With regard to the Wood Destroying Insect Report, which statement is correct?
A.
The seller usually pays for the report.
B.
The seller is responsible for repairing all structural damage discovered.
C.
The report determines that there is no sign of insects
C. The report determines that there is no sign of insects, but does not guarantee structural integrity.
Rationale: The Wood Destroying Insect Report is usually paid for by the buyer. It provides information as to the presence of insects, but it does not g
Assume annual real estate taxes amount to $1,800 and have been paid in advance for the calendar year by the seller. If closing is set for September 15, which of the following is correct.
A.
Credit seller $525, debit buyer $1,275
B.
Credit seller $1,275, d
D. Credit seller $525, debit buyer $525
Rationale: Annual taxes are $1,800. The daily amount is $1,800 divided by 360 = $5 per day. From January 1 through August 30 is 240 days + 15 days for September = 255 days. The seller owes 255 days x $5 per day = $1
Personal property taxes on a residential closing are normally: I. Prorated between the buyer and seller. II. Single entry debit to the seller if the personal property taxes are unpaid. III. No entry and disregarded if the personal property taxes are paid.
C.II and III
Rationale: Usually the personal property taxes are the seller's responsibility and are paid. When the personal property taxes have been paid, there is no entry on the HUD and the amount of the personal property taxes is disregarded.
The type of interest usually charged on home loans is:
A.
compound interest
B.
accrued interest
C.
interim interest
D.
simple interest
D. simple interest
Rationale: Usually mortgage loans are simple interest loans meaning that interest is charged only on the outstanding principal balance.
The purpose of a percolation test is to:
A.
test a soil's absorption or drainage capacity to accommodate septic systems.
B.
test for soil toxins to assure they do not leach into the septic system.
C.
test the potability of drinking water from a private we
A. test a soil's absorption or drainage capacity to accommodate septic systems.
Rationale: A percolation (or perc) test is conducted on homes that have a septic system as opposed to a city sewer connection to make certain the septic tank can operate prope
What is the federal law which requires the lender to provide the borrower with a Good Faith Estimate and the booklet, "Shopping for Your Home Loan" within 3 business days of loan application?
A.
Truth in Lending Act
Rationale: The Truth in Lending Act (TI
B.Real Estate Settlement & Procedures Act
Rationale: The Good Faith Estimate (GFE) and the booklet are required within 3 business days of loan application by the Real Estate Settlement & Procedures Act (RESPA).v
If a consumer receives 100% financing, which of the following types of loans would the consumer MOST likely be obtaining?
A.
FHA
B.
Conventional
C.
Seller financing
D.
VA
D. VA
Rationale: Although there are other loans which provide 100% financing, the most common and heavily utilized 100% financing loan program is a VA loan.
A buyer who has a VA loan has elected to pay the loan off early because the buyer inherited a large sum of money. Which of the following would be a correct statement?
A.
VA loans may not be paid off early.
B.
VA loans may be paid off early, but a 30 day p
D. VA loans may be paid off early with no penalty.
Rationale: There is no prepayment penalty with VA loans. In fact, Conventional, FHA and VA loans due not have a prepayment penalty. However, on the payoff of an FHA loan the lender may collect interest fo
When calculating qualifying ratios, real property taxes are included when you calculate:
A.
only the housing expense.
B.
only the total debt of recurring obligations expense.
C.
neither the housing expense nor the total debt of recurring obligations expen
D. in both the calculation of the housing expense and the total debt of recurring obligations expense.
Rationale: When calculating debt ratios, the payment which is used to qualify the borrower is a PITI payment which includes the taxes and insurance. Tha
An adjustable rate mortgage (ARM) can BEST be described as:
A.
one in which payments go up when the index to which it is based goes down.
B.
one in which payments are adjustable in the first few years, but then fixed.
C.
one in which payments can go up or
C. one in which payments can go up or down depending on the fluctuation or changes in an index upon which it is based.
Rationale: Adjustable rate mortgages can fluctuate either up or down. The change which occurs when the interest rate is adjusted is base
Which of the following ads would be considered a violation of Regulation Z requiring the disclosure of costs?
A.
Seller willing to finance at an interest rate of 10%.
Rationale: Regulation Z does not apply to seller financing or seller carryback loans.
B.
D.Fantastic residential loan can make you a home owner for just $1,000 down.
Rationale: Regulation Z, also known as the Truth in Lending Act or TILA requires disclosure of the APRment and this ad must therfore include the APR. when trigger terms (use of a
All of the following statements are correct, EXCEPT:
A.
The trustee receives naked or bare title from the trustor.
Rationale: The trustee receives naked title or bare title from the trustor. Naked or bare title is the same thing as the power of sale. The
D. The beneficiary delivers a deed of reconveyance to the trustee when the loan is paid in full.
Rationale: This statement is incorrect. The deed of reconveyance, which evidences payoff of the promissory note and releases the lender's lien on the property
All of the following statements are correct, EXCEPT:
A.
the payoff document in a mortgage is called the satisfaction of mortgage.
B.
the payoff document with a deed of trust is called the deed of reconveyance.
C.
TILA or Regulation Z requires lenders and
D. RESPA requires attorneys to close real estate transactions in North Carolina.
Rationale: The use of real estate attorneys is a matter of state law. RESPA does not dictate the use of real estate attorneys as closing agents, that is required because NC i
Which federal law provides individuals with the right to check their own credit reports and demand that mistakes be corrected?
A.
Real Estate Settlement and Procedures Act
B.
Truth in Lending Act
C.
Equal Credit Opportunity Act
D.
Fair Credit Reporting Ac
D. Fair Credit Reporting Act
Rationale: The Fair Credit Reporting Act provides that consumers have a right to access their credit report at least once a year and provides a process for them to correct credit report errors. It also requires that lenders pr
Which of the following act requires credit institutions to inform borrowers of the true cost of obtaining credit so that the borrowers can compare the costs of various lenders and avoid the uninformed use of credit?
A.
Regulation Z
Rationale: Regulation Z
A. Regulation Z
Rationale: Regulation Z or the Truth in Lending Act deals with the cost of obtaining credit and the true costs of that credit. It is why TILA imposes the inclusiion of the Annual Percentage Rate (APR) in both advertising and as a separate
James Smith moved to North Carolina. What type of document will Mr. Smith be asked to sign that gives a security interest in the real property to the lender?
A.
Promissory note
B.
Security deed
C.
General warranty deed
D.
Deed of trust
Rationale: In NC bo
D. Deed of trust
Rationale: In NC borrower's usually sign two documents for the lender, the promissory note (or the IOU) is the written promise to pay back all of the money under certain terms and conditions and the trust deed gives the trustee (neutral t
When must the brochure, "Shopping for Your New Home Loan" and a Good Faith Estimate be provided to a borrower?
A.
Within 3 business days of loan application
Rationale: A borrower makes a loan application when they provide the lender with enough informatio
A. Within 3 business days of loan application
Rationale: A borrower makes a loan application when they provide the lender with enough information upon which a credit decision could reasonably be based. Within 3 business days, the lender must provide the b
A real estate agent has created a "Gratitude Program" where they provide a $100 gift certificate to a local restaurant each time a home inspector or a loan officer refers a client to them. Which federal law prohibits this type of referral fee or "kickback
C. Real Estate Settlement & Procedures Act
Rationale: RESPA prohibits a kickback or referral fee to a settlement service provider in connection with the referral of business in a real estate transaction. Both the home inspector and the loan officer would
Which of the following best describes a package loan?
A.
Both real and personal property are included in the loan.
Rationale: A package loan is one which covers both real and personal property. They are rare in residential transactions. In residential tra
A. Both real and personal property are included in the loan.
Rationale: A package loan is one which covers both real and personal property. They are rare in residential transactions. In residential transactions we convey personal property with a separate
Which of the following is another name for the due-on-sale clause?
A.
Acceleration clause
Rationale: An acceleration clause also means that the lender is calling the entire loan balance due and payable and that the borrower must bring all of their money n
B. Alienation clause
Rationale: An alienation clause and a due on sale clause are the same thing. They both mean that the borrower is alienating (selling or transferring) the real estate and must pay off the entire loan balance.
In North Carolina, the closing attorney is usually selected by:
A.
the buyer's agent
B.
the closing agent
Rationale: The closing agent and the attorney are similar. In NC we use closing attorneys. In other non-attorney states the real estate transactions
D. the buyer
Rationale: The buyer typically selects the closing attorney and pays the closing attorney's fees.
In performing their duties, which would be a correct action by a Property Manager?
A.
Spot checking credit histories for a large enough sample size of tenants to assure all tenants credit histories are in line with the property owner's credit history crit
B. Offering concessions to all prospective tenants to induce tenants to fill those vacancies.
Rationale: Concessions are inducements to retain or attract tenants and with the permission and consent of the owner are often offered by property managers.
An amortized loan payment includes:
A.
principal and interest payments
Rationale: An amortized loan is a loan in which each level payment includes a portion that is applied to principal and a portion that is applied to interest.
B.
principal payments only
A. principal and interest payments
Rationale: An amortized loan is a loan in which each level payment includes a portion that is applied to principal and a portion that is applied to interest.
Which of the following best describes subordination?
A.
Entering into a mortgage agreement with the lender
Rationale: When a borrower pledges collateral as security for a loan without giving up use or possession, it is called hypothecation.
B.
An insuranc
C. A waiver of lien priority of one lender to another lender
Rationale: One lender may waive their lien priority and allow other lenders to be in a high lien priority. This is subordination. The superior lien would have to waive its rights in order for a
An owner's equity is best represented as:
A.
the amount of money the owner has repaid the lender
B.
the difference between the market value and the remaining mortgage owed
C.
the property's original market value minus its original cost
D.
the current appr
B. the difference between the market value and the remaining mortgage owed
Rationale: The equity created in a property would be that amount over all of the liens and monies owed, or the difference between the market value and what is owed. While the homeo