P3-86 quiz

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Question 1 of 8

1. Question
In the example where a borrower takes a $130,000 loan to purchase a home worth $150,000, what is the loan-to-value (LTV) ratio and what does the remaining percentage represent?
- A) 80% LTV and 20% lender’s equity.
- B) 87% LTV and 13% borrower’s equity/down payment.
- C) 90% LTV and 10% seller’s contribution.
- D) 50% LTV and 50% borrower’s equity/down payment.
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Question 2 of 8

2. Question
How is mortgage interest accrued and paid according to the text?
- A) Interest accrues monthly and is paid three months in advance.
- B) Interest is charged once per year at the end of the year.
- C) Interest accrues weekly and is added only to the final payment.
- D) Interest accrues daily and is paid one month after it accrues, while the current month’s principal is paid with that same payment.
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Question 3 of 8

3. Question
Which fees are considered finance charges for purposes of calculating the APR, based on the text?
- A) Fees paid to the lender or its affiliates as profit or that otherwise benefit the lender.
- B) All fees paid to third-party appraisers and inspectors.
- C) Only government recording and transfer fees.
- D) Only title insurance premiums paid to independent title companies.
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Question 4 of 8

4. Question
How is daily simple interest on a mortgage calculated according to the text?
- A) Divide the loan amount by 12, then multiply by the note rate.
- B) Multiply the loan amount by the APR, then divide by the loan term in months.
- C) Multiply the loan amount by the note rate to get annual interest, then divide by 360 or 365 days to get the daily interest amount.
- D) Multiply the payment amount by 30 and then divide by 365 days.
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Question 5 of 8

5. Question
Which description best matches “Settlement” as defined in the text?
- A) The lender’s internal underwriting review prior to issuing a conditional approval.
- B) The closing or escrow event where documents are signed, funds are disbursed, and title is conveyed by Warranty Deed.
- C) The appraisal inspection of the property.
- D) The initial application interview between borrower and loan officer.
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Question 6 of 8

6. Question
What do the front and back debt ratios measure when qualifying a borrower?
- A) The ratio of the loan amount to the appraised value of the property.
- B) The ratio of savings to total monthly expenses.
- C) The ratio of interest paid to principal paid each month.
- D) The percentage of income used for the mortgage payment (front ratio) and for the mortgage plus all other consumer debts (back ratio).
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Question 7 of 8

7. Question
According to the text, what is “Premium Pricing”?
- A) An above-par interest rate that generates a credit (YSP) applied toward the borrower’s settlement costs.
- B) A below-market interest rate purchased with discount points.
- C) A fee paid directly to the appraiser for a rush appraisal.
- D) An increase in rate due to a low credit score.
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Question 8 of 8

8. Question
How does the text define a “Lender Credit”?
- A) A government subsidy that reduces the borrower’s monthly payment.
- B) A refund of all discount points paid at closing.
- C) A credit generated when the lender offers a rate above par and applies the resulting YSP to the borrower’s settlement costs.
- D) A temporary interest rate reduction during the first year of the loan.
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