Real Estate License Financing 3 — Questions and Answers
Question 1: A VA loan is a government-backed mortgage available primarily to:
- First-time buyers only
- Eligible veterans and service members (Correct answer)
- Rural property buyers
- Low-income borrowers
Correct answer: Eligible veterans and service members
VA loans are guaranteed by the Department of Veterans Affairs for qualifying veterans and military members.
Question 2: What is the loan-to-value (LTV) ratio if a buyer borrows $160,000 on a $200,000 home?
- 60%
- 70%
- 80% (Correct answer)
- 90%
Correct answer: 80%
LTV equals loan divided by value: 160,000 / 200,000 = 80%.
Question 3: Which entity is a secondary mortgage market participant that buys loans from lenders?
- FHA
- Fannie Mae (Correct answer)
- HUD
- Regulation Z
Correct answer: Fannie Mae
Fannie Mae purchases mortgages in the secondary market, providing lenders liquidity.
Question 4: An FHA loan is insured by the:
- Federal Housing Administration (Correct answer)
- Federal Reserve
- Veterans Affairs
- Department of the Treasury
Correct answer: Federal Housing Administration
FHA loans are insured by the Federal Housing Administration, allowing lower down payments.
Question 5: A point paid to a lender at closing typically equals what percentage of the loan amount?
- 0.5%
- 1% (Correct answer)
- 2%
- 5%
Correct answer: 1%
One discount or origination point equals 1% of the loan amount.
Question 6: When a seller finances the buyer's purchase directly, it is called a:
- Wraparound loan
- Purchase-money mortgage (Correct answer)
- Bridge loan
- Construction loan
Correct answer: Purchase-money mortgage
A purchase-money mortgage is seller financing where the seller acts as the lender.
Question 7: Hypothecation in financing refers to:
- Pledging property as collateral without giving up possession (Correct answer)
- Transferring title to the lender
- Refinancing an existing loan
- Paying off a loan early
Correct answer: Pledging property as collateral without giving up possession
Hypothecation lets a borrower pledge property as security while retaining possession and use.
Real Estate License Financing 3
A VA loan is a government-backed mortgage available primarily to: