Texas Law of Contracts - Chp. 10 Transaction Process and Closing

Pre-Approval

A step above prequalification, it involves verifying a purchaser's credit, down payment, and employment history.

Good Faith Estimate

The lender's estimate of the borrower's settlement costs; RESPA is required to furnish it to the borrower at the time of the loan application.

Clear Title

Title which is not encumbered or burdened with defects.

Underwriting

The act of reviewing loan documentation and evaluation the borrower's ability and willingness to repay the loan and sufficiency of collateral value of the property.

This is a step above prequalification, it involves verifying a purchaser's credit, down payment, and employment history...?

Closing

Pre-approval

Commitment letter

Underwriting

Pre-approval

The act of reviewing loan documentation and evaluating the borrower's ability and willingness to repay the loan and sufficiency of collateral value of the property is referred to as...?

Qualification

Closing

Settlement

Underwriting

Underwriting

What is the first step in the loan process...?

Pre-qualification

Pre-approval

Closing

Underwriting

Pre-qualification

What should a real estate agent have their client obtain before viewing any properties...?

A credit report

A pre-qualification letter from a lender

A pre-approval letter from a lender

Proof of employment

A pre-approval letter from a lender

In order to simplify the process, a real estate agent should only recommend one mortgage broker to their clients...?

T (True)

F (False)

F (False)

Andrew was pre-approved for a $200,000 loan. How much money will Andrew have to put down if he makes $275,000 offer on a property...?

$50,000

$75,000

$100,000

$200,000

$75,000

Individuals who are liable for a lot of debt will most likely obtain what type of loan...?

Conventional loan

FHA-insured loan

Non-conforming loan

All of the above

FHA-insured loan

Which of the following is a credit reporting bureau...?

Equifax

TransUnion

Experian

All of the above

Equifax

TransUnion

Experian

All of the above

Uniform Residential Loan Application

Standard loan application form

What type of insurance do most lenders require of homebuyers...?

Flood insurance

Earthquake insurance

Homeowner's insurance

All of the above

Homeowner's insurance

The buyer in a transaction typically hires a property inspector during which part of the closing process...?

Offer and acceptance period

Options period

Loan closing

Final closing

Options period

Who should the buyer hire after having their offer accepted...?

Real estate broker

Mortgage broker

Loan officer

Property inspector

Property inspector

Who gets a copy of the home inspection report?

Buyer and buyer's agent only - not the seller

Title Insurance

Insurance against loss or damage resulting from defects or failure of title to a given parcel of real estate.

HUD Form No. 1

A standard settlement form required by RESPA. (Settlement Statement)

Debit

In a closing statement, an expense or money received against a credit. (Charge that has to be paid)

Credit

In a closing statement, money to be received or credit given for money or an obligation given. (Something that has already been paid and will be reimbursed)

Escrow Agent

The neutral third party holding funds or something of value in trust for another or others.

A married couple is exempt from paying taxes on any capital gains under...?

$250,000

$400,000

$500,000

$1,000,000

$500,000

What should a buyer perform right before closing on a property...?

Perform a final walk-through

Survey the property

Obtain a commitment letter from the lender

Hire a property inspector

Perform a final walk-through

Mortgage Disclosure Improvement Act (MDIA)

Enacted in July 2008 as an amendment to the Truth in Lending Act (TILA) to require mortgage loan cost disclosures to consumers. Early disclosure (a good-faith estimate) of mortgage loan cost must be provided within three business days of receiving a consumer's application for a mortgage loan; a creditor must wait seven business days after providing the early disclosures before closing the loan; and a creditor must provide new disclosures and wait an additional three business days before closing the loan, if a change occurs that makes the annual percentage rate quoted in the early disclosure inaccurate beyond a specified tolerance.

Title insurance is commonly broken down into a lender's policy and a...?

Broker's policy

Seller's policy

Owner's policy

Agent's policy

Owner's policy

The neutral third party holding funds or something of value in trust for another or others is known as the...?

Real estate broker

Escrow agent

Beneficiary

Grantor

Escrow agent

In a closing statement, money to be received is referred to as a...?

Debit

Asset

Credit

Liability

Credit

3/7/3 Rule disclosure requirements

three business days from the application to provide the TIL and GFE to the client, 7 business days before signing of loan documents after buyer receives final TIL & GFE, 3 business days wait if the APR changes more than .125% from original or most recent TIL and GFE

Truth in Lending Act (TILA)

An act which requires lenders to inform borrowers of all direct, indirect and true costs of credit.

GFE

Good Faith Estimate

This document includes the breakdown of approximate payments due upon the closing of a mortgage loan

A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.

Real Estate Settlement Procedures Act (RESPA)

RESPA does...

Accurate and timely information about the cost of the transaction, eliminates kick backs and other referral fees, prohibits lenders from requiring excessive escrow deposits, lenders and settlement agents must provide special booklet prepared by HUD to every person for whom they receive or prepare a loan application (except for refinancing), GFE has to be given no later than 3 business days after loan application, HUD1 to seller and buyer with all fees within 1 day of closing

RESPA does not apply to

purchase money mortgage taken back by a seller , a contract for deed or an installment contract, or a buyer's assumption of a seller's existing loan

Which of the following may be prorated between the buyer and seller...?

Insurance premiums

Rents

Taxes

All of the above

Insurance premiums

Rents

Taxes

All of the above

This refers to the dividing of taxes equally or proportionately to time of use, usually between the seller and buyer...?

Settlement of taxes

Conversion of taxes

Proration of taxes

Splitting of taxes

Proration of taxes

RESPA does not apply to which of the following...?

Seller financing

The buyer's assumption of the seller's existing mortgage

A contract for deed

All of the above

Seller financing

The buyer's assumption of the seller's existing mortgage

A contract for deed

All of the above

Which of the following Acts prohibits kickbacks and other referral fees between lenders and real estate brokers...?

ADA

MDIA

TILA

RESPA

RESPA

Contract for Deed

A means by which the seller passes possession but retains title to the property until the total or a substantial portion of the purchase price is paid. Installment contract. The two parties here are the vendor (owner) and the vendee (buyer).

Proration

The division of certain settlement costs between a buyer and seller.

Proration of Taxes

To divide or prorate the taxes equally or proportionately to time of use, usually between seller and buyer.

Title which is not encumbered or burdened with defects is known as...?

AClear title

BClouded title

CGeneral title

DEffective title

Clear title

The escrow agent typically serves as the...?

AClosing agent

BSeller's agent

CAttorney

DLender representative

Closing agent

Which of the following Acts helps prevent consumers from getting charged higher than anticipated fees by lenders at closing...?

AMortgage Disclosure Improvement Act

BMortgage Settlement Act

CLender Disclosure Act

DFinancing Disclosure Act

Mortgage Disclosure Improvement Act

Which of the following is included in a lender's good faith estimate...?

AThe lender's loan origination fee

BA survey of the property

CAn appraisal of the property

DAll of the above

The lender's loan origination fee

What should a buyer do in preparation for closing...?

AAll of the above

BObtain a cashier's check

CConduct the final walk-through

DCompare the good faith estimate to the HUD-1 form

All of the below

BObtain a cashier's check

CConduct the final walk-through

DCompare the good faith estimate to the HUD-1 form