The SAFE Mortgage Loan Originator National Exam Study Guide practice exam 1

1. A discount point is BEST described as a charge the borrower pays to:

A. A lender to decrease the interest rate on the mortgage loan

2. A buyer has made an earnest money payment of $5,000. The buyer pays an additional $2,000 in option money to be credited at closing on a property with a sale price of $160,000. If the required down payment is 20%, how much additional money will the buyer need to provide toward the down payment at closing?

D. $25,000

3. If an applicant works 40 hours every week and is paid $13.52 per hour, what is the applicant's monthly income?

B. $2,343.47

4. The requirement for private mortgage insurance is generally discontinued when the loan-to-value ratio falls below:

C. 80 %

5. Which of the following documents itemizes all settlement costs including lender charges?

B. HUD-1/Closing Disclosure

6. According to the Truth-in-Lending Act (TILA), the term "refinance" applies to:

D. The satisfaction of an existing obligation and its replacement by a new obligation

7. What does a loan originator use to determine the estimated value of a property based on an analytical comparison of similar property sales?

A. An appraisal

8. Which of the following methods of disclosure does NOT meet the requirements of the Equal Credit Opportunity Act (ECOA)?

C. Telephone

9. The term "20 basis points" expressed as a percentage is:

B. 0.20%

10. According to the Truth-in-Lending Act (TILA), which of the following fees is EXCLUDED from the calculation of the annual percentage rate?

A. Hazard insurance

11. FHA loans are:

B. 100% insured

12. The late fee for a conventional loan is:

C. 5 % of principal and interest

13. A funding fee is required for a:

B. VA loan

14. A Mortgage Insurance Premium is required on:

A. FHA loans

15. The mortgagee is the:

B. Lender

16. The borrower does NOT sign which document:

A. Deed

17. Which document is usually NOT recorded?

B. Note

18. A mortgagee title insurance policy is NOT :

C. Optional

19. Which parties sign the deed?

B. Grantor and two witnesses

20. When the mortgagor and mortgagee title insurance policies are issued at the same time, this is known as:

A. Simultaneous issue

21. A shrubbery hedge is one example of an:

D. Acceptable title impediment

22. A loan on personal property only is known as:

B. Chattel mortgage

23. Which of the following is NOT a characteristic of a Tenants in Common form of ownership:

C. Right of survivorship

24. PITI payments do NOT include which of the following:

B. Funding Fee

25. Who does Fannie Mae hold responsible for the quality of an appraisal?

D. Lender

26. Which law is known as Regulation B?

C. Equal Credit Opportunity Act

27. Which law prohibits discrimination by lenders?

C. Equal Credit Opportunity Act

28. A property sold for $200,000 and was appraised at $180,000. The borrower received a loan for $150,000. What is the loan-to-value?

B. 83.3 %

29. How many days does a lender have to send an adverse action notice?

C. 30

30. The GFE/Loan Estimate must be mailed or given to the borrower within how many days after receiving the signed application?

A. 3 business days

31. The enforcement of a lien is known as a:

B. Foreclosure

32. What minimum percentage of ownership in a related service requires a conflict of interest disclosure?

B. 10 %

33 What minimum percentage of ownership qualifies an individual as self-employed? A. 5 %

C. 25 %

34. A salaried employee may have to produce which of the following documents to obtain a loan?

B. 2 years W2s

35. How many months must be left on an automobile lease to include it as a debt?

D. It is always included

36 Which law defines the right of rescission?

A. Truth-in-Lending

37. How long after the application date must social security payments continue to be received in order to count as income?

D. 3 years

38. Credit reports on new construction are good for how many days?

B. 120 days

39. Which clause in a mortgage allows a lender to increase the interest rate?

B. Escalation

40. Which clause in a mortgage prevents the lender from foreclosing unless the borrower is in default?

A. Defeasance

41. The lender has how many days to send the Satisfaction of Mortgage letter to the borrower once the loan balance is paid?

B. 60 days

42. Which of the following increases cap rate?

A. Lower purchase price

43. Who should applicants contact if they have questions about their credit score or credit information?

A. Credit reporting agency

44. Who is responsible for maintaining the national flood maps?

B. FEMA

45. A VA appraisal is known as a:

A. CRV

46. Fannie Mae's automated underwriting system is known as:

C. Desktop Underwriter

47. There are 10 days left in the month. The purchase price is $150,000, the loan amount is $100,000 and the interest rate is 6%. How much mortgage interest must the borrower pay at closing?

A. $164.38

48. Private Mortgage Insurance is automatically canceled when the loan-to-value reaches what level?

C. 78 %

49. Which types of loans are meant for rural areas?

C. USDA

50. The purchase price of a home is $200,000 and the loan amount is $180,000. The borrower pays 6% interest with 1 discount point and 1 origination point. What is the cost of the points?

C. $3,600

51. If the Gross Rent Multiplier (GRM) decreases, the property value:

B. Decreases

52. What is the maximum allowable amount of VA seller concessions?

C. 4 %

53. When a property increases in value for any reason this is known as:

B. Appreciation

54. Which appraisal approach is most suitable for an office building?

C. Income capitalization approach

55. Which of the following is incorrect regarding an adjustable-rate mortgage?

A. The index is fixed

56. Which of the following is NOT a fully amortized loan?

A. Term mortgage

57. Which of the following is a negatively amortizing loan?

A. Reverse mortgage

58. Fannie Mae does NOT require:

A. 6 months of bank statements

59. A note is:

C. The borrower's IOU

60. A mortgage is:

B. The pledge of the property as collateral for the loan

61. An adjustable-rate mortgage can adjust after 2 years with an adjustment cap of 3 % per period and a lifetime cap of 7 %. The starting interest rate is 4%. What is the maximum interest that can be charged at the time of the first adjustment?

B. 7 %

62. What is the FHA minimum down payment?

B. 3.5 %

63. Which law is known as Regulation C?

D. Home Mortgage Disclosure Act

64. What is the minimum down payment for a USDA loan?

A. $0

65. How many hours of continuing education are minimally required?

A. 8 hours every year

66. Who is responsible for completing the HUD-/Loan Disclosure?

B. The closing agent

67. A mortgagor's title insurance policy is:

C. Based on purchase price

68. The assignee of a mortgage and note is participating in the:

C. Secondary market

69. VA loans are:

A. Partially guaranteed

70. The late fee for a VA loan is:

B. 4 % of principal and interest

71. The purchase price of a home is $325,000 and the appraisal price is $350,000. If the first mortgage is in the amount of $200,000 and the second mortgage is $60,000. What is the combined loan-to-value ratio?

B. 80.0 %

72. The purchase price of a home is $375,000 and the buyer will assume a $175,000 1st mortgage. The loan-to-value cannot exceed 85 %. What is the maximum amount of the new 2nd mortgage?

B. $143,750

73. What clause in a mortgage allows the lender to call the entire loan balance due?

C. Acceleration

74. What clause in a mortgage prevents the lender from recovering additional assets from the mortgagor if there is a shortfall in the foreclosure proceeds?

D. Exculpatory

75. What term describes the intentional delay of action on the part of the lender upon a borrower's default?

A. Forbearance

76 Which of the following does NOT appear in a lock-in agreement?

B. APR

77. Freddie Mac was originally known as:

A. Federal Home Loan Mortgage Corporation

78. Fannie Mae allows what amount of fees to be charged to a credit card?

A. 1 % of the loan amount plus $500 for the appraisal and credit report

79. Loan Prospector can NOT be used for which type of loans?

D. Commercial

80. A five bedroom, one bathroom house is an example of:

B. Functional obsolescence

81. Which of the following is NOT a benefit of an FHA loan?

C. No monthly mortgage insurance

82. A loan closes on May 14. When is the first mortgage payment due?

D. July 1

83. Alimony payments must continue to be received for how long after the application date if they are to be included as income?

C. 3 years

84. Credit reports are good for how many days after they are pulled for qualifying purposes?

C. 120

85. When title is transferred and the buyer assumes no liability for the note, this type of transference is known as:

B. Subject to the mortgage

86. Which of the following is correct for an adjustable-rate mortgage?

C. Index + margin = fully indexed rate

87. The maximum term for a FHA loan is:

B. 30 years

88. Which of the following is NOT an involuntary lien?

C. Mortgage lien

89. The most comprehensive form of ownership is:

B. Fee simple absolute

90. Which is NOT a component of a valid contract?

C. Two witnesses

91. Which type of co-ownership permits the property to pass to an heir?

B. Tenants in common

92. The economic concept which states that a knowledgeable buyer will pay no more for one property than they would pay for an equally desirable comparable property is:

A. Principle of Substitution

93. Which law allows consumers a free copy of their credit report every year?

B. The Fair and Accurate Credit Transaction Act

94. Which law requires the interviewer to complete the Government Monitoring section on the 1003?

D. The Equal Credit Opportunity Act

95. Which law entitles an applicant to a copy of his property appraisal report?

D. The Equal Credit Opportunity Act

96. Which law is also known as Regulation X?

B. Real Estate Settlement Procedures Act

97. Which law protects an individual's confidential information?

D. Gramm-Leach-Bliley Act

98. Who enforces RESPA violations?

A. FTC

B. CFPB

C. FHA

D. FCC

B. CFPB

99. Which law requires that the Special Information booklet be given to borrowers?

B. Real Estate Settlement Procedures Act

100. What is the fine for violating the Federal Do Not Call rules?

C. $16,000