TEXAS PRE-LICENSE - REAL ESTATE FINANCE PRACTICE EXAM QUESTIONS & CORRECT ANSWERS 2025. 100% COMPLETE AND ACCURATE.

TEXAS PRE-LICENSE - REAL ESTATE FINANCE PRACTICE EXAM QUESTIONS & CORRECT ANSWERS 2025. 100% COMPLETE AND ACCURATE. What is a mortgage banker? -CORRECT ANSThe correct answer is that a mortgage banker is an entity or person who originates and services mortgage loans using their own funds. They usually provide financing on behalf of large investors. Eloise's loan is neither insured by the government nor guaranteed by the government. Which of these BEST describes the kind of loan she has? -CORRECT ANSConventional loans are neither guaranteed nor insured by the government. Conforming loans CAN be conventional loans, but they must meet other criteria as well. For a loan to fall under RESPA, it has to be what is called a(n): -CORRECT ANSfederally related mortgage loan Why would a lender want to sell their loans on the secondary mortgage market? -CORRECT ANSSelling their loans allows them to get money faster. Under what conditions could a lender seek a deficiency judgment? -CORRECT ANSIf a borrower defaults, and the sale of the foreclosed home doesn't cover the loan and expenses of foreclosure, the lender can seek a deficiency judgment. What does this formula solve for: (PITI + Long-term liabilities) ÷ Gross monthly income? -CORRECT ANStotal debt service ratio Which of the following institutions has 11 districts and the purpose to support residential mortgage lending and related community investment? -CORRECT ANSFederal Home Loan Bank System What is a back-end ratio? -CORRECT ANSa person's total monthly expenses divided by their monthly income. Which of these statements most accurately describes the 203(b) FHA loan? -CORRECT ANSIt is the most popular kind of FHA loan. Which of these actions would constitute actual notice? -CORRECT ANSNo, recording a deed creates constructive notice. The answer is that Christine looking up a deed creates actual notice. How does the VA pay for its loan guarantee program? -CORRECT ANSby charging a funding fee Which of the following is one of the federal government's monetary powers? -CORRECT ANSlowering the interest rate for member banks by a half percentage point is an example of the federal government's monetary powers. Ramsey is considering an ARM with an initial rate of 5.13%. The margin is 2%, and the initial index rate is 3.13% The initial rate will adjust every four years. The lifetime cap is 3%. What is the highest rate Ramsey could pay? -CORRECT ANS5.13% plus the lifetime cap of 3% is 8.13%. Termite infestations, mold problems, a falling-in roof, lead-based paint, asbestos, and flood damage are all attributes of what kind of property, according to lender classifications? -CORRECT ANSa physically distressed property What happens to a borrower's PMI when the equity in their property reaches 22%? -CORRECT ANSthe PMI is automatically removed. The borrower doesn't have to be found credit-worthy. What is the main difference between credit unions and banks? -CORRECT ANSCredit unions require customers to be members, tend to put community before profits, but offer the same services as banks. What is another name for the process of compound interest causing a loan debt to increase, despite a borrower making payments? -CORRECT ANSNegative amortization Stabilized conditions, home foreclosures, and low government interest rates are a sign of which phase of the real estate cycle? -CORRECT ANSrecovery What are buyer rebates? -CORRECT ANSthe illegal practice of a buyer receiving money at closing without their lender's knowledge. Note that what makes it illegal is that it's being concealed from the lender that the buyer is getting this money. Ansel took out an 80-10-10 piggyback loan. The purchase price of the property was $275,000. How much did he put down? -CORRECT ANSNo, the answer is $27,500. Remember that an 80-10-10 piggyback loan means Ansel is financing 80% of the purchase price with one loan (that likely has a lower interest rate), 10% of the property with a second loan (that likely has a higher interest rate), and putting 10% down. To find 10% of $275,000, we multiply it by 0.1: $275,000 x 0.1 = $27,500. You, instead, found 80% of $275,000. Which of these actions would a mortgage's due-on-sale clause prevent? -CORRECT ANSA due-on-sale clause prevents a buyer from assuming the mortgage of the seller. Which of these actions could cause a loan to default? -CORRECT ANSnot paying taxes Which of the following would increase the amount the buyer pays at closing? -CORRECT ANSa debit to the buyer Your client, Jonathan, wants to sell his house. The property has an encumbrance on it. What should you tell Jonathan? -CORRECT ANSIt's possible to sell the property as is, but if he can't clear the encumbrance, the home may be harder to market. What are the two primary categories of foreclosure? -CORRECT ANSjudicial and nonjudicial What is a blanket mortgage? -CORRECT ANSblanket mortgages use more than one piece of collateral. What is one advantage of getting an FHA loan? -CORRECT ANSNo, the minimum down payment with an FHA loan is 3.5% down. The answer is that FHA loans are easier to qualify for than other loans. This is a huge advantage for borrowers with lower down payments or other challenges. What is it called when a lender allows a borrower in financial difficulty to not make principal and/or interest payments for a period of time? -CORRECT ANSWhen a lender allows a borrower in financial difficulty to not make principal and/or interest payments for a period of time, it is called a moratorium. Which of these forms is a title company representative or real estate attorney required to prepare? -CORRECT ANSclosing disclosure What is a dollar-by-dollar reduction in the appraisal value of a property? -CORRECT ANStax exemption Without a secondary mortgage market, mortgages would be considered: -CORRECT ANSWithout a secondary mortgage market, mortgages would be considered illiquid. Congress created a secondary market where mortgages could be bought and sold. This is known as mortgage liquidity (the relative difficulty of converting an asset to cash without loss of value). What is a statutory redemption period? -CORRECT ANSperiod of time after the sale of a foreclosed property during which the foreclosed party may still recover the property. What is the difference between a 203(b) FHA loan and a 203(k) FHA loan? -CORRECT ANSFHA 203(b) loans are for buying a home, whereas 203(k) loans include money for renovations. Which of these loan types is paid in installments called "draws"? -CORRECT ANSconstruction mortgage Alberto wants to buy a home whose purchase price is $175,000. What is the least amount he could put down if he is taking out an FHA loan? -CORRECT ANSBorrowers can get FHA loans with 3.5% down. $175,000 x 0.035 = $6,125. Which agency is tasked with creating easier-to-use mortgage disclosure forms, aiding in comparison shopping for borrowers, preventing surprises at the closing table, and increasing consumer understanding of how mortgages work? -CORRECT ANSThe Consumer Financial Protection Bureau What does a REMIC do? -CORRECT ANSassemble mortgages into pools and issue pass-through certificates, multi-class bonds, or other securities to investors in the secondary mortgage market. Which of these is a goal of the Consumer Financial Protection Bureau? -CORRECT ANSimprove consumer understanding, prevent surprises at the closing table, and create easier-to-use mortgage disclosure forms. When Fannie Mae packages loans to be sold to investors, they are creating: -CORRECT ANSmortgage-backed securities.