Housing and Real Estate Finance Flashcards
7 cards from real AFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Housing and Real Estate Finance flashcards as text
A homeowner with a $250,000 mortgage balance has a home valued at $200,000. This situation is best described as:
Answer: Being underwater or upside-down
When the mortgage balance exceeds the home's market value, the homeowner is said to be underwater or upside-down on their mortgage.
Which federal law requires lenders to disclose the Annual Percentage Rate (APR) and total finance charges to borrowers before loan closing?
Answer: Truth in Lending Act (TILA)
TILA (Regulation Z) mandates disclosure of the APR and total cost of credit so borrowers can compare loan offers.
A 5/1 ARM mortgage means the interest rate is fixed for the first:
Answer: 5 years, then adjusts annually
In a 5/1 ARM, the rate is fixed for 5 years and then adjusts once per year based on a benchmark index plus margin.
Which type of deed provides the GREATEST protection to a home buyer because the seller warrants the title against ALL prior claims?
Answer: General warranty deed
A general warranty deed guarantees the title against all defects and encumbrances, even those arising before the seller owned the property.
A client is considering a 15-year mortgage versus a 30-year mortgage for the same loan amount at the same interest rate. Which statement is MOST accurate?
Answer: The 15-year loan has higher monthly payments but significantly less total interest paid
A 15-year mortgage has higher monthly payments but dramatically reduces total interest paid because the principal is repaid in half the time.
Under RESPA, within how many business days of receiving a complete mortgage application must a lender provide a Loan Estimate?
Answer: 3 business days
RESPA (as implemented through TRID rules) requires lenders to deliver or mail the Loan Estimate within 3 business days of receiving a complete application.
A housing counselor's client wants to calculate their debt-to-income (DTI) ratio for a mortgage. Their gross monthly income is $5,000 and total monthly debt payments (including proposed PITI) are $1,750. What is their back-end DTI?
Answer: 35%
Back-end DTI = total monthly debts ÷ gross monthly income = $1,750 ÷ $5,000 = 35%.