Free Kentucky Finance Practice Test — LicenseIQ

Question 1

A home sells for $389,000. The seller pays a 5% commission, a $212,600 mortgage payoff, $1,200 attorney fee, $1,950 transfer tax and $600 in other costs. What are the seller's net proceeds?

Accepted Answer

Commission = $389,000 x 0.05 = $19,450. Total costs = $19,450 + $212,600 + $1,200 + $1,950 + $600 = $235,800. Net = $389,000 - $235,800 = $153,200.

Question 2

Using an amortization factor of 4.77415 per $1,000 (30 years at 4%), what is the monthly principal and interest payment on a $250,000 loan?

Accepted Answer

$250,000 / $1,000 = 250; 250 x 4.77415 = $1,193.54.

Question 3

Under TRID, the borrower must receive the Closing Disclosure at least how long before loan closing?

Accepted Answer

The Loan Estimate is due within 3 business days after application, and the Closing Disclosure at least 3 business days before closing.

Question 4

Which statement about FHA-insured loans is correct?

Accepted Answer

FHA loans are made by approved lenders and insured by FHA, with down payments as low as 3.5% and mortgage insurance premium (MIP) required on all FHA loans, for 1-4 family homes.

Question 5

A home is worth $410,000. The owner owes $238,500 on a first mortgage and $41,200 on a home equity loan. What is the owner's equity?

Accepted Answer

Equity = value - all loan balances = $410,000 - ($238,500 + $41,200) = $410,000 - $279,700 = $130,300.

Question 6

The mortgage clause that allows the lender to declare the entire balance due immediately upon the borrower's default is the:

Accepted Answer

The acceleration clause lets the lender call the entire debt due on default. The alienation (due-on-sale) clause is triggered by transfer of the property.

Question 7

The document issued by a VA-approved appraiser for a VA loan is the:

Accepted Answer

The VA appraiser issues a CRV. The Certificate of Eligibility establishes the veteran's entitlement before applying.

Question 8

A buyer purchases a $300,000 home with an 80% loan, pays 1 point on the loan, a $450 appraisal and $1,800 in title charges, and has already deposited $10,000 earnest money. How much must the buyer bring to closing?

Accepted Answer

Down payment = $60,000; 1 point = $240,000 x 0.01 = $2,400; total = $60,000 + $2,400 + $450 + $1,800 = $64,650; minus $10,000 earnest money = $54,650.

Question 9

Adding a new financing contingency to an existing sales contract is done by a(n) ____, while changing the existing closing date is done by a(n) ____.

Accepted Answer

An addendum ADDs new terms; an amendment changes existing terms. Both require agreement of both parties.

Question 10

A VA loan is:

Accepted Answer

VA loans are guaranteed (not insured) by the VA for eligible veterans and service members, often with no down payment, and only for a primary residence.

Question 11

Which loan is insured by the federal government and allows a low down payment?

Accepted Answer

FHA loans are insured by the Federal Housing Administration and permit down payments as low as 3.5%. Conventional loans are not government-backed.

Question 12

On the buyer's side of the closing statement, the earnest money deposit and the new mortgage loan are both:

Accepted Answer

Earnest money and loan proceeds are sources of funds that reduce what the buyer must bring, so they are buyer credits.

Question 13

A borrower paid $3,150 in points on a $210,000 loan. How many points were paid?

Accepted Answer

Points = cost / loan = $3,150 / $210,000 = 0.015 = 1.5 points (1 point = 1% of the loan).

Question 14

A conventional loan that exceeds the conforming loan limits set by the FHFA is called a:

Accepted Answer

Loans above the conforming limits cannot be sold to Fannie Mae/Freddie Mac and are non-conforming 'jumbo' loans, usually at higher rates.

Question 15

A lender's refusal to make loans in certain neighborhoods based on demographics is:

Accepted Answer

Redlining is denying loans or services to areas based on protected characteristics rather than the borrower's qualifications.

Question 16

A property has a first mortgage (recorded 2015), a judgment lien (2018), a mechanic's lien (2020) and unpaid property taxes. Which is paid FIRST from sale proceeds?

Accepted Answer

Real property tax liens take priority over all others regardless of recording date; other liens generally follow in order of recording.

Question 17

A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

Accepted Answer

LTV is applied to the LESSER of price or appraised value: $290,000 x 0.75 = $217,500. Using the $300,000 price ($225,000) is the common mistake.

Question 18

On an adjustable-rate mortgage, the interest rate after the initial period is determined by:

Accepted Answer

ARM rate = index + margin, subject to periodic and lifetime caps. In a 5/1 ARM the rate is fixed 5 years, then adjusts every year.

Question 19

A buyer purchases a $300,000 home with a $60,000 down payment. What is the loan-to-value (LTV) ratio?

Accepted Answer

Loan = $300,000 - $60,000 = $240,000; $240,000 / $300,000 = 80% LTV. (20% is the down payment percentage.)

Question 20

One discount point equals what percentage of the loan amount?

Accepted Answer

One point = 1% of the loan amount (not the purchase price), paid to lower the interest rate.

Question 21

A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

Accepted Answer

At 95% LTV the down payment is 5% of price. Price = $18,000 / 0.05 = $360,000; loan = $342,000.

Question 22

In the early years of a fully amortizing fixed-rate mortgage, the largest portion of each monthly payment goes toward:

Accepted Answer

Early payments are mostly interest; as the balance declines, more of each payment goes to principal.

Question 23

The periodic report a property manager gives the owner showing rents and other income collected and expenses paid for the period is the:

Accepted Answer

The income statement (P&L) summarizes income and expenses for the accounting period, typically monthly.

Question 24

Under 201 KAR 11:121 §3(5), the sales contract's financing provision must state:

Accepted Answer

The regulation requires the method of financing, the amount of any encumbrance, and whether the seller, a commercial institution, or another party underwrites it.

Question 25

A buyer pays $150,000 cash and assumes the seller's $90,000 mortgage. What transfer tax is due?

Accepted Answer

The base is the full actual consideration including liens: 150,000 + 90,000 = 240,000. 240,000 / 500 = 480 units, and 480 x $0.50 = $240.00.

Kentucky real estate finance practice test

1. A home sells for $389,000. The seller pays a 5% commission, a $212,600 mortgage payoff, $1,200 attorney fee, $1,950 transfer tax and $600 in other costs. What are the seller's net proceeds?

2. Using an amortization factor of 4.77415 per $1,000 (30 years at 4%), what is the monthly principal and interest payment on a $250,000 loan?

3. Under TRID, the borrower must receive the Closing Disclosure at least how long before loan closing?

4. Which statement about FHA-insured loans is correct?

5. A home is worth $410,000. The owner owes $238,500 on a first mortgage and $41,200 on a home equity loan. What is the owner's equity?

6. The mortgage clause that allows the lender to declare the entire balance due immediately upon the borrower's default is the:

7. The document issued by a VA-approved appraiser for a VA loan is the:

8. A buyer purchases a $300,000 home with an 80% loan, pays 1 point on the loan, a $450 appraisal and $1,800 in title charges, and has already deposited $10,000 earnest money. How much must the buyer bring to closing?

9. Adding a new financing contingency to an existing sales contract is done by a(n) , while changing the existing closing date is done by a(n) .

10. A VA loan is:

11. Which loan is insured by the federal government and allows a low down payment?

12. On the buyer's side of the closing statement, the earnest money deposit and the new mortgage loan are both:

13. A borrower paid $3,150 in points on a $210,000 loan. How many points were paid?

14. A conventional loan that exceeds the conforming loan limits set by the FHFA is called a:

15. A lender's refusal to make loans in certain neighborhoods based on demographics is:

16. A property has a first mortgage (recorded 2015), a judgment lien (2018), a mechanic's lien (2020) and unpaid property taxes. Which is paid FIRST from sale proceeds?

17. A buyer contracts to buy a home for $300,000, but it appraises at $290,000. The lender offers 75% LTV. What is the maximum loan?

18. On an adjustable-rate mortgage, the interest rate after the initial period is determined by:

19. A buyer purchases a $300,000 home with a $60,000 down payment. What is the loan-to-value (LTV) ratio?

20. One discount point equals what percentage of the loan amount?

21. A lender offers a 95% LTV loan. The buyer has $18,000 for the down payment. What is the maximum purchase price?

22. In the early years of a fully amortizing fixed-rate mortgage, the largest portion of each monthly payment goes toward:

23. The periodic report a property manager gives the owner showing rents and other income collected and expenses paid for the period is the:

24. Under 201 KAR 11:121 §3(5), the sales contract's financing provision must state:

25. A buyer pays $150,000 cash and assumes the seller's $90,000 mortgage. What transfer tax is due?

Sources