Practice Test 3 Review Flashcards

A set of 40 question-and-answer flashcards covering key concepts from Practice Test 3 wrong Q&As, designed for exam review.

What is the preferred debt-to-income (DTI) ratio for VA loans?

41% (though residual income analysis may allow higher DTIs).

Money paid by a buyer to show intent and ability to carry out a contract is called what?

Earnest money.

Under federal definitions, does a mobile home have to be permanently affixed to serve as security for a residential mortgage loan?

No. A dwelling includes a mobile home whether or not it is attached to real property.

A balloon mortgage typically has what amortization and payoff structure?

30-year amortization with the unpaid balance due in a much shorter period (e.g., 5–15 years).

Which section of the URLA can contain answers that lead to immediate rejection of an application?

The Declarations section.

Negative amortization occurs under what payment condition?

When the borrower’s payment is insufficient to cover the interest currently due, causing the loan balance to grow.

Which type of reverse mortgage is generally the least expensive for borrowers?

Single-purpose reverse mortgage.

Which loan feature is allowed for a non-qualified mortgage (non-QM) but not for a qualified mortgage (QM)?

An interest-only payment option.

The amount of the government guarantee on a VA loan is based on what factor?

The amount of the loan being obtained.

How does securitization help mortgage lenders?

By allowing them to exchange active loans for funds to make more new loans.

What is the definition of a nontraditional mortgage?

Any mortgage product other than a 30-year fixed-rate loan.

An interest-only loan would generally NOT be suitable for which borrower type?

A part-time hourly worker who only "may" get overtime income.

Which federal agency polices misleading mortgage credit advertising?

The Consumer Financial Protection Bureau (CFPB).

Which of the following is NOT required for a HECM loan?

That the borrower have no existing mortgage on the residence.

On the Loan Estimate, how must most costs be shown?

Rounded to the next whole dollar, except estimated principal and interest payments.

If foreclosure has begun, a three-year right to rescind exists when the finance charge was understated by more than how much?

More than $35.

Who is ultimately responsible for ensuring the borrower receives the Closing Disclosure?

The creditor (lender).

Judgment, attachment, and mortgage are all examples of what?

Liens.

Which of the following is NOT a characteristic of a higher-priced mortgage loan (HPML)?

APR exceeds the Treasury rate of comparable maturity by 6.5 percentage points.

For how long can a bankruptcy remain on a consumer credit report?

No more than 10 years.

Critics of fiduciary duty in mortgage transactions believe who is responsible for choosing appropriate loan terms?

The consumer.

Which of the following is NOT considered a liquid asset?

Net worth of businesses.

A 30-year fixed loan with 6% rate and five years of $1,400 interest-only payments is classified as what?

An interest-only option fixed-rate loan.

When a borrower rescinds a loan under TILA, what happens to fees already paid?

The lender must return all fees and loses its security interest in the property.

Does a purchase from a servicemember require a second appraisal on a higher-priced mortgage loan?

No. Purchases from servicemembers are exempt from the two-appraisal rule.

The sales comparison appraisal approach is most appropriate for which property type?

A condominium complex for residents aged 55 and over.

On a $230,000 home with 10% down using a conforming loan, what is the maximum seller concession?

$13,800 (6% of the sales price).

Which appraisal form (FNMA) is used for single-family investment properties?

Form 1007.

Under TILA, when may a consumer waive the right to rescind?

In writing, when needed to meet a bona fide personal financial emergency.

Which document is NOT required for a fully-documented salaried borrower?

Year-to-date profit and loss statements.

Which type of loan requires collection of HMDA data?

A refinance of a second home (secured by a dwelling).

The Loan Estimate is required for what category of loans?

All closed-end federally related mortgage loans.

Conforming loan seller concessions are limited to what percentages for LTVs over 90% and 90% or less?

3% for LTVs over 90% and 6% for LTVs of 90% or less.

Which federal agency enforces rules for FHA loan origination?

The Department of Housing and Urban Development (HUD).

Which practice is prohibited for a HOEPA (high-cost) loan?

Making a loan solely on the collateral value without assessing ability to repay.

What is the name of the reporting form used to submit HMDA data?

Loan/Application Register (LAR).

Which mortgage document might the borrower sign while it still has blank sections?

A Verification of Employment form.

Loan origination fees, PMI premiums, and commitment fees paid at or before closing are classified as what?

Prepaid finance charges.

Under the Homeowners Protection Act, what happens to PMI on high-risk loans at the loan’s midpoint if payments are current?

PMI terminates automatically.

For detailed information about the collateral on a mortgage loan, what document does the underwriter primarily rely on?

The property appraisal.