PSI Real Estate Financing 5 — Questions and Answers
Question 1: A seller finances the buyer's purchase directly by accepting a note and mortgage instead of full cash payment. This is called a:
- Package mortgage
- Purchase money mortgage (Correct answer)
- Blanket mortgage
- Open-end mortgage
Correct answer: Purchase money mortgage
A purchase money mortgage is created when the seller extends credit to the buyer as part of the property sale transaction.
Question 2: Which type of mortgage uses one loan to finance multiple properties simultaneously?
- Package mortgage
- Blanket mortgage (Correct answer)
- Wraparound mortgage
- Open-end mortgage
Correct answer: Blanket mortgage
A blanket mortgage covers two or more parcels of real estate under a single loan, often used by developers.
Question 3: A VA loan guarantee benefit is available to eligible veterans and allows them to purchase a home with:
- A minimum 3.5% down payment
- No down payment required (Correct answer)
- A minimum 10% down payment
- PMI required at all times
Correct answer: No down payment required
VA-guaranteed loans allow eligible veterans to purchase a home with no down payment and without private mortgage insurance.
Question 4: In a mortgage, which clause releases the lien on the property once the debt is fully paid?
- Acceleration clause
- Subordination clause
- Defeasance clause (Correct answer)
- Prepayment clause
Correct answer: Defeasance clause
The defeasance clause requires the lender to release the mortgage lien once the borrower has fully repaid the debt.
Question 5: Which loan type is typically used by investors to fund a quick property purchase before obtaining permanent financing?
- Reverse mortgage
- Bridge loan (Correct answer)
- Graduated payment mortgage
- Blanket mortgage
Correct answer: Bridge loan
A bridge loan is a short-term loan that 'bridges' the gap between a property purchase and securing long-term financing.
Question 6: When a second mortgage lender agrees to accept a lower priority lien position behind a new first mortgage, this is called:
- Defeasance
- Acceleration
- Subordination (Correct answer)
- Novation
Correct answer: Subordination
Subordination is the process by which a junior lienholder agrees to maintain a lower priority position relative to a new senior lien.
Question 7: A lender who originates loans and holds them in their own portfolio rather than selling them is known as a:
- Mortgage broker
- Portfolio lender (Correct answer)
- Correspondent lender
- Wholesale lender
Correct answer: Portfolio lender
A portfolio lender originates and retains loans in its own portfolio instead of selling them to the secondary market.
PSI Real Estate Financing 5
A seller finances the buyer's purchase directly by accepting a note and mortgage instead of full cash payment.
This is called a: