7D VAN Financing and Settlement
EXAM GUIDE 2025
|MOST COMMON QUESTIONS WITH CORRECTLY
VERIFIED ANSWERS|ALREADY A+
GRADED|GUARANTEED PASS
"Or More" Clause - A clause in a note, mortgage, or deed of trust, allowing for additional
payments to be made without penalty.
"Subject to" loan or mortgage - A method of purchasing real estate without agreeing to
pay the underlying encumbrance. Since the buyer is not personally liable on the loan, a
deficiency judgment from a foreclosure would have to be against the original seller/borrower.
Acceleration Clause - A provision in a note, mortgage or deed of trust that makes the
entire loan amount due immediately (accelerates all future payments to now) in the event of
default or other triggering event.
Adjustable Rate Mortgage (ARM) - A mortgage with an interest rate that may change,
usually in response to changes in the Treasury Bill rate or the prime rate. The purpose of the
interest rate adjustment is primarily to bring the interest rate on the mortgage in line with
market rates. The mortgage holder is protected by a maximum interest rate (called a ceiling),
which might be reset annually. ARMs usually start with lower rates than fixed rate mortgages, in
order to compensate the borrower for the additional risk that future interest rate fluctuations
will create.
Adjustment Periods - The period, usually 6 or 12 months, when the monthly payment on
an ARM is recalculated based on changes in the index.
Alienation Clause - A clause in the loan documents that states that if ownership of the
encumbered property transfers, the lender can accelerate the due date of the loan and demand
payment in full; also called a due-on-sale clause.
All-Inclusive Deed of Trust (Wraparound Mortgage) - Secondary financing that "wraps"
around, without disturbing, the first mortgage. The "wrap" lender provides a new larger loan
but continues to make payments on the underlying existing loan.
,Amortized Loan - A loan with equal periodic payments that include interest plus an
increasing partial re-payment of the principal over a set period of time such that at the end of
the term, the balance is zero.
Annual Percentage Rate (APR) - The APR is the real interest rate that takes into
consideration all of the fees and loan costs and is usually higher than the interest rate buyers
think they are getting. The APR was created to help borrowers shop loans. Since lenders can
have different closing costs, origination fees, and discount points, their true profit (yield) on the
loans does not equal the loan interest rate. To find the APR you subtract all the upfront costs
from the loan amount, and then re-calculate the interest rate based on the same loan payment.
Assumability (FHA) - Before December 15, 1989, FHA loans were assumable without
qualifying. After 12/15/89, owner-occupant buyers could only assume loans for which they
financially qualified. The seller could remain liable if the buyer defaults unless there is a
novation.
Back-end Ratio - A loan qualification ratio, typically requiring projected monthly principal,
interest, taxes and insurance (PITI), plus all other long-term monthly debt to be within a specific
percentage of gross monthly income. See front-end ratio.
Bait-and-Switch - An illegal advertising gimmick that offers property that is not really
available in order to trick buyers into a different property. Typically, offers low-priced property,
but really has only higher-priced properties available.
Beneficiary - A person who is to receive payment under a deed of trust or the person for
whom a trust operates. It is the lender in a deed of trust arrangement.
Biweekly Mortgage - A loan with 26 payments each year instead of 12 monthly
payments, which helps reduce the principal balance more rapidly.
Blanket Mortgage - One single mortgage covering more than one parcel of land.
Blended Mortgage Rate - The interest rate that results from blending the existing
underlying loan rate and the rate on a new, wraparound mortgage amount.
Bridge Loan - short-term loan that "bridges" the gap between a buyer acquiring a new
property before selling and paying off the loan on their current property.
Budget Mortgage - (PITI) Each loan payment includes principal plus interest plus 1/12
each of the estimated annual property tax and homeowner's insurance payments. The lender
then makes the tax and insurance payments to protect its interests in the loan. Most first
mortgages are budget loans.
,Buying Down Interest - Paying discount points up front (by either buyer or seller) to
receive a lower interest rate.
Capacity - The legal capacity to enter into a contract. Additionally, the borrower's income
and indebtedness. Used to calculate the loan-to-value (LTV) ratio.
Caps - Annual and lifetime limits on maximum interest rate increases on an ARM loan.
Enables the borrower to make a risk assessment based on the worst case scenarios.
Carry Back (Owner) Financing - When a seller acts as the lender and carries a second
mortgage on the subject property to facilitate the transaction.
Certificate of Eligibility - Proof to a lender that a veteran may apply for a VA-guaranteed
home loan. Obtained by most lenders from the VA electronically or by the veteran submitting a
Department of Defense Form (DD 214) Active Duty discharge document to the Department of
Veterans Affairs.
Certificate of Reasonable Value (CRV) - A statement of value issued by the Department of
Veterans Affairs after appraisal by a VA approved lender. If the CRV does not match or exceed
the contract purchase price, the veteran applicant may void the contract, or may choose to pay
any excess in cash at closing.
Character - The history of how a borrower has paid obligations in the past. While
character is one of the 3 C's of credit scores (capital and capacity are the others) character is not
synonymous with credit scores.
Collateral - Something of value offered as security for repayment of a loan. In real estate,
it is the mortgaged property.
Compensating Balance - Funds deposited in a bank by a borrower as additional security
for the lender's risk in loaning money or extending a line of credit to the borrower.
Compound Interest - Interest computed on the sum of the principal plus accrued interest
to date, at the beginning of each new period. Interest may be compounded daily, monthly,
quarterly, or annually.
Computerized Loan Origination (CLO) - Faceless, machine-to-machine loan process.
RESPA requires lenders to disclose any additional CLO fees and to advise that the consumer may
avoid the fee by meeting directly with the lender.
Conforming Loan - Any loan that conforms to Fannie Mae & Freddie Mac guidelines.
, Construction Loan - A short-term loan in which the lender periodically advances funds as
construction progresses and costs are documented. Typically replaced by new permanent
financing when construction is complete.
Constructive Eviction - Action or inaction by a landlord that causes a property to become
uninhabitable, thus causing eviction for the tenant. Terminates the lease and releases tenant
from responsibility to pay rent.
Contract for Deed - Also called an Installment Land Contract; an alternative method for
the sale of real estate where the buyer makes payments directly to the seller, does not receive a
deed immediately, and holds equitable title (the right to possess). The seller retains legal title
until all or an agreed upon portion of the sale price is paid.
Conventional loans - A mortgage loan not insured by any government program.
Conventional loans are the most common type of mortgage. They differ from FHA loans and VA
loans which are guaranteed or insured by the federal government. Conforming conventional
loans follow the loan underwriting guidelines set by Fannie Mae and Freddie Mac. Each
mortgage lender, bank or mortgage broker will establish their own rates, terms and fees for
conventional loans.
Deficiency Judgment - A judgment given to the holder of a foreclosed promissory note
against the borrower when the proceeds of the foreclosure sale are not enough to pay off the
debt.
Convertible Mortgage - An ARM that can be converted to a fixed-rate mortgage at some
point in time.
Deed in Lieu of Foreclosure - A deed given by a borrower to the holder of the mortgage
or deed of trust by which the title to the property is transferred, thus avoiding the necessity of
the lender foreclosing on the property.
Deed of Trust - A three-party security instrument for a promissory note that conveys
"naked title," and gives the trustee a right and process to foreclose without resorting to the
courts in the event of default. The 3 parties are: the borrower (trustor), the trustee, and the
lender (beneficiary of the trust).
Default Clause - A provision in a deed of trust that allows a junior lienholder (e.g., 2nd
deed of trust) to cure any higher priority lien(s); Absolutely essential to protect a junior
lienholder from being wiped out by the foreclosure of the prior lien.
EXAM GUIDE 2025
|MOST COMMON QUESTIONS WITH CORRECTLY
VERIFIED ANSWERS|ALREADY A+
GRADED|GUARANTEED PASS
"Or More" Clause - A clause in a note, mortgage, or deed of trust, allowing for additional
payments to be made without penalty.
"Subject to" loan or mortgage - A method of purchasing real estate without agreeing to
pay the underlying encumbrance. Since the buyer is not personally liable on the loan, a
deficiency judgment from a foreclosure would have to be against the original seller/borrower.
Acceleration Clause - A provision in a note, mortgage or deed of trust that makes the
entire loan amount due immediately (accelerates all future payments to now) in the event of
default or other triggering event.
Adjustable Rate Mortgage (ARM) - A mortgage with an interest rate that may change,
usually in response to changes in the Treasury Bill rate or the prime rate. The purpose of the
interest rate adjustment is primarily to bring the interest rate on the mortgage in line with
market rates. The mortgage holder is protected by a maximum interest rate (called a ceiling),
which might be reset annually. ARMs usually start with lower rates than fixed rate mortgages, in
order to compensate the borrower for the additional risk that future interest rate fluctuations
will create.
Adjustment Periods - The period, usually 6 or 12 months, when the monthly payment on
an ARM is recalculated based on changes in the index.
Alienation Clause - A clause in the loan documents that states that if ownership of the
encumbered property transfers, the lender can accelerate the due date of the loan and demand
payment in full; also called a due-on-sale clause.
All-Inclusive Deed of Trust (Wraparound Mortgage) - Secondary financing that "wraps"
around, without disturbing, the first mortgage. The "wrap" lender provides a new larger loan
but continues to make payments on the underlying existing loan.
,Amortized Loan - A loan with equal periodic payments that include interest plus an
increasing partial re-payment of the principal over a set period of time such that at the end of
the term, the balance is zero.
Annual Percentage Rate (APR) - The APR is the real interest rate that takes into
consideration all of the fees and loan costs and is usually higher than the interest rate buyers
think they are getting. The APR was created to help borrowers shop loans. Since lenders can
have different closing costs, origination fees, and discount points, their true profit (yield) on the
loans does not equal the loan interest rate. To find the APR you subtract all the upfront costs
from the loan amount, and then re-calculate the interest rate based on the same loan payment.
Assumability (FHA) - Before December 15, 1989, FHA loans were assumable without
qualifying. After 12/15/89, owner-occupant buyers could only assume loans for which they
financially qualified. The seller could remain liable if the buyer defaults unless there is a
novation.
Back-end Ratio - A loan qualification ratio, typically requiring projected monthly principal,
interest, taxes and insurance (PITI), plus all other long-term monthly debt to be within a specific
percentage of gross monthly income. See front-end ratio.
Bait-and-Switch - An illegal advertising gimmick that offers property that is not really
available in order to trick buyers into a different property. Typically, offers low-priced property,
but really has only higher-priced properties available.
Beneficiary - A person who is to receive payment under a deed of trust or the person for
whom a trust operates. It is the lender in a deed of trust arrangement.
Biweekly Mortgage - A loan with 26 payments each year instead of 12 monthly
payments, which helps reduce the principal balance more rapidly.
Blanket Mortgage - One single mortgage covering more than one parcel of land.
Blended Mortgage Rate - The interest rate that results from blending the existing
underlying loan rate and the rate on a new, wraparound mortgage amount.
Bridge Loan - short-term loan that "bridges" the gap between a buyer acquiring a new
property before selling and paying off the loan on their current property.
Budget Mortgage - (PITI) Each loan payment includes principal plus interest plus 1/12
each of the estimated annual property tax and homeowner's insurance payments. The lender
then makes the tax and insurance payments to protect its interests in the loan. Most first
mortgages are budget loans.
,Buying Down Interest - Paying discount points up front (by either buyer or seller) to
receive a lower interest rate.
Capacity - The legal capacity to enter into a contract. Additionally, the borrower's income
and indebtedness. Used to calculate the loan-to-value (LTV) ratio.
Caps - Annual and lifetime limits on maximum interest rate increases on an ARM loan.
Enables the borrower to make a risk assessment based on the worst case scenarios.
Carry Back (Owner) Financing - When a seller acts as the lender and carries a second
mortgage on the subject property to facilitate the transaction.
Certificate of Eligibility - Proof to a lender that a veteran may apply for a VA-guaranteed
home loan. Obtained by most lenders from the VA electronically or by the veteran submitting a
Department of Defense Form (DD 214) Active Duty discharge document to the Department of
Veterans Affairs.
Certificate of Reasonable Value (CRV) - A statement of value issued by the Department of
Veterans Affairs after appraisal by a VA approved lender. If the CRV does not match or exceed
the contract purchase price, the veteran applicant may void the contract, or may choose to pay
any excess in cash at closing.
Character - The history of how a borrower has paid obligations in the past. While
character is one of the 3 C's of credit scores (capital and capacity are the others) character is not
synonymous with credit scores.
Collateral - Something of value offered as security for repayment of a loan. In real estate,
it is the mortgaged property.
Compensating Balance - Funds deposited in a bank by a borrower as additional security
for the lender's risk in loaning money or extending a line of credit to the borrower.
Compound Interest - Interest computed on the sum of the principal plus accrued interest
to date, at the beginning of each new period. Interest may be compounded daily, monthly,
quarterly, or annually.
Computerized Loan Origination (CLO) - Faceless, machine-to-machine loan process.
RESPA requires lenders to disclose any additional CLO fees and to advise that the consumer may
avoid the fee by meeting directly with the lender.
Conforming Loan - Any loan that conforms to Fannie Mae & Freddie Mac guidelines.
, Construction Loan - A short-term loan in which the lender periodically advances funds as
construction progresses and costs are documented. Typically replaced by new permanent
financing when construction is complete.
Constructive Eviction - Action or inaction by a landlord that causes a property to become
uninhabitable, thus causing eviction for the tenant. Terminates the lease and releases tenant
from responsibility to pay rent.
Contract for Deed - Also called an Installment Land Contract; an alternative method for
the sale of real estate where the buyer makes payments directly to the seller, does not receive a
deed immediately, and holds equitable title (the right to possess). The seller retains legal title
until all or an agreed upon portion of the sale price is paid.
Conventional loans - A mortgage loan not insured by any government program.
Conventional loans are the most common type of mortgage. They differ from FHA loans and VA
loans which are guaranteed or insured by the federal government. Conforming conventional
loans follow the loan underwriting guidelines set by Fannie Mae and Freddie Mac. Each
mortgage lender, bank or mortgage broker will establish their own rates, terms and fees for
conventional loans.
Deficiency Judgment - A judgment given to the holder of a foreclosed promissory note
against the borrower when the proceeds of the foreclosure sale are not enough to pay off the
debt.
Convertible Mortgage - An ARM that can be converted to a fixed-rate mortgage at some
point in time.
Deed in Lieu of Foreclosure - A deed given by a borrower to the holder of the mortgage
or deed of trust by which the title to the property is transferred, thus avoiding the necessity of
the lender foreclosing on the property.
Deed of Trust - A three-party security instrument for a promissory note that conveys
"naked title," and gives the trustee a right and process to foreclose without resorting to the
courts in the event of default. The 3 parties are: the borrower (trustor), the trustee, and the
lender (beneficiary of the trust).
Default Clause - A provision in a deed of trust that allows a junior lienholder (e.g., 2nd
deed of trust) to cure any higher priority lien(s); Absolutely essential to protect a junior
lienholder from being wiped out by the foreclosure of the prior lien.
