P3-108 quiz

1. Question

What is installment debt?

A) Money borrowed that is repaid only at maturity in a lump sum
B) Borrowed money repaid in regular payments over a specific term
C) A revolving line of credit with no fixed term or payment schedule
D) Equity taken out of a home with no repayment required

2. Question

What is an institutional lender?

A) A financial institution that invests in mortgages and holds them in its portfolio
B) An individual investor who occasionally purchases notes
C) A mortgage broker who only arranges loans for others
D) A title company that insures real estate transactions

3. Question

What is an insurance binder in a mortgage transaction?

A) A permanent insurance policy covering the life of the loan
B) A receipt for payment of property taxes
C) A document that waives the need for insurance at closing
D) A temporary written proof of hazard or title insurance coverage until the permanent policy is issued

4. Question

In real estate finance, what is interest?

A) Only the principal balance still owed on a loan
B) Only the borrower’s ownership right in property
C) Money paid for the use of money, usually as an annual percentage, and also a right or share in property
D) Fees charged for late payments only

5. Question

What is the interest accrual rate on a mortgage?

A) The maximum rate the lender can ever charge on the loan
B) The percentage rate at which interest accrues on the mortgage, usually used to calculate monthly payments
C) The borrower’s annual income growth rate
D) The rate used only to compute late charges

6. Question

How does an interest rate buydown plan benefit the mortgagor?

A) It permanently lowers the note rate for the entire loan term
B) It eliminates the need for a down payment
C) It converts the loan from fixed rate to adjustable rate
D) It temporarily reduces the borrower’s effective interest rate and payments when funds are applied each month from a buydown account

7. Question

What is the interest rate change date on an ARM/GPARM?

A) The specific date when the interest rate on an ARM/GPARM is adjusted
B) The loan application date
C) The date the appraisal is completed
D) The date property taxes are due

8. Question

What does the interest rate change interval describe on an ARM/GPARM?

A) The time between loan application and closing
B) The number of days in a billing cycle
C) The period of time between scheduled interest rate changes on an ARM/GPARM
D) The time between property tax assessments

9. Question

In this glossary, what does interest rate shortfall refer to?

A) When the note rate exceeds the investor’s required yield
B) When the borrower pays off the loan early
C) When the property value is less than the loan amount
D) When the net note rate on the mortgage is less than the required yield, creating a rate shortage

10. Question

What is an intermediate-term mortgage?

A) A mortgage with a term of 1 to 5 years only
B) A mortgage that amortizes over 10, 15, or 20 years
C) Any mortgage with a 30-year term
D) A mortgage that never amortizes

11. Question

How is investment property defined in this glossary?

A) Property acquired mainly to realize a profitable return in the future rather than for immediate ongoing income
B) Property held only for current rental income
C) An owner-occupied primary residence
D) Property used exclusively for charitable purposes

12. Question

Who is the investor in a mortgage transaction?

A) Only the original borrower on the loan
B) The appraiser who values the property
C) The holder of the mortgage or permanent lender, or any person or institution that invests in mortgages
D) Only government-sponsored entities

13. Question

How is joint tenancy with right of survivorship best described?

A) Ownership in unequal shares with no survivorship rights
B) Equal undivided ownership by two or more persons, with surviving owners automatically taking the interest of a deceased co-owner
C) A temporary leasehold interest shared by roommates
D) Sole ownership held by one individual only

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