PSI Real Estate Financing 3

Question 1

A seller allows the buyer to take over payments on the existing mortgage without formally qualifying for a new loan. This is known as:

Accepted Answer

Assumption

Answer

Assumption occurs when a buyer takes over the seller's existing mortgage obligation, subject to lender approval in most cases.

Question 2

Which clause in a mortgage allows the lender to demand full repayment if the property is sold?

Accepted Answer

Due-on-sale clause

Answer

The due-on-sale (or alienation) clause requires the entire loan balance to be paid when the property is transferred to a new owner.

Question 3

A lender charges 2 discount points on a $300,000 loan. How much does the borrower pay in points?

Accepted Answer

$6,000

Answer

Each point equals 1% of the loan amount; 2 points × 1% × $300,000 = $6,000.

Question 4

In a deed of trust, who holds legal title to the property until the loan is repaid?

Accepted Answer

The trustee

Answer

In a deed of trust, the trustee holds legal title on behalf of the lender until the borrower satisfies the debt.

Question 5

What type of loan features payments that start low and gradually increase over time to match anticipated income growth?

Accepted Answer

Graduated payment mortgage (GPM)

Answer

A graduated payment mortgage (GPM) starts with lower payments that increase at set intervals, designed for borrowers who expect their income to rise.

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