FREE Real Estate Sales Financing and Valuation Questions and Answers

Question 1

A buyer is purchasing a home for $400,000 and is making a down payment of $80,000.
The lender requires the buyer to pay for private mortgage insurance (PMI).
What is the loan-to-value (LTV) ratio, and why is PMI required?

Accepted Answer

80% LTV; PMI is not required.

Answer

75% LTV; PMI is required because the LTV is below 80%.

Answer

20% LTV; PMI is required because the down payment is low.

Answer

85% LTV; PMI is required because the loan amount is high.

Question 2

An appraiser is using the Sales Comparison Approach to determine the value of a subject property. A comparable property recently sold for $350,000 but has a swimming pool, which is valued at $20,000. The subject property does not have a pool. How should the appraiser adjust the comparable's sale price?

Accepted Answer

Subtract $20,000 from the comparable's price.

Answer

Add $20,000 to the comparable's price.

Answer

Subtract $10,000 from the subject property's value.

Answer

Add $10,000 to the subject property's value.

Question 3

Which of the following is a primary feature of an FHA-insured loan that distinguishes it from a typical conventional loan?

Accepted Answer

It allows for lower down payments and is more lenient on credit scores.

Answer

It is available only to veterans of the U.S. military.

Answer

It does not require any form of mortgage insurance.

Answer

It is directly funded by the Federal Housing Administration.

Question 4

A homebuyer receives a Loan Estimate from a lender three days after submitting their application. This disclosure, which outlines the estimated costs and terms of the mortgage, is a requirement under which federal law?

Accepted Answer

Truth in Lending Act (TILA)

Answer

Real Estate Settlement Procedures Act (RESPA)

Answer

Fair Housing Act (FHA)

Answer

Equal Credit Opportunity Act (ECOA)

Question 5

The process of paying off a loan in regular installments of principal and interest over a set period is known as:

Accepted Answer

Amortization

Answer

Depreciation

Answer

Appreciation

Answer

Capitalization

Question 6

A borrower obtains a conventional loan with a 90% loan-to-value (LTV) ratio. The lender requires the borrower to obtain private mortgage insurance (PMI). The primary purpose of PMI is to protect the:

Accepted Answer

Lender against loss if the borrower defaults.

Answer

Borrower from defaulting on the loan.

Answer

Title company from claims against the property.

Answer

Government from losses on insured loans.

A buyer is purchasing a home for $400,000 and is making a down payment of $80,000.The lender requires the buyer to pay for private mortgage insurance (PMI).What is the loan-to-value (LTV) ratio, and why is PMI required?

A buyer is purchasing a home for $400,000 and is making a down payment of $80,000.
The lender requires the buyer to pay for private mortgage insurance (PMI).
What is the loan-to-value (LTV) ratio, and why is PMI required?