Financing and Mortgages Flashcards
7 cards from real Real Estate Sales Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financing and Mortgages flashcards as text
A buyer wants to purchase a home with no down payment. Which loan program is most likely to accommodate this?
Answer: VA loan
VA loans are available to eligible veterans and active-duty military and require no down payment.
What does the term 'amortization' refer to in mortgage lending?
Answer: The gradual repayment of a loan through scheduled payments
Amortization is the process of paying off a loan over time through regular principal and interest payments.
Which type of mortgage has a fixed interest rate for an initial period, then adjusts periodically based on a market index?
Answer: Adjustable-rate mortgage (ARM)
An ARM starts with a fixed rate for an introductory period, then the rate adjusts at set intervals based on an index.
A lender charges 2 discount points on a $300,000 loan. How much will the borrower pay in points?
Answer: $6,000
Each discount point equals 1% of the loan amount, so 2 points on $300,000 = $6,000.
What is the primary purpose of private mortgage insurance (PMI)?
Answer: To protect the lender if the borrower defaults
PMI protects the lender — not the borrower — in case of borrower default on a conventional loan with less than 20% down.
What is the 'loan-to-value' (LTV) ratio on a $250,000 home with a $200,000 mortgage?
Answer: 80%
LTV = loan amount ÷ property value = $200,000 ÷ $250,000 = 80%.
Under RESPA, a lender must provide the borrower with a Loan Estimate within how many business days of receiving a loan application?
Answer: 3 business days
RESPA requires lenders to deliver the Loan Estimate to borrowers within 3 business days of receiving a completed application.
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