PSI Real Estate Financing MCQ 2

Question 1

What is the purpose of a 'due-on-sale' clause in a mortgage?

Accepted Answer

It requires the full loan balance to be paid when ownership transfers

Answer

A due-on-sale (acceleration) clause requires the borrower to repay the entire outstanding balance if the property is transferred or sold.

Question 2

A borrower takes out a home equity line of credit (HELOC). Which statement BEST describes a HELOC?

Accepted Answer

A revolving credit line secured by the borrower's home equity

Answer

A HELOC is a revolving line of credit secured by the equity in a home, allowing borrowers to draw and repay funds as needed.

Question 3

Which federal law requires lenders to give borrowers a Loan Estimate within three business days of receiving a mortgage application?

Accepted Answer

TILA-RESPA Integrated Disclosure (TRID) rule

Answer

The TRID rule, effective October 2015, requires lenders to provide a Loan Estimate within three business days of a completed loan application.

Question 4

What does a 'buydown' accomplish in real estate financing?

Accepted Answer

It temporarily or permanently reduces the mortgage interest rate by paying points upfront

Answer

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.

Question 5

In a balloon mortgage, what happens at the end of the loan term if the borrower has not refinanced?

Accepted Answer

The entire remaining principal balance becomes due immediately

Answer

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.

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