Real Estate Financing MCQ Flashcards
7 cards from real PSI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Real Estate Financing MCQ flashcards as text
What is the purpose of a 'due-on-sale' clause in a mortgage?
Answer: It requires the full loan balance to be paid when ownership transfers
A due-on-sale (acceleration) clause requires the borrower to repay the entire outstanding balance if the property is transferred or sold.
A borrower takes out a home equity line of credit (HELOC). Which statement BEST describes a HELOC?
Answer: A revolving credit line secured by the borrower's home equity
A HELOC is a revolving line of credit secured by the equity in a home, allowing borrowers to draw and repay funds as needed.
Which federal law requires lenders to give borrowers a Loan Estimate within three business days of receiving a mortgage application?
Answer: TILA-RESPA Integrated Disclosure (TRID) rule
The TRID rule, effective October 2015, requires lenders to provide a Loan Estimate within three business days of a completed loan application.
What does a 'buydown' accomplish in real estate financing?
Answer: It temporarily or permanently reduces the mortgage interest rate by paying points upfront
A buydown uses upfront points paid by the buyer, seller, or builder to reduce the borrower's interest rate temporarily (2-1, 3-2-1) or permanently.
In a balloon mortgage, what happens at the end of the loan term if the borrower has not refinanced?
Answer: The entire remaining principal balance becomes due immediately
A balloon mortgage requires a large lump-sum payment of the remaining principal at the end of the term, regardless of how little has been paid down.
Which ratio do conventional lenders most commonly use to determine the maximum allowable housing payment relative to gross monthly income?
Answer: Front-end ratio not exceeding 28%
The front-end (housing) ratio compares PITI to gross monthly income; conventional guidelines typically cap it at 28%.
A seller agrees to carry back a second mortgage for 10% of the purchase price to help the buyer close the deal. This arrangement is called:
Answer: Seller financing or a purchase money mortgage
When the seller extends credit to the buyer as part of the sale, it is seller financing (also called a purchase money mortgage), reducing the buyer's need for outside financing.