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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

  1. An FHA loan requires a minimum down payment of 3.5% when the borrower's credit score is:

    Answer: At least 580

    FHA requires a minimum 580 credit score for the 3.5% down payment; borrowers with scores between 500–579 must put down at least 10%.

  2. What is 'negative amortization' in a mortgage loan?

    Answer: When monthly payments are insufficient to cover interest, causing the loan balance to increase

    Negative amortization occurs when a borrower's payment does not cover all accrued interest, causing unpaid interest to be added to the loan principal.

  3. A lender requires an impound (escrow) account. What funds does the borrower deposit into this account monthly?

    Answer: Property taxes and hazard insurance premiums

    An impound/escrow account collects monthly portions of property taxes and hazard (homeowner's) insurance so the lender can pay these obligations on the borrower's behalf.

  4. Which of the following loan types does NOT require mortgage insurance regardless of the down payment amount?

    Answer: VA loan

    VA loans do not require monthly mortgage insurance premiums regardless of the down payment or LTV ratio, a significant benefit for eligible veterans.

  5. What is the primary function of the secondary mortgage market?

    Answer: To allow lenders to sell existing loans, replenishing capital to issue new loans

    The secondary mortgage market enables lenders to sell originated loans to investors, recovering capital so they can fund additional mortgages for new borrowers.

  6. Which disclosure must a lender provide to a borrower within three business days before closing on most residential mortgage transactions under TRID?

    Answer: Closing Disclosure

    TRID requires lenders to provide the Closing Disclosure at least three business days before consummation, giving borrowers time to review final loan terms.

  7. A borrower refinances to get a lower interest rate. Under TILA, the borrower has the right to rescind the transaction within how many business days after closing?

    Answer: 3 business days

    TILA's right of rescission gives borrowers three business days to cancel a refinance or home equity loan on their primary residence without penalty.