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a. minimum down payment of $10,000 plus closing costs.
b. minimum down payment of $10,000 including closing costs .
c. maximum down payment of $10,000 including closing costs and mortgage points.
d. maximum down payment of $10,000.
e. minimum down payment of $90,000 including closing costs.
36. A lender will usually require a loan-to-value ratio of _____ or less for a borrower to avoid having to pay private
mortgage insurance (PMI).
a. 75%
b. 80%
c. 85%
d. 90%
e. 95%
37. A real estate sales contract will include:
a. the amount you have paid as an earnest money deposit.
b. the terms of a mortgage loan taken from a third party.
c. expected home maintenance costs.
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d. the movement in the value of the property over the last 20 years.
e. the current value of the properties in the neighboring locations.
38. The data in a Multiple Listing Service (MLS):
a. eliminate the need for a real estate agent.
b. are accessible to buyers and sellers directly.
c. include the entire ownership history of the listed properties.
d. deal only with undervalued properties that are authorized by the government within a geographic location.
e. consist of a comprehensive listing of properties for sale in a given community area.
39. The _____ governs closings on owner-occupied houses, condominiums, and apartment buildings of four units or
fewer.
a. Equal Credit Opportunity Act
b. Truth-in-Lending Act
c. Real Estate Settlement Procedures Act
d. Mortgage Lenders Act
e. Real Estate Agents Act
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40. Fredrick purchased a property worth $150,000 on mortgage. He paid $30,000 as a down payment on this property.
However, a recent slump in real estate prices forced Fredrick to sell the property for $115,000 only 2 months later. This
sale is termed a(n):
a. real estate declining equity.
b. real estate short sale.
c. fixed mortgage sale.
d. shrinking principal sale.
e. indexed equity.
41. Jane and Smith are considering the purchase of a home in downtown Minneapolis. They approached Larson’s
Mortgagers Inc. to arrange for the financing needed for their home. This process of arranging with a mortgage lender in
advance of buying a home is called:
a. foreclosure.
b. a contingency auction.
c. prequalification.
d. a real estate short sale.
e. diversification.
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42. Which of the following will help a buyer know ahead of time the specific mortgage amount that he or she will be
eligible for subject to changes in rates and terms?
a. Prequalification
b. The rent ratio
c. Leasing
d. Anchoring
e. The interest rate
43. If the interest rate and monthly mortgage payment do not change over the life of your mortgage, you have a(n):
a. reverse-annuity mortgage.
b. fixed-rate mortgage.
c. adjustable-rate mortgage.
d. rollover mortgage.
e. graduated-payment mortgage.
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44. The monthly interest on your adjustable-rate mortgage was $690. You paid $650 as your monthly payment on the loan
leading to an increase in the principal balance. This is an example of a(n):
a. growing equity.
b. negative amortization.
c. fixed interest expense.
d. shrinking principal.
e. indexed equity.
45. A buydown refers to:
a. a mortgage that starts with unusually low payments that rise over several years to a fixed payment.
b. financing made available by a builder or seller to a potential new-home buyer at well below market interest rates,
often only for a short period.
c. a fixed-rate mortgage with payments that increase over a specific period.
d. a mortgage that requires the borrower to pay only interest; typically used to finance the purchase of more
expensive properties.
e. a loan on which payments that equal half the regular annual interest amount are made every 6 months.
46. _____ are loans offering low payments for the first few years, gradually increasing until year three or five, and then
remaining fixed.
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a. Reverse-annuity mortgages
b. Fixed-rate mortgages
c. Adjustable-rate mortgages
d. Graduated-payment mortgages
e. Rollover mortgages
47. Assume that you have taken a car on a closed-end lease for a period of 5 years. At the end of the fifth year, you would
need to pay additional money only when:
a. fuel costs have been higher than expected.
b. the residual value is more than expected.
c. the mileage limits are exceeded.
d. the company upgrades the automobile.
e. the driver does not have automobile insurance.
48. Janet is considering the purchase of a condo for $150,000 during a recession phase, partly financed by a mortgage.
She is due to retire in a few years. If she cannot make her mortgage payments on time, she is bound to incur a:
a. neutral equity on her property.
b. reduced residual value of the property.
c. higher rent ratio.
d. foreclosure of her house.
e. fine from the local government.
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51. If your lender charges 1.5 mortgage points on a house selling for $100,000, on which there is a $90,000 loan, the
points will cost you:
a. $1,350.
b. $1,500.
c. $2,850.
d. $150.
e. $900.
52. A(n) _____ ratio specifies the maximum percentage of the value of a property that a lender is willing to loan.
a. affordability-to-expense
b. loan-to-value
c. rent-to-mortgage
d. mortgage points to closing costs
e. points-to-mortgage
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53. The seller of a house typically pays the:
a. appraisal fee.
b. loan application fee.
c. real estate agent’s commission.
d. title search and insurance.
e. mortgage points.
54. Earnest money is the sum of money the home buyer pledges with the:
a. lender to guarantee the purchase.
b. seller to indicate the intent to purchase.
c. realtor for finding the desired home within a preset budget.
d. lender to originate the loan.
e. financial institution to prequalify for a mortgage loan.
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55. The _____ governs closings on owner-occupied houses, condominiums, and apartment buildings of four units or
fewer.
a. Equal Credit Opportunity Act
b. Truth-in-Lending Act
c. Real Estate Settlement Procedures Act
d. Mortgage Lenders Act
e. Tax Cut and Jobs Act of 2017
56. Matt is considering the purchase of a condo on a mortgage. However, he is not sure of the amount of the mortgage he
is eligible for. _____ will help him identify and correct any problems such as credit report errors that may arise on his
application.
a. Prequalification
b. A contingency clause
c. A Multiple Listing Service
d. The seller’s financial institution
e. A buyer’s agent
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57. With prequalification, a buyer can:
a. negotiate a price lower than the quoted price on the property.
b. correct any problems on his credit report.
c. get a comprehensive list of all the suitable properties in a locality.
d. bargain for additional time in a property deal.
e. reduce the required down payment.
58. The real estate agent’s commission is generally paid by the:
a. seller.
b. buyer.
c. mortgage bank.
d. local multiple listing service provider.
e. seller’s financial institution.
59. A type of financing made available by a builder or seller to a potential new-home buyer at interest rates well below
market interest rates, often only for a short period, is termed a:
a. conventional mortgage.
b. convertible ARM.
c. buydown.
d. two-step ARM.
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e. growing equity mortgage.
60. A veteran might be able to buy a home with no down payment with a(n):
a. FHA mortgage insurance.
b. VA loan guarantee.
c. buydown.
d. conventional mortgage.
e. graduated-payment mortgage.
61. You made a $900 mortgage payment. The interest of $925 on the mortgage for this month leads to an increase in the
principal balance. You have:
a. experienced a negative amortization.
b. signed up for a conventional mortgage.
c. refinanced your loan.
d. taken a fixed-rate mortgage.
e. accepted a buydown.
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64. Leslie has been offered the choice of either a $1,000 rebate or a 5.5%, 48-month loan for the new car she is
purchasing. If Leslie will be financing $15,000 and can get a 7.5%, 48-month loan at her credit union, should she take the
$1,000 rebate or the 5.5% loan? (Show all work.)
65. Dick and Jane have just purchased a house and are calculating how much money they will need when the closing day
rolls around. The purchase price is $200,000. They will make a 20% down payment, and they must pay two points on the
loan. Closing costs should be 3% of the purchase price. What is the total dollar amount they will need at closing? (Show
all work.)
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