PSI Real Estate Financing 4

Question 1

An elderly homeowner receives monthly payments from a lender based on the equity in their paid-off home. This arrangement is a:

Accepted Answer

Reverse mortgage

Answer

A reverse mortgage allows senior homeowners (typically 62+) to convert home equity into cash payments without selling the property.

Question 2

Which type of mortgage requires the borrower to pay interest only during the initial period, with no principal reduction?

Accepted Answer

Interest-only mortgage

Answer

An interest-only mortgage requires payments that cover only interest during the initial term, meaning the principal balance does not decrease.

Question 3

RESPA requires that buyers receive a Loan Estimate within how many business days of submitting a loan application?

Accepted Answer

3 business days

Answer

Under RESPA and TILA (TRID rules), lenders must provide the Loan Estimate within 3 business days of receiving a completed loan application.

Question 4

A borrower's existing loan is replaced with a new loan at a lower interest rate. This process is called:

Accepted Answer

Refinancing

Answer

Refinancing replaces an existing mortgage with a new loan, often to secure a lower interest rate or different loan terms.

Question 5

Which FHA mortgage insurance premium is collected at loan closing?

Accepted Answer

Upfront MIP (UFMIP)

Answer

FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), currently 1.75% of the base loan amount, paid at closing.

PSI - Exams Practice Test