Principles Of Real Estate Finance! Trivia Quiz

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Quizzes Created: 21 | Total Attempts: 28,503

Questions: 15 | Attempts: 291 | Updated: Mar 21, 2023

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Principles Of Real Estate Finance! Trivia Quiz - Quiz

Principles of real estate finance! A lot of people look forward to owning a house one day and the mode of financing available for most people is getting a house through mortgage. There are some things that one should pay close attention when choosing a mortgage and the quiz below is perfect for testing out how well you understand them. Do give them a chance and see what new facts you may learn.

Questions and Answers

1.

Before the Great Depression of 1929-1939, it was possible to buy a house in the United States with as little as 5% down.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
Down payments of 40%-50% were common before the Great Depression.

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2.

The legal document through which a loan is obtained to purchase real property is called a mortgage.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
It is called a Note.

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1
0
3.

The document used to secure payment of the loan to buy a property is called a mortgage.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
A mortgage is a legal document that is used to secure payment of a loan that is taken out to purchase a property. This document serves as a guarantee to the lender that the borrower will repay the loan amount, and if the borrower fails to do so, the lender has the right to take possession of the property. Therefore, the statement that the document used to secure payment of the loan to buy a property is called a mortgage is true.

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4.

The mortgage represents a portion of the total value of the real estate that is expressed by the financial phrase "loan to value ratio" (the relationship between the loan and the value of the property).
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The explanation for the given correct answer is that the mortgage does represent a portion of the total value of the real estate, which is expressed by the loan to value ratio. This ratio shows the relationship between the loan amount and the value of the property. Therefore, it is true that the mortgage represents a portion of the total value of the real estate.

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5.

A mortgage is provided by lenders who charge interest for the use of the borrowed money to make a profit. The loan amount is known as the "principal".
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
A mortgage is a loan provided by lenders, and they charge interest on the borrowed money to make a profit. The loan amount, which is the money borrowed, is referred to as the "principal." This statement is true because lenders do charge interest on mortgages to earn a profit, and the borrowed amount is indeed called the principal.

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6.

Charging an excessively high rate of interest is known as gouging the buyer.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
This practice is known as "usury" and is illegal on some kinds of loans; however, there is no usury limit on most mortgage loans with the exception of some private lenders.

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7.

The mortgage application fee is a fee that is paid by the seller and is usually paid at settlement. The fee is refundable if a mortgage cannot be obtained.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
The mortgage application fee is paid by the borrower at the time of mortgage application and is usually non-refundable.

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8.

The mortgage origination fee is a fee to originate or obtain the mortgage. It is often referred to as "points". In real estate, the word "point" means percent.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The statement is true because the mortgage origination fee is indeed a fee that is charged to cover the costs of originating or obtaining a mortgage. It is commonly referred to as "points" in the real estate industry, and the term "point" represents a percentage.

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9.

Lenders require "private mortgage insurance" to provide insurance coverage for the amount of any unpaid mortgage balance if it is ever discovered there is a defective title of the real property owner. The policy is paid by the borrower but is issued to the lender as their beneficiary.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
Lenders require a "title insurance policy" to provide insurance coverage for the amount of any unpaid mortgage balance if it is ever discovered that there is a defective title of the real property owner.

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10.

Pledging of real property as collateral security while the borrower still retains possession and use of the property are called hypothecation. It is done as a precaution so that in the event the borrower fails to perform on the contract, such as the failure to make the mortgage loan payments on schedule the lender can institute a legal procedure known as a foreclosure to recover the balance of borrowed money.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
Hypothecation refers to the practice of pledging real property as collateral while the borrower still retains possession and use of the property. This is done as a precautionary measure in case the borrower fails to fulfill their contractual obligations, such as making mortgage loan payments on time. In such cases, the lender can initiate a legal procedure called foreclosure to recover the remaining borrowed money. Therefore, the statement is true.

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11.

An "amortized mortgage"is one in which regular payments consist only of interest. The loan principal is required to be paid at the end of a term loan in a large lump sum payment.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
The above is a description of a balloon mortgage. An amortized mortgage is one in which the regular periodic, payments have a portion of each payment that is first applied to pay the loan interest. The remaining portion of the loan payment is then used to reduce the loan amount known as the principal.

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12.

The change in the type of mortgage financing from term loans to amortized mortgages caused by the Great Depression contributed to a significant increase in real property ownership in the United States. Today, government statistics indicate that more than two-thirds of the population of the United States live in dwellings that are owned by the inhabitants, as opposed to renting.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The change in mortgage financing from term loans to amortized mortgages during the Great Depression led to an increase in real property ownership in the United States. This shift allowed more people to afford homes and led to a significant increase in the number of people who own their dwellings rather than renting. Government statistics today confirm that over two-thirds of the population in the United States are homeowners. Therefore, the statement "True" is correct.

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13.

The "alienation provision" in the mortgage indicates that if the real property on which the loan exists is sold, the borrower is required to pay off any remaining mortgage debt in full. FHA and VA mortgages always include this provision.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
The alienation provision is not used on FHA and VA mortgages as they allow their mortgages to be assumed.

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14.

All of the direct lenders that are available in the marketplace are collectively referred to as the primary mortgage market.
- A.
  
  True
- B.
  
  False
Correct Answer
A. True

Explanation
The statement states that all direct lenders in the marketplace are collectively referred to as the primary mortgage market. This means that the primary mortgage market includes all the direct lenders available in the marketplace. Therefore, the statement is true.

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15.

The most dominant buyer of mortgages from the primary mortgage market is the Federal National Mortgage Association, known commonly in financial markets as Freddie Mac.
- A.
  
  True
- B.
  
  False
Correct Answer
B. False

Explanation
The Federal National Mortgage Association is known as FANNIE MAE and is the most dominant buyer of mortgages from the primary mortgage market.

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Current Version
Mar 21, 2023

Quiz Edited by
ProProfs Editorial Team
Aug 02, 2011

Quiz Created by
Sseveland

Principles Of Real Estate Finance! Trivia Quiz

Before the Great Depression of 1929-1939, it was possible to buy a house in the United States with as little as 5% down.

The legal document through which a loan is obtained to purchase real property is called a mortgage.

The document used to secure payment of the loan to buy a property is called a mortgage.

The mortgage represents a portion of the total value of the real estate that is expressed by the financial phrase "loan to value ratio" (the relationship between the loan and the value of the property).

A mortgage is provided by lenders who charge interest for the use of the borrowed money to make a profit. The loan amount is known as the "principal".

Charging an excessively high rate of interest is known as gouging the buyer.

The mortgage application fee is a fee that is paid by the seller and is usually paid at settlement. The fee is refundable if a mortgage cannot be obtained.

The mortgage origination fee is a fee to originate or obtain the mortgage. It is often referred to as "points". In real estate, the word "point" means percent.

Lenders require "private mortgage insurance" to provide insurance coverage for the amount of any unpaid mortgage balance if it is ever discovered there is a defective title of the real property owner. The policy is paid by the borrower but is issued to the lender as their beneficiary.

An "amortized mortgage"is one in which regular payments consist only of interest. The loan principal is required to be paid at the end of a term loan in a large lump sum payment.

The "alienation provision" in the mortgage indicates that if the real property on which the loan exists is sold, the borrower is required to pay off any remaining mortgage debt in full. FHA and VA mortgages always include this provision.

All of the direct lenders that are available in the marketplace are collectively referred to as the primary mortgage market.

The most dominant buyer of mortgages from the primary mortgage market is the Federal National Mortgage Association, known commonly in financial markets as Freddie Mac.