Residential and Commercial Financing Flashcards
7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Residential and Commercial Financing flashcards as text
A residential borrower wants to use rental income from a property they are vacating to qualify for a new home. What documentation is typically required?
Answer: A signed lease, evidence of security deposit or first month's rent received, and history of managing rental properties
Most agency guidelines require a signed lease plus evidence of receipt of security deposit or first month's rent, along with property management experience, to count departing residence rental income.
What is 'defeasance' in commercial mortgage lending?
Answer: Substituting U.S. government securities to replace a property as loan collateral when prepaying
Defeasance allows a commercial borrower to substitute government securities (which replicate loan cash flows) for the property collateral, effectively prepaying without triggering yield maintenance.
Under RESPA, within how many business days must a lender provide the Loan Estimate to a residential mortgage applicant?
Answer: 3 business days
Regulation X requires the Loan Estimate to be delivered or placed in the mail within 3 business days of receiving a completed loan application.
A commercial lender requires a 65% LTV on a $3,000,000 appraised property. What is the maximum loan amount?
Answer: $1,950,000
Maximum loan = $3,000,000 × 65% = $1,950,000.
Which residential loan program is specifically targeted at Native American veterans purchasing homes on federal trust land?
Answer: VA Native American Direct Loan (NADL)
The VA's Native American Direct Loan (NADL) program helps eligible Native American veterans finance homes on federal trust land.
In a commercial real estate transaction, what does 'earnest money' deposited into escrow represent from the lender's underwriting perspective?
Answer: It is counted as part of the borrower's down payment and equity
Earnest money held in escrow demonstrates buyer commitment and is credited toward the down payment at closing, contributing to the borrower's equity.
What is the main distinction between a 'rate and term refinance' and a 'cash-out refinance' for conventional mortgages?
Answer: Cash-out refinances result in a new loan exceeding the payoff balance, providing proceeds to the borrower
A cash-out refinance produces a loan balance greater than the existing payoff amount, giving the borrower the difference in cash, while a rate and term refinance only adjusts the rate or term without net cash proceeds.