CMC Real Estate Finance 2

Question 1

A borrower has a gross monthly income of $8,000 and total monthly debt payments of $2,400. What is their debt-to-income ratio?

Accepted Answer

30%

Answer

DTI is calculated by dividing total monthly debt ($2,400) by gross monthly income ($8,000), which equals 30%.

Question 2

Which type of mortgage allows the borrower to pay only interest for an initial period before principal and interest payments begin?

Accepted Answer

Interest-only mortgage

Answer

An interest-only mortgage requires the borrower to pay only interest for a set period, after which payments increase to include principal.

Question 3

What is the primary purpose of a title search in a real estate transaction?

Accepted Answer

To verify the seller has clear ownership and no liens

Answer

A title search examines public records to confirm the seller has legal ownership and identifies any existing liens or encumbrances.

Question 4

Under RESPA, within how many business days must a lender provide a Loan Estimate to a mortgage applicant?

Accepted Answer

3 business days

Answer

RESPA requires lenders to deliver a Loan Estimate within three business days of receiving a completed loan application.

Question 5

What does the term 'seasoning' refer to in the context of mortgage lending?

Accepted Answer

The length of time assets or credit history have been established

Answer

Seasoning refers to the length of time a borrower has held an asset, account, or credit tradeline, which lenders use to assess stability.

(CMC) Certified Mortgage Consultant Practice Test