P4-45 Quiz

1. Question

Government bonds are being used as a source of funds to close. How should they be valued?

A. At purchase price unless the redemption value can be determined and verified.

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B. At face value regardless of redemption status.

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C. At current market value only.

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D. At redemption value only, even if it cannot be verified.

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2. Question

Stocks are being used for funds to close. What documentation is required to verify their value?

A. A current statement from the stockbroker or a photocopy of the stock certificate, accompanied by a dated newspaper stock list.

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B. Only the original purchase receipt.

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C. A bank statement showing deposit of funds.

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D. A verbal confirmation from the borrower.

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3. Question

When can trust account funds be used for funds to close?

A. Only if the trust is irrevocable.

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B. Only if the trustee approves in writing.

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C. If the borrower has access to the funds and it can be verified.

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D. Only if the trust has been established for at least five years.

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4. Question

How is cash-on-hand treated as a source of funds for the down payment or closing costs?

A. Acceptable if documented by affidavit.

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B. Acceptable for closing costs only.

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C. Acceptable if deposited prior to application.

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D. Cash-on-hand is not an acceptable source of funds for the down payment or closing costs.

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5. Question

A seller will take the borrower’s existing property in trade as part of the down payment. What must be true for trade equity to be acceptable?

A. The borrower has made a 5% cash down payment and the equity contribution is a true-value consideration.

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B. No separate appraisal is needed if both parties agree on value.

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C. The borrower has at least 3% equity in the traded property.

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D. The seller may accept the property at any value without documentation.

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6. Question

In a rent-with-option-to-purchase situation, when can the portion of rent that exceeds market rent be applied toward the down payment?

A. If there is a valid rental/purchase agreement, the lease term was at least 12 months, payments for the last 12 months are documented, and the appraiser develops market rents.

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B. If the lease term is at least 6 months.

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C. If the borrower provides proof of any rent paid, regardless of term.

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D. If rent exceeds market rent by any amount, even without a written agreement.

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7. Question

How is sweat equity treated under Fannie Mae and Freddie Mac guidelines?

A. Allowed by both agencies without restrictions.

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B. Not acceptable with Fannie Mae, but Freddie Mac permits it if the borrower provides a 5% cash investment from their own funds.

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C. Not allowed by either agency.

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D. Allowed by Fannie Mae but not Freddie Mac.

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8. Question

Why may borrowed funds secured by an asset be used for funds to close?

A. Because they are treated as income.

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B. Because they represent a return of equity.

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C. Because repayment is optional.

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D. Because they do not require documentation.

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9. Question

When may the monthly repayment debt for a loan secured by a financial asset not need to be counted for qualifying?

A. When the lender obtains a copy of the loan instrument showing the borrower’s financial asset as collateral for the loan.

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B. When the loan term is under 12 months.

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C. When the borrower has reserves equal to the loan amount.

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D. When the collateral asset is still counted as an available asset for verifying funds to close.

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10. Question

If an asset is used as collateral for borrowed funds, how is that asset treated when verifying funds to close?

A. It may still be counted as an asset if it is liquid.

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B. It is partially counted based on the outstanding loan balance.

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C. It is counted only if the borrower has additional reserves.

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D. The assets used to secure the loan may not be counted as “Assets” for verifying funds to close.

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