Arkansas Real Estate License Financing and Settlement Practices 3

Question 1

A seller in Arkansas agrees to pay points on the buyer's behalf to reduce the interest rate. This arrangement is called a:

Accepted Answer

Buydown

Answer

A buydown occurs when the seller (or buyer) pays discount points upfront to permanently or temporarily reduce the loan's interest rate.

Question 2

What does the Annual Percentage Rate (APR) represent on a mortgage loan?

Accepted Answer

The total cost of the loan including fees expressed as a yearly rate

Answer

APR includes the interest rate plus finance charges and fees, expressed as an annual rate to allow loan comparisons.

Question 3

Which of the following best describes a conventional loan?

Accepted Answer

A loan not insured or guaranteed by a government agency

Answer

A conventional loan is one that is not backed by a government program such as FHA, VA, or USDA.

Question 4

On the Closing Disclosure, which section shows how much the buyer and seller each receive or owe at closing?

Accepted Answer

The Summaries of Transactions section

Answer

The Summaries of Transactions section of the Closing Disclosure shows the complete accounting for both the buyer and seller.

Question 5

In a purchase transaction, earnest money deposited by the buyer is typically shown on the Closing Disclosure as a:

Accepted Answer

Credit to the buyer

Answer

Earnest money already paid by the buyer reduces the cash needed at closing, so it appears as a credit to the buyer.

Arkansas Real Estate License Practice Test