Chapter 10 Quiz - California Real Estate

Principles of California Real Estate Instructor Materials Chapter 10 Quiz 1. Which of the following documents would be   7KH9DQ%XUHQVSXUFKDVHGDKRXVHZLWKD¿UVW used when a veteran purchases a home through deed of trust obtained from a savings and loan....

Principles of California Real Estate Instructor Materials Chapter 10 Quiz 1. Which of the following documents would be   7KH9DQ%XUHQVSXUFKDVHGDKRXVHZLWKD¿UVW used when a veteran purchases a home through deed of trust obtained from a savings and loan. the California Veterans Farm and Home Pur- 7KH+DUULVRQVUH¿QDQFHGWKHLUKRXVHRZQHG chase Plan? IUHHDQGFOHDUZLWKD¿UVWGHHGRIWUXVWREWDLQHG A. Deed of trust IURPDFRPPHUFLDOEDQNLQRUGHUWR¿QDQFHD B. Mortgage new business venture. Which of the following C. Special warranty deed is correct? D. Land contract of sale A. Both have a right of rescission B. The Van Burens have a right of rescission C. The Harrisons have a right of rescission 2. A buyer assumes an FHA loan with the lender’s D. Neither has a right of rescission approval, by paying the seller’s equity in cash and a $300 fee. What is this fee called? A. An origination fee 7. If a fully amortized, long-term home mortgage B. Discount points loan provides for equal monthly payments, C. An assumption fee the: D. A lock-in fee A. principal payment will decrease as the interest payment increases B. interest payment will decrease as the prin- 3. Which of the following is not a cost of owning cipal payment increases a home? C. principal and interest payments will both A. Amortization increase B. Deferred maintenance D. principal and interest payments will both C. Depreciation decrease D. Loss of income from investment of capital 8. A federal notice of the right of rescission must 4. Which of the following topics would a lender be given to a borrower if the loan is: be least concerned with in assessing the risk A. secured by the borrower’s existing resi- posed by potential borrowers? dence A. Wife’s part-time income B. secured by commercial property B. Couple’s total liabilities C. an unsecured loan of more than $58,300 C. Husband’s overtime earnings D. for the purchase of business inventory D. Wife’s credit history 9. Which of the following types of loans is least 5. Which of the following is a distinguishing likely to require a downpayment from a bor- feature of VA-guaranteed loans? rower? A. The downpayment is determined by the A. Conventional loan Notice of Value B. FHA-insured loan B. The downpayment doesn’t have to be more C. VA-guaranteed loan than 3% of the selling price D. Cal-Vet loan C. Interest rates on VA-guaranteed loans are VHWE\WKH'HSDUWPHQWRI9HWHUDQV$൵DLUV D. VA-guaranteed loans do not require a downpayment 12  Chapter 10: Applying for a Residential Loan 10. A loan in which the interest rate is periodically 15. When compared with an FHA loan, a conven- LQFUHDVHGRUGHFUHDVHGWRUHÀHFWFKDQJHVLQWKH WLRQDOORDQZLOOR൵HUWKHERUURZHU cost of money is called a/an: A. lower interest rates A. graduated payment mortgage B. a lower loan-to-value ratio B. growth equity mortgage C. a longer repayment period C. adjustable-rate mortgage D. less stringent qualifying standards D. shared appreciation mortgage 11. All of the following items are required to be GLVFORVHGDV¿QDQFHFKDUJHVXQGHUWKH7UXWKLQ Lending Act, except: A. appraisal fees B. origination fee C. discount points paid by borrower  ' ¿QGHU¶VIHH 12. If a home sells for $290,000 and has been appraised at $286,000, what is the minimum amount of cash that a buyer under a VA loan will need to pay at closing? A. $0 B. $50 C. $1,500 D. $4,000 13. Which of the following considerations would be least important to a lender of real estate mortgage loans? A. Present value of the subject property  % %RUURZHU¶VQHHGIRU¿QDQFLDODVVLVWDQFH C. Borrower’s net worth D. Attractiveness of investments in other sec- tors of the economy  $PDQRZQVDKRXVHDQGKDVD¿UVWGHHGRIWUXVW executed against the home. He has a substan- tial amount of equity in the home. He needs a loan of $9,600 for college tuition for his son. A real estate broker arranges the loan, which is secured by the home. What document does the broker need for this transaction? A. Real property security statement B. Broker’s loan disclosure statement C. Real property securities license D. None of the above 13  Principles of California Real Estate Instructor Materials Answer Key 1. D. When a home is purchased through the 6. D. The Van Burens do not have the California Veterans Farm and Home right of rescission under the Truth in Purchase Plan (generally known as Lending Act because their loan was a Cal-Vet), the state purchases and holds purchase money loan. And the Truth legal title to the property, and sells the in Lending Act does not apply to the property to the veteran through a land Harrisons’ loan at all, since it was a contract. business loan, even though it used a residence as collateral. 2. C. In order to assume any loan, FHA or conventional, the borrower will typi- 7. B. With each successive month of an cally have to pay an assumption fee. amortized loan, the amount of each A buyer assuming an FHA loan will payment applied toward the princi- also have to meet FHA underwriting pal balance will increase, while the standards and intend to make the home amount applied to interest will de- their primary residence. crease. 3. A. Amortization is a method of structur- 8. A. Under the Truth in Lending Act, the ing mortgage payments, not a cost right of rescission applies to home eq- of owning a home. Depreciation and uity loans, where a borrower secures a deferred maintenance are costs of own- loan with a property he already owns. ing a home, as is the loss of income TILA does not apply to agricultural, that could be earned if the equity in the business, or commercial loans, or house could be invested elsewhere. loans of more than $58,300 that aren’t secured by real property. 4. C. Overtime or temporary income is not considered stable monthly income, be- 9. C. A VA loan does not require a down- cause there is no guarantee what it will payment from the borrower. If a loan be in the future. It will have no bearing amount is larger than the maximum on a prospective borrower’s income guaranty amount, a lender may still ratios. demand a downpayment, but that is the only time a VA borrower will need a 5. D. One principal advantage of VA-guar- downpayment. anteed loans is that they do not require a downpayment. For a large loan 10. C. This is called an adjustable-rate mort- that exceeds the maximum guaranty gage. amount, a lender may still charge a downpayment. 14  Chapter 10: Applying for a Residential Loan 11. A. The fees for an appraisal are not con- VLGHUHGDVSDUWRIWKHWRWDO¿QDQFH charge that must be disclosed under the requirements of the Truth in Lend- ing Act. 12. D. A VA loan will not be guaranteed for more than the appraised value of the property as set forth in the Notice of Value. Therefore, if a property is ap- praised for $4,000 less than the sale price, a VA borrower will need to pay at least $4,000 in cash to complete the sale. (The borrower will probably need to pay more, though, in order to pay for closing costs.) 13. B. A lender is not concerned with the size or scope of the borrower’s need. A lender is only concerned with whether or not the loan will be a safe and worthwhile investment. 14. B. If a real estate broker provides loan services, he must provide a disclosure statement to the borrower. The dis- closure statement must list all costs involved in obtaining the loan. 15. B. A conventional loan will usually re- quire a lower loan-to-value ratio than an FHA loan, because the conventional loan does not come with governmental insurance in case of default. The great- er risk means the lender is less likely to accept an LTV of 95% or greater. 15