REAL ESTATE FINANCE FINAL EXAM UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
1. - step in loan process
- is the first step in determining "how much house" the buyer can afford and which type of loan might be
best. The buyer supplies information about their financial situation to the lender, who then provides a
general estimate.
Answer:
pre-qualification
Question:
2. - step in loan process
- is the more official process of being approved by the lender to borrow a specific amount at an interest rate
within a small range.
Answer:
Pre-approval
Question:
3. - is someone who brings together a borrower and a lender in order to create a mortgage
- generally package and sell loans to larger investors
Answer:
mortgage brokers
Question:
4. - is an entity or person who provides mortgage financing by using their own funds
- the loans come from the ________, rather than a commercial bank or savings association
Answer:
mortgage banker
Question:
5. - offers loans using their own money at their own risk. The difference is that a _____________ generally
works on a smaller scale than mortgage brokers and bankers.
Answer:
correspondent lenders
Question:
6. Six step life of a mortgage:
Answer:
1. Origination
2. Loan Processing
3. Underwriting
4. Funding
5. Closing
6. Loan Servicing
, Question:
7. - first step of the life of a mortgage
A. - creation of a new mortgage
B. - Mortgages can be originated by mortgage brokers, mortgage bankers, or correspondent lenders.
Answer:
origination
Question:
8. - second step of the life of a mortgage
A. - The lender collects information from the buyer that will help determine the loan type and amount they
will qualify for. The person who is seeking the loan will need to complete and submit an application to
kick off the loan processing. Lenders have to consider a borrower's income, credit, debt, source of funds,
and net worth. They do this by creating a file for each interested borrower containing pertinent information
about them and the property. They also verify that the information provided by the borrower is actually
true
B. - A MAJOR component of loan processing is ordering and checking the borrower's credit reports. Not all
creditors report to all three of the big national credit reporting agencies (Equifax, Experian, and
TransUnion), so a single individual could have a different score from each agency.
Answer:
Loan Processing
Question:
9. - third step of the life of a mortgage
- is the process of deciding the level of risk a lender would take on by offering a loan to a certain borrower
for a specific property. It's a complex process that has been automated to some degree, but still requires the
work of a specially trained professional.
Answer:
underwriting
Question:
10. - fourth step of the life of a mortgage
- happens when the lender provides the cash in the amount of the approved loan. It is the transferring of
funds to a title company or escrow company so that they may be disbursed from there. Usually, the
homebuyer doesn't get the keys until funding (not just closing) has occurred.
Answer:
funding
Question:
11. - fifth step of the life of a mortgage
- is the tuition of a real estate transaction when all the necessary contracts are signed and the lender
disburses the funds of the mortgage loan. The physical meeting at which the paperwork is signed for the
property transfer is also called the closing.
Answer:
closing
, Question:
12. - sixth step of the life of a mortgage
- is a collection of monthly payments, usually including payments on the principal, interest, taxes, and
insurance, or PITI, along withthe maintenance of records. The loan servicer is also responsible for
sendingthe collected funds to the note holder and contacting the borrower about any delinquencies.
Additionally, the loan servicer will provide the borrower an annualstatement that details the activity of the
escrow account, showing the account balance and payments for property taxes, homeowners insurance,
and other escrowed items.
Answer:
loan servicing
Question:
13. With ______ lenders have the right to foreclose on the property and sell it to get some of their money
back in the event the borrower stops making payments
Answer:
collateral
Question:
14. - is where mortgages are first created by connecting lenders to borrowers
A. - Institutions include; credit unions, commercial banks, life insurance companies, savings banks
B. - People; mortgage lenders and borrowers
Answer:
primary market
Question:
15. - where loans and servicing rights are sold to investors
Made up of:
• Fannie Mae
• Freddie Mac
• Ginnie Mae
• Federal Home Loan Bank • Private investors
• Life insurance companies
People;
- mortgage lenders and buyers
Answer:
secondary market
Question:
16. - property valuation
- determines value by comparing the subject property to the sales prices of "comps" (short for
comparables, aka similar properties) that have been sold recently.
Answer:
sales comparison approach
, Question:
17. - property valuation
A. - estimates the value of a property by determining how much it would cost to completely replace it and
then subtracting from that value to account for depreciation
B. - Better with new construction
Answer:
cost approach
Question:
18. - property valuation
A. - determines the value ofa property by paying particular attention to the amount of income a property could
produce for its owner
B. - ex apartment complexes
Answer:
income approach
Question:
19. Loans are either government-guaranteed (insured), such as FHA or VA loans,or they are
___________________. _____________are not insured by the government
Answer:
conventional loans
Question:
20. ___________ loans are an option for homebuyers who may not be qualified for a conventional loan. It
allows them to put down a smaller down payment (as low as 3.5%) and get into their own home sooner
than they may have been able to afford it without this program.
Answer:
Federal Housing Administration (FHA)
Question:
21. - Insurance required for conventional loans
A. - required for borrowers with less than 20% equity
B. - recurring monthly payment
Answer:
Private Mortgage Insurance (PMI)
Question:
22. - Insurance for government backed loans
A. - required on all FHA loans
B. - upfront premium and recurring monthly payment
Answer:
Mortgage Insurance Premium (MIP)
QUESTIONS AND CORRECT ANSWERS
Question:
1. - step in loan process
- is the first step in determining "how much house" the buyer can afford and which type of loan might be
best. The buyer supplies information about their financial situation to the lender, who then provides a
general estimate.
Answer:
pre-qualification
Question:
2. - step in loan process
- is the more official process of being approved by the lender to borrow a specific amount at an interest rate
within a small range.
Answer:
Pre-approval
Question:
3. - is someone who brings together a borrower and a lender in order to create a mortgage
- generally package and sell loans to larger investors
Answer:
mortgage brokers
Question:
4. - is an entity or person who provides mortgage financing by using their own funds
- the loans come from the ________, rather than a commercial bank or savings association
Answer:
mortgage banker
Question:
5. - offers loans using their own money at their own risk. The difference is that a _____________ generally
works on a smaller scale than mortgage brokers and bankers.
Answer:
correspondent lenders
Question:
6. Six step life of a mortgage:
Answer:
1. Origination
2. Loan Processing
3. Underwriting
4. Funding
5. Closing
6. Loan Servicing
, Question:
7. - first step of the life of a mortgage
A. - creation of a new mortgage
B. - Mortgages can be originated by mortgage brokers, mortgage bankers, or correspondent lenders.
Answer:
origination
Question:
8. - second step of the life of a mortgage
A. - The lender collects information from the buyer that will help determine the loan type and amount they
will qualify for. The person who is seeking the loan will need to complete and submit an application to
kick off the loan processing. Lenders have to consider a borrower's income, credit, debt, source of funds,
and net worth. They do this by creating a file for each interested borrower containing pertinent information
about them and the property. They also verify that the information provided by the borrower is actually
true
B. - A MAJOR component of loan processing is ordering and checking the borrower's credit reports. Not all
creditors report to all three of the big national credit reporting agencies (Equifax, Experian, and
TransUnion), so a single individual could have a different score from each agency.
Answer:
Loan Processing
Question:
9. - third step of the life of a mortgage
- is the process of deciding the level of risk a lender would take on by offering a loan to a certain borrower
for a specific property. It's a complex process that has been automated to some degree, but still requires the
work of a specially trained professional.
Answer:
underwriting
Question:
10. - fourth step of the life of a mortgage
- happens when the lender provides the cash in the amount of the approved loan. It is the transferring of
funds to a title company or escrow company so that they may be disbursed from there. Usually, the
homebuyer doesn't get the keys until funding (not just closing) has occurred.
Answer:
funding
Question:
11. - fifth step of the life of a mortgage
- is the tuition of a real estate transaction when all the necessary contracts are signed and the lender
disburses the funds of the mortgage loan. The physical meeting at which the paperwork is signed for the
property transfer is also called the closing.
Answer:
closing
, Question:
12. - sixth step of the life of a mortgage
- is a collection of monthly payments, usually including payments on the principal, interest, taxes, and
insurance, or PITI, along withthe maintenance of records. The loan servicer is also responsible for
sendingthe collected funds to the note holder and contacting the borrower about any delinquencies.
Additionally, the loan servicer will provide the borrower an annualstatement that details the activity of the
escrow account, showing the account balance and payments for property taxes, homeowners insurance,
and other escrowed items.
Answer:
loan servicing
Question:
13. With ______ lenders have the right to foreclose on the property and sell it to get some of their money
back in the event the borrower stops making payments
Answer:
collateral
Question:
14. - is where mortgages are first created by connecting lenders to borrowers
A. - Institutions include; credit unions, commercial banks, life insurance companies, savings banks
B. - People; mortgage lenders and borrowers
Answer:
primary market
Question:
15. - where loans and servicing rights are sold to investors
Made up of:
• Fannie Mae
• Freddie Mac
• Ginnie Mae
• Federal Home Loan Bank • Private investors
• Life insurance companies
People;
- mortgage lenders and buyers
Answer:
secondary market
Question:
16. - property valuation
- determines value by comparing the subject property to the sales prices of "comps" (short for
comparables, aka similar properties) that have been sold recently.
Answer:
sales comparison approach
, Question:
17. - property valuation
A. - estimates the value of a property by determining how much it would cost to completely replace it and
then subtracting from that value to account for depreciation
B. - Better with new construction
Answer:
cost approach
Question:
18. - property valuation
A. - determines the value ofa property by paying particular attention to the amount of income a property could
produce for its owner
B. - ex apartment complexes
Answer:
income approach
Question:
19. Loans are either government-guaranteed (insured), such as FHA or VA loans,or they are
___________________. _____________are not insured by the government
Answer:
conventional loans
Question:
20. ___________ loans are an option for homebuyers who may not be qualified for a conventional loan. It
allows them to put down a smaller down payment (as low as 3.5%) and get into their own home sooner
than they may have been able to afford it without this program.
Answer:
Federal Housing Administration (FHA)
Question:
21. - Insurance required for conventional loans
A. - required for borrowers with less than 20% equity
B. - recurring monthly payment
Answer:
Private Mortgage Insurance (PMI)
Question:
22. - Insurance for government backed loans
A. - required on all FHA loans
B. - upfront premium and recurring monthly payment
Answer:
Mortgage Insurance Premium (MIP)
