Real Estate Sales Exam Financing and Mortgages 2

Question 1

A buyer wants to purchase a home with no down payment. Which loan program is most likely to accommodate this?

Accepted Answer

VA loan

Answer

VA loans are available to eligible veterans and active-duty military and require no down payment.

Question 2

What does the term 'amortization' refer to in mortgage lending?

Accepted Answer

The gradual repayment of a loan through scheduled payments

Answer

Amortization is the process of paying off a loan over time through regular principal and interest payments.

Question 3

Which type of mortgage has a fixed interest rate for an initial period, then adjusts periodically based on a market index?

Accepted Answer

Adjustable-rate mortgage (ARM)

Answer

An ARM starts with a fixed rate for an introductory period, then the rate adjusts at set intervals based on an index.

Question 4

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

Accepted Answer

$6,000

Answer

Each discount point equals 1% of the loan amount, so 2 points on $300,000 = $6,000.

Question 5

What is the primary purpose of private mortgage insurance (PMI)?

Accepted Answer

To protect the lender if the borrower defaults

Answer

PMI protects the lender — not the borrower — in case of borrower default on a conventional loan with less than 20% down.

Real Estate Sales Exam Practice Test