REE 3043 Paul Black - FIU Exam 2 TEST STUDY
GUIDE 2025/2026 ACCURATE QUESTIONS AND
VERIFIED CORRECT SOLUTIONS WITH
RATIONALES || 100% GUARANTEED PASS
<RECENT VERSION>
REE 3043 - Real Estate Finance: Exam 2 Study Guide
Mortgage Types & Instruments
1. What is the most common type of mortgage loan used in residential real
estate?
A. Balloon Mortgage
B. Adjustable-Rate Mortgage (ARM)
C. Fixed-Rate, Fully Amortized Mortgage
D. Reverse Mortgage
*Rationale: The standard 30-year fixed-rate mortgage is the cornerstone of the U.S.
residential housing market due to its predictable payments.*
2. In an Adjustable-Rate Mortgage (ARM), the interest rate is tied to a
specific benchmark known as a(n):
,A. Cap
B. Index
C. Margin
D. Ceiling
Rationale: The index (like the SOFR or Treasury Index) is the publicly-available
benchmark rate. The margin is the lender's add-on, and the sum of the two equals
the borrower's interest rate.
3. A loan that requires the borrower to pay only interest for a set period, with
the full principal due at the end, is called a(n):
A. Amortizing Loan
B. Interest-Only Loan
C. Balloon Loan
D. ARM Loan
Rationale: This defines an interest-only loan, where periodic payments cover no
principal, deferring the full repayment to maturity.
4. A "partially amortized" loan is also commonly known as a:
A. Fixed-Rate Loan
B. Balloon Loan
C. Interest-Only Loan
,D. GPM
Rationale: A balloon loan has payments based on a long amortization schedule,
but the loan matures in a shorter term, leaving a large "balloon" payment of the
remaining principal.
5. The FHA primarily helps borrowers by:
A. Lending money directly to borrowers
B. Insuring loans made by private lenders
C. Providing down payment grants
D. Setting interest rate caps
Rationale: The FHA provides insurance to lenders against borrower default, which
encourages lenders to offer loans with lower down payments.
6. A VA loan is a benefit for eligible veterans that allows for:
A. No down payment
B. Below-market interest rates set by the VA
C. Forgiveness of the loan after 10 years
D. All of the above
Rationale: The most significant feature of a VA loan is the ability to purchase a
home with $0 down payment. The VA does not set the interest rate.
, 7. A "Jumbo" loan is best defined as a loan that:
A. Has a high interest rate
B. Is used for commercial properties
C. Exceeds the conforming loan limits set by the FHFA
D. Is insured by the FHA
Rationale: Conforming loans are those that meet FHFA standards for sale to
Fannie Mae/Freddie Mac. Jumbo loans are larger than these limits and are
considered non-conforming.
8. The clause in a mortgage that allows the lender to demand immediate
repayment of the entire loan if the property is sold is the:
A. Prepayment Clause
B. Due-on-Sale Clause
C. Acceleration Clause
D. Alienation Clause
Rationale: The Due-on-Sale clause is a specific type of acceleration clause that is
triggered by the transfer of ownership.
9. A mortgage that includes a pledge of both real and personal property is
known as a:
A. Package Mortgage
GUIDE 2025/2026 ACCURATE QUESTIONS AND
VERIFIED CORRECT SOLUTIONS WITH
RATIONALES || 100% GUARANTEED PASS
<RECENT VERSION>
REE 3043 - Real Estate Finance: Exam 2 Study Guide
Mortgage Types & Instruments
1. What is the most common type of mortgage loan used in residential real
estate?
A. Balloon Mortgage
B. Adjustable-Rate Mortgage (ARM)
C. Fixed-Rate, Fully Amortized Mortgage
D. Reverse Mortgage
*Rationale: The standard 30-year fixed-rate mortgage is the cornerstone of the U.S.
residential housing market due to its predictable payments.*
2. In an Adjustable-Rate Mortgage (ARM), the interest rate is tied to a
specific benchmark known as a(n):
,A. Cap
B. Index
C. Margin
D. Ceiling
Rationale: The index (like the SOFR or Treasury Index) is the publicly-available
benchmark rate. The margin is the lender's add-on, and the sum of the two equals
the borrower's interest rate.
3. A loan that requires the borrower to pay only interest for a set period, with
the full principal due at the end, is called a(n):
A. Amortizing Loan
B. Interest-Only Loan
C. Balloon Loan
D. ARM Loan
Rationale: This defines an interest-only loan, where periodic payments cover no
principal, deferring the full repayment to maturity.
4. A "partially amortized" loan is also commonly known as a:
A. Fixed-Rate Loan
B. Balloon Loan
C. Interest-Only Loan
,D. GPM
Rationale: A balloon loan has payments based on a long amortization schedule,
but the loan matures in a shorter term, leaving a large "balloon" payment of the
remaining principal.
5. The FHA primarily helps borrowers by:
A. Lending money directly to borrowers
B. Insuring loans made by private lenders
C. Providing down payment grants
D. Setting interest rate caps
Rationale: The FHA provides insurance to lenders against borrower default, which
encourages lenders to offer loans with lower down payments.
6. A VA loan is a benefit for eligible veterans that allows for:
A. No down payment
B. Below-market interest rates set by the VA
C. Forgiveness of the loan after 10 years
D. All of the above
Rationale: The most significant feature of a VA loan is the ability to purchase a
home with $0 down payment. The VA does not set the interest rate.
, 7. A "Jumbo" loan is best defined as a loan that:
A. Has a high interest rate
B. Is used for commercial properties
C. Exceeds the conforming loan limits set by the FHFA
D. Is insured by the FHA
Rationale: Conforming loans are those that meet FHFA standards for sale to
Fannie Mae/Freddie Mac. Jumbo loans are larger than these limits and are
considered non-conforming.
8. The clause in a mortgage that allows the lender to demand immediate
repayment of the entire loan if the property is sold is the:
A. Prepayment Clause
B. Due-on-Sale Clause
C. Acceleration Clause
D. Alienation Clause
Rationale: The Due-on-Sale clause is a specific type of acceleration clause that is
triggered by the transfer of ownership.
9. A mortgage that includes a pledge of both real and personal property is
known as a:
A. Package Mortgage
