Free PSI Real Estate Financing Practice Test Questions and Answers

Question 1

How do a home equity line of credit and a second mortgage differ from one another?

Accepted Answer

A home equity line of credit allows the borrower to take out cash as needed.

Answer

A home equity line of credit (HELOC) functions like a revolving credit line, allowing borrowers to draw funds as needed, repay them, and then draw again up to a set limit. This flexibility is its primary distinction from a second mortgage, which typically provides a lump sum of money upfront. Therefore, the ability to take out cash as needed is a key characteristic of a HELOC.

Question 2

What is a biweekly mortgage's main benefit?

Accepted Answer

quicker loan repayment

Answer

The main benefit of a biweekly mortgage is quicker loan repayment. By making half of the monthly payment every two weeks, borrowers effectively make 26 half-payments, which equates to 13 full monthly payments per year. This extra annual payment significantly reduces the principal balance faster, shortening the loan term and saving a substantial amount in interest over the life of the loan.

Question 3

What paperwork does the lender send to show that a property has been liberated from a mortgage since the borrower has paid it off?

Accepted Answer

satisfaction piece

Answer

When a borrower fully pays off a mortgage, the lender issues a 'satisfaction piece,' also known as a satisfaction of mortgage or deed of reconveyance. This official document confirms that the debt has been satisfied and the lien on the property has been released. Recording this document in public records is crucial to clear the property's title.

Question 4

Which organization of the government was established to promote low-income housing?

Accepted Answer

GNMA (Ginnie Mae)

Answer

The Government National Mortgage Association (GNMA), commonly known as Ginnie Mae, was established to promote low-income housing. Ginnie Mae achieves this by guaranteeing mortgage-backed securities (MBS) that are backed by FHA, VA, and USDA loans. This guarantee makes these securities more attractive to investors, thereby encouraging lenders to provide financing for affordable housing programs.

Question 5

Which organization of the government was established to promote low-income housing?

Accepted Answer

$2,750

Answer

The provided question text 'Which organization of the government was established to promote low-income housing?' does not align with the numerical answer options, making it impossible to explain why '$2,750' is correct in this context. Typically, a question leading to a specific dollar amount like this would involve a calculation related to fees, taxes, or maximum limits within a real estate transaction, which is missing here.

PSI - Exams Practice Test

PSI - Exams Practice Test

Free PSI Real Estate Financing Practice Test Questions and Answers