Principles of Real Estate 2- Study Guide Flashcards

Principles of Real Estate 2- Study Guide Flashcards Is a benefit, but its value should not be over-sold, especially to the sellerA) Pre-approvalB) AppraisalC) Pre-qualificationD) Escrow C Also known as the Federal National Mortgage Association (FNMA), plays a vital role in financing mortgages and increasing home ownership opportunities in the United States. It began in 1938 as an agency of the federal government and was created to bring stability to the U.S.housing market. Is is the largest investor in home mortgages today.A) Fannie MaeB) Freddie Mac A *Government's right in land-PETE*Also referred to as property taxes, which means according to value. The higher the value of a parcel of land, the higher the taxes.Property taxes create thehighest priority lienagainst property. Unpaid taxes are an automatic lien, and at foreclosure will always be paid first. If property taxes are not paid, the property will be seized and sold.A) EasementsB) Inverse condemnationC) Ad valorem taxesD) Variance C Who is the largest investor of Secondary Mortgage Market?A) Freddie MacB) Fannie Mae B *Government's right in land-PETE*Assessed Value (ad valorem) is property value for tax purposes. Tax rate times assessed value equals the tax payment. Rates can be per _______ or per ________, calledmills.A) 10/100B)

100/1,000C) 1,000/10,000D) 10,000/100,000

B Principles of AppraisalsWhen it is prudent to improve property when the value added by the improvement exceeds the cost of the improvement. This principle would suggest that an owner should not "over-improve" a property.A) Principle of SubstitutionB) Principle of ConformityC) Principle of Increasing & Decreasing ReturnsD) Principle of RegressionE) Principle of Competition C When a buyer wants to purchase a residential property in need of repair or modernization, the buyer usually has to obtain financing first to purchase the dwelling, additional financing to do the rehabilitation construction, and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. The FHA 203(k) program provides for the purchase and rehabilitation

of buildings with up to four living units.A) Collateral-Dependent Loans (Hard-Money Loans)B) Wraparound MortgageC) Construction to PermanentD) Open-End Mortgage C Which of the following is an advantage when choosing an

Adjustable Rate Mortgage (ARM):A) Lower interest rate up

front so more are able to qualifyB) Afford a higher loan amountC) Falling ratesD) All of the above D Is an insurance policy used in FHA loans if your down payment is less than 20%. The rate you pay for annually

depends on the length of the loan and the loan-to-value (LTV) ratio.A) Renters InsuranceB) Private Mortgage Insurance (PMI)C) Mortgage Insurance Premium (MIP)D) Dwelling Insurance C

The best choice for a buyer that plans to sell sooner rather than later. Might also be an ideal product for the borrower that believes that the trend in mortgages rates is downward. Desirable for a borrower that wants to qualify at a lower initial rate to give him or her more purchasing power. Most widely used alternative loan program. Will pick a certain term (15, 20, 30/yr term)A) Fixed Rate MortgageB) Adjustable Rate Mortgage (ARM)C) Blanket MortgageD) Package Mortgage B The appraiser's estimate of the age of the house based upon its ongoing maintenance and upgrades. A house may be well-maintained and been updated over the years; therefore, the appraiser might determine that a 20-year-old house might have an age of 10.A) DepreciationB) Chronological AgeC) Effective Age C *Principles of Appraisals*States that mixed land use should result in the maximum value for all properties involved. A master-planned community is an excellent example of this principle.A) Principle of SubstitutionB) Principle of ConformityC) Principle of BalanceD) Principle of RegressionE) Principle of Competition C Real Estate Transaction TerminologyThe process of formulating, executing, and delivering all documents required by a permanent investor, the disbursement of the mortgage funds, and providing for the protection of the investor's security. The required documentation for each closing is determined by the lender or investor in the transaction.A) FundingB) ServicingC) ClosingD) OriginationE) Consummation E Beneficial to some borrowers, especially those who do not plan to stay in their homes for an extended period. Is a partially amortized loan with a final payment substantially larger than the others. The benefit of this type of loan is alower interest rate. The main disadvantage is thehigh cost of refinancing.A) Blanket MortgageB) Package MortgageC) Budget MortgageD) Balloon Loans D If the loan limits the loan-to-value ratio to a maximum of 90%, and the appraised value of the home is $100,000, the maximum loan amount permitted under that program is

$90,000.A) $80,000B) $90,000C) $100,000D) $110,000

B The monthly house payment includes principal, interest, taxes, and insurance (known as PITI). The tax and insurance portion of the payment is held in a special account called an escrow account. It is also called an impound, trust, or reserve account.A) Blanket MortgageB)