Free PSI Real Estate Financing MCQ Test Questions and Answers

Question 1

Federal laws about truth-in-lending are also called _____.

Accepted Answer

Regulation Z

Answer

Federal laws regarding truth-in-lending are commonly referred to as Regulation Z. This regulation implements the Truth in Lending Act (TILA), which mandates that lenders disclose key credit terms, such as the Annual Percentage Rate (APR) and finance charges, to consumers. Regulation Z aims to protect borrowers by ensuring transparency and allowing for informed credit decisions.

Question 2

What does the underwriter do?

Accepted Answer

Ensuring the borrower is capable of paying the mortgage

Answer

An underwriter's primary responsibility in the mortgage process is to assess the risk of lending money to a borrower. They evaluate the borrower's creditworthiness, income, assets, and debt-to-income ratio to ensure they are capable of repaying the mortgage. This assessment determines whether the loan meets the lender's guidelines and is approved.

Question 3

Who ensures the property has good title before closing?

Accepted Answer

Title agent

Answer

A title agent or title company is responsible for conducting a thorough title search to ensure the property has a clear and marketable title before closing. They examine public records for any liens, encumbrances, or defects that could affect ownership. The title agent also typically issues title insurance to protect both the buyer and lender from future title claims.

Question 4

FHA acts most like:

Accepted Answer

an insurance company

Answer

The Federal Housing Administration (FHA) acts most like an insurance company because it insures loans made by private lenders to homebuyers. The FHA does not directly lend money; instead, it provides mortgage insurance to protect lenders against losses if a borrower defaults. This insurance encourages lenders to offer more accessible terms, such as lower down payments, to a broader range of borrowers.

Question 5

Usury laws were made to protect the:

Accepted Answer

borrower

Answer

Usury laws are designed to protect borrowers by setting a legal maximum on the interest rates that can be charged on loans. These laws prevent lenders from imposing excessively high or predatory interest rates, ensuring fair lending practices. By limiting the cost of borrowing, usury laws safeguard vulnerable individuals from financial exploitation.

PSI - Exams Practice Test

PSI - Exams Practice Test

Free PSI Real Estate Financing MCQ Test Questions and Answers