Red Real Estate Dynamics Chapter 17

Front 1

Chap 17 question 1
At a closing to take place on June 16th the purchaser's charge for prepaid interest will be for:
A: 15 days
B: 45 days
C: 31 days
D: 14 days

Back 1

A: 15 days
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Since the closing took place on June 16 and there are 30 days in June you count starting the day of closing.
Also chap 17 -3
B: Calculating the interest adjustment (Pre Paid Interest)
The purpose of the interest adjustment is to allow the buyer's monthly payment to come due on the 1st of the month. Interest is paid in arrears. In other words, the loan payment made on the 1st of July covers the interest that was due for June. Therefore when the closing occurs on June 16th, for example, the first payment on the buyer's load will not be due until August 1st and this will cover the interest for July. We still have to provide for the payment of interest in June starting on the 16th.

Front 2

Chap 17 question 2
In estimating the prepaid taxes for a purchaser with a new loan who has signed a contract, it is safe to assume and amount equal to:
A: One year
B: three months
C: six months
D: an amount based on estimated date of the first monthly payment

Back 2

D: an amount based on estimated date of the first monthly payment
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Chap 17 -6
1. Property Tax
The annual tax bill is divided by 12 to get a monthly figure; this in a turn is multiplied by the number of months worth of tax payments the lender can collect. It cannot exceed the number of monthly increments necessary to pay the next tax bill when it comes due plus two extra months

Front 3

Chap 17 question 3
If a purchaser buys a home for $110,000 and pays $13,200 down, the lender would consider this to be a (an):
A: 88% loan
B: 80% loan
C: 90% loan
D: 85% loan

Back 3

C: 90% loan
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chap 17 -3
C. Calculating the cost of mortgage insurance
Loan amount above 80% up to and including 90% loan to value.
In this question the loan amount =price-downpayment
$110,000 - $13,200 = $96,800
since 96,800 is 88% LTV the lendor will consider it 90%

Front 4

Chap 17 question 4
At a closing the purchaser's cost for hazard insurance include:
A: a one year pre paid policy
B: only two months cost paid to escrow
C: one year policy plus at least two months in escrow
D: The cost of one year policy minus two months

Back 4

C: One year policy plus at least 2 months in escrow
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Front 5

Chap 17 question 5
All of the following costs will usually be included in a buyers monthly loan payment except:
A: Principle and interest on the loan balance
B: a monthly payment for property tax
C: a monthly payment toward hazard insurance
D: bills for water and sewer service

Back 5

D: bills for water and sewer
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chap 17-5
D Calulating Escrow Items
If the loan a buyer is arranging is a budget mortgage then the escrow account for thst purpose must be set up at closing. In a budget mortgage the lender will collect as a monthly payment not only pricipal and interest but also increments toward the payment of property taxes, hazard insurance, and mortgage insurance, if needed, so that the lender can pay these costs when due.

Front 6

Chap 17 question 6
If it costs $9.52 per $1000 to borrow for thirty years at an amortized rate of eleven percent, what would the monthly payment to principal and interest be on a $96,000 loan?
A: $923.45
B: $924.37
C: $913.92
D: $956.17

Back 6

C: $913.92
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Step 1
factor is $9.52 per $1000 so we have to fiqure how many increments per 1000.
divide the loan amount by 1000
$96000/1000=96X9.52=913.92

Front 7

Chap 17 question 7
When a purchaser assumes the seller's loan due the first of each month and the closing is to take place March 10th:
A: Seller gives buyer a credit for ten days of interest
B: buyer gives seller a credit for ten days of interest.
C: seller gives seller a credit for twenty-one days of interest
D: buyer gives seller a credit for twenty-one days of interest

Back 7

A: seller gives buyer a credit for ten days of interest
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Since the loan was assumed, the buyer will have to pay March interest in arrears when he pays the April 1st bill, therefore the seller will have to pay for the 10 days he occupied the property

Front 8

Chap 17 question 8
If the loan is in the amount of $87,000 and the interest rate is 9.5 percent, the daily rate for computing interest proration is:
A: 22.96
B: 22.64
C: 21.45
D: 21.75

Back 8

A: $22.96
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$87,000.00x9.5%=$8265
$82.65/360=$22.96

Front 9

Chap 17 question 9
If the purchaser will obtain a purchase money loan from the seller, it will appear on the estimated purchaser cost sheet as:
A: a credit to the buyer
B: a debit to the buyer
C: a credit to the seller
D: as a portion of the purchase price

Back 9

A: a credit to the buyer
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Front 10

Chap 17 question 10
The earnest money deposited with the contract will appear on the estimated purchaser cost sheet as:
A: a credit to the buyer
B: a debit to the buyer
C: a credit to the buyer and a debit to the seller
D: a debit to buyer and credit to seller

Back 10

A: a credit to the buyer.

Front 11

Chap 17 question 11
In a contract providing for a conventional loan, the loan discount fee will be:
A: charged to the purchaser
B: charged to the seller
C: devided between purchaser and seller
D: paid according to the provisions of the contract

Back 11

D: paid according to the provisions of the contract.

Front 12

Chap 17 question 12
Joshua is buying a house. Among other concessions, the seller has agreed to pay half of the cost of the PMI that will be charged at closing on the buyer's 95% new mortgage loan. On the Net to Seller and Cost to Buyers forms, this will show as:
A: A credit to the buyer and a debit to the seller
B: a credit to the seller and a debit to the buyer
C: a credit on both forms
D: a debit on both forms

Back 12

D: a debit on both forms
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Since the seller is paying only half and the PMI will be fully paid at closing that will show as a debit and the other half will show as a debit to buyer

Front 13

Chap 17 question 13
The estimated purchasers cost form is designed to show the buyer both how much cash will be rquired and_____?
A: the cost of repairs
B: The total finance cost
C: The monthly payment
D: The sellers net

Back 13

C: The monthly payment
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Front 14

Chap 17 ques 13
The Estimated Purchaser Cost form is designed to show the buyer both how much cash will be required and ____________?
A: The cost of repairs
B: The total finance cost
C: The monthly payment
D: The sellers net

Back 14

C: The monthly payment

Front 15

Chap 17 ques 14
Is it a good idea for a buyer's agent to prepare a Cost to Buyer estimate for first time home buyers, even before they begin looking for property?
A: No, because it is mostly guess work and could give a wrong impression
B: No, because they will probably find the numbers confusing.
C: Yes, but not until they have established their price level
D: Yes, knowing how much cash they should have at closing will help in finding an affordable price.

Back 15

D: Yes, knowing how much cash they should have at closing will help in finding an affordable price.

Front 16

Chap 17 ques 15
A purchaser who closes her new loan on May 1st will have her first payment due on ________?
A: June 1
B: July 1
C: june 10
D: July 10

Back 16

A: June 1

Front 17

Chap 17 ques 16
In calculating the tax escrow, the lender estimates the number of monthly increments necessary to pay the next tax bill then adds how many months?
A: One
B: Two
C: Three
D: Four

Back 17

B: Two

Front 18

Chap 17 ques 17
One discount point is what percentage of the loan amount
A: 1/8%
B: 1/4%
C: 1/2%
D: 1%

Back 18

D: 1%

Front 19

Chap 17 ques 18
If the sale of a property is more than $50,000, the maximum FHA loan a borrower can get is ________per cent of the sale price?
A: 95%
B: 97%
C: 97.75%
D: 98.75%

Back 19

C: 97.75%
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chap 17 - 7
III FILLING OUT THE COST TO BUYER FORM
B: Loan Amount
The maximum FHA loan is 97.75% of the sales price above $50,000 and (98.75% below $50,000)

Front 20

Chap 17 ques 19
The purchaser who closes on a loan on 10/2 will have her first payment due on_______?
A: 11/1
B: 11/10
C: 12/1
D: 12/10

Back 20

C: 12/1
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Chap 17 - 2
II. MATH STEPS TO FOLLOW WHEN ESTIMATING PURCHASERS COSTS
A. Determining the date of the Purchaser's first monthly payment.
...If the closing is on the 1st of the month. the next payment will be due on the 1st of the next month. BUT,
if the closing is on any other day, the payment will not be due on the follwowing month, but will skip a month.

Front 21

Chap 17 ques 20
The purchaser will pay MIP on what type of loan?
A: 80% Conventional
B: 90% conventional
C: FHA
D: VA

Back 21

C: FHA
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chap 17 - 3 & 4
C: Calculating the Cost of Mortgage Insurance (PMI - Conventional Loans * MIP - FHA Loans.)
For the MIP required for FHA loan program there are no payment options. The borrower pays:
* 1.5% of the loan amount at closing, plus
* A monthly increment calculated by multiplying the loan amount by 0.5% and dividing by 12

Front 22

Chap 17 ques 21
Which of the follwoing statements regarding the transfer tax is true:
A: The transfer tax is a credit of the buyers cost estimate.
B: The tax is calculated at a rate of 10 cents per hundred dollars of the new loan amount
C: The transfer tax is based on the sale price minus any assumed loan amt.
D: The transfer tax is usually prorated between seller and buyer

Back 22

C: The transefer tax is based on the sale price minus any assumed loan amount.
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Front 23

Chap 17 ques 22
All the following items are usually prepaid except:
A Interest on a mortgage loan
B: hazard insurance premiums
C: The tenants rent
D: security deposits

Back 23

A: Interest on the mortgage loan.

Front 24

Chap 17 ques 23
Whjich is not included in the monthly payment for a condominium loan?
A: hazard insurance
B: Principal
C: Interest
D: Property Tax

Back 24

A: Hazard insurance
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Front 25

Chap 17 ques 24
If a buyer wants to purchase some personal property from the seller, this would show on the Purchasers cost estimate as ________________?
A: Debit to the buyer
B: credit to the buyer
C: debit to the seller
D: credit to the seller

Back 25

A: Debit to the buyer

Front 26

Chap 17 ques 25
Unpaid property tax would show on the purchasers cost estimate as a:
A: debit to the buyer
B: credit to the buyer
C: debit to the seller
D: credit to the seller

Back 26

B" Credit to the buyer