Real Estate Sales Exam Financing and Valuation 2

Question 1

A borrower has a $300,000 loan at 6% annual interest. What is the monthly interest charge for the first month?

Accepted Answer

$1,500

Answer

$300,000 × 6% ÷ 12 = $1,500 monthly interest.

Question 2

Which appraisal approach is most commonly used to value a single-family residential home?

Accepted Answer

Sales comparison approach

Answer

The sales comparison approach is preferred for residential properties because comparable sales data is readily available.

Question 3

A deed of trust differs from a mortgage primarily because it involves:

Accepted Answer

A trustee who holds title until the loan is repaid

Answer

A deed of trust uses a neutral third-party trustee to hold title, while a mortgage involves only the borrower and lender.

Question 4

What does a loan-to-value (LTV) ratio of 80% mean?

Accepted Answer

The borrower is financing 80% of the property's value

Answer

An 80% LTV means the mortgage amount equals 80% of the appraised property value, with a 20% down payment.

Question 5

Which type of mortgage allows the interest rate to change periodically based on an index?

Accepted Answer

Adjustable-rate mortgage (ARM)

Answer

An ARM has an interest rate that adjusts at set intervals based on a market index such as SOFR or the Treasury index.

Real Estate Sales Exam Practice Test