Real Estate Financing Concepts Quiz - Chapter 10

Chapter 10 Quiz - Key Concepts

• Veteran Home Purchases: California Veterans Farm and Home Purchase Plan uses land contracts, not deeds of trust or mortgages.

• FHA Loan Assumptions: A $300 fee, called an assumption fee, accompanies FHA loan assumptions when the seller's equity is paid in cash.

• Home Ownership Costs: Amortization is not a cost of homeownership; depreciation, deferred maintenance, and loss of income are.

• Loan Risk Assessment: A lender is primarily concerned with a borrower's total liabilities, wife's credit history and part-time income. Husband's overtime is less important to a lender.

• VA-Guaranteed Loans: A distinguishing feature is that down payments are not typically required, and interest rates are not determined by the Department of Veterans Affairs.

• Rescission Rights (Van Burens/Harrisons): The Van Burens, using a purchase money loan, do not have rescission rights under the Truth in Lending Act. The Harrisons, using a commercial bank loan for a business venture, have no rescission rights.

• Mortgage Payments: Fully amortized mortgages have principal payments increasing and interest payments decreasing over the loan duration.

• Federal Loan Notice: A federal notice of rescission rights must be provided to a borrower when the loan secures a borrower's existing residence or is a loan of over $58,300 (or is for things other than the borrower's home).

• Down Payment Loans: Conventional loans are less likely to waive downpayments compared to VA loans.

Applying for a Residential Loan - Key Concepts

• Graduated Payment Mortgages: A loan in which interest rates change periodically to reflect market fluctuations in costs of money.

• Finance Charge Disclosure: Appraisal fees, origination fees, and points paid by the borrower are considered finance charges. Finder's fees are not.

• VA Loan Appraisals: A VA loan is capped at the appraised value of the property. Any gap between sales price and appraisal amounts must be paid in cash by the buyer. (Often for closing costs, not necessarily the entire loan amount)

• Real Estate Loan Considerations: Attractiveness of investment options in other financial sectors is the least important factor for lenders in assessing real estate loans.

• Loan Secured by Home: A real estate broker would need a Real Property Security Statement for a home-secured loan.

• Conventional Loan Comparisons: Conventional loans generally offer lower interest rates compared to FHA loans and shorter loan terms. Compared to FHA loans, conventional loans typically have less stringent qualifying standards for the borrower.

• Additional Notes: Some details are more important to lenders to determine if the borrower would be a worthwhile investment. Specific financial and investment situations may determine a borrower's viability for a loan.

Test your knowledge on key concepts of real estate financing in Chapter 10. This quiz covers various topics such as veteran home purchases, FHA loan assumptions, assessment of loan risks, and VA-guaranteed loans. Evaluate your understanding of these critical elements in home ownership and financing.