signup and view all the answers

What does the Truth in Lending Act not apply to?

Purchase money loans Signup and view all the answers

What occurs with each successive month of an amortized loan payment?

Interest payment decreases, principal payment increases Signup and view all the answers

What fee must a buyer typically pay when assuming an FHA loan?

Assumption fee Signup and view all the answers

Study Notes

Chapter 10 Quiz - Key Concepts

Veteran Home Purchases (Cal-Vet): A Cal-Vet purchase uses a land contract, not a deed of trust or mortgage, as the state holds title initially.
FHA Loan Assumption: A fee, called an assumption fee, is paid when a buyer assumes an FHA loan. This fee is separate from origination fees or discount points.
Home Ownership Costs: Amortization isn't a cost of home ownership but rather a structuring method for payments. Deferred maintenance, depreciation, and loss of potential investment return are costs.
Lender Concerns: Lenders are least concerned with a borrower's part-time income, and more interested in total liabilities, overtime income, and credit history.
VA-Guaranteed Loans: A distinguishing feature is the absence of required down payments (though, some down payments might still apply for large loan amounts).

Loan Rescission Rights

Rescission Rights Vary: Rescission rights differ based on loan purpose (e.g., purchase money loan vs. business loan) under specific acts.
Van Burens: The Van Burens wouldn't have the right of rescission because their loan is a purchase money loan. Their original loan is connected to purchasing a home, not a business.
Harrisons: The Harrisons did not have the right of rescission, as their loan was related to financing a business, not their residence.

Mortgage Loan Details

Amortization: In fully amortized mortgages, the interest portion of the payment decreases while the principal portion increases over time.
Loan Types and Risks: Different types of loans have varying degrees of concern on the part of the lender. Cal-Vet loans are less risky (in general) than conventional loans for lenders. This is partially because of government backing on some loan types.
Downpayments: Conventional loans typically require a downpayment that's lower than on other loans types. This means they carry a greater risk for the lender.
Importance of Loan Terms: Various factors like loan structures, terms and conditions, and type of property have to be considered to determine risk.

Applying for a Residential Loan

Loan Fees: Appraisal fees aren't considered part of the total finance charge and don't have to be disclosed as a part of the finance charge.
VA Loan Appraisals: A VA loan is not guaranteed for more than the appraised value. A buyer must pay the difference in sale price and appraisal, or cover the shortfall in cash.
Lender Considerations: Lenders least consider a borrower's ability to access financial assistance in other sectors while lenders are also concerned with the present value of the property they are selling.
Disclosure Statement: Real estate brokers who provide loan services are obligated to provide a broker disclosure statement to borrowers.
Conventional Loan Risk: Conventional loans pose greater risk for lenders since they are not backed by a government agency, which means they lack the same protections.

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Description

Test your understanding of key real estate financing concepts covered in Chapter 10. This quiz includes topics such as Cal-Vet purchases, FHA loan assumptions, home ownership costs, and VA-guaranteed loans. Assess your knowledge of how these elements influence home buying and financing decisions.

Real Estate Financing Concepts - Chapter 10 Quiz

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