Mortgage Process 4

Question 1

What is 'cash to close' and what does it typically include?

Accepted Answer

The total funds the buyer must bring to closing, including down payment, closing costs, and prepaid items minus any credits

Answer

Cash to close is the total out-of-pocket amount required from the buyer at settlement, encompassing the down payment, closing costs, prepaid expenses, and any adjustments.

Question 2

What is the purpose of an escrow impound account in a mortgage?

Accepted Answer

To collect and pay property taxes and insurance on behalf of the borrower

Answer

An escrow impound account collects a portion of property taxes and insurance premiums monthly so the lender can pay these bills when due, protecting the collateral.

Question 3

When must a lender return a borrower's appraisal report?

Accepted Answer

At least three business days before closing

Answer

Under the Equal Credit Opportunity Act, lenders must provide applicants a copy of the appraisal promptly and no later than three business days before closing.

Question 4

What is a 'funding condition' in the final stages of the mortgage process?

Accepted Answer

A last-minute lender requirement that must be satisfied before loan funds are disbursed

Answer

Funding conditions are final items—such as signed closing documents, proof of insurance, or updated verification—that must be cleared before the lender releases loan funds.

Question 5

What is the 'right of rescission' and which mortgage type does it apply to?

Accepted Answer

A three-business-day right to cancel that applies to refinances of primary residences

Answer

Under TILA, borrowers refinancing their primary residence have three business days to rescind the transaction without penalty; this right does not apply to purchase loans.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Process 4