Free Vermont Finance Practice Test — LicenseIQ

Question 1

A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

Accepted Answer

RESPA prohibits kickbacks and unearned referral fees between settlement service providers and real estate licensees, even if disclosed.

Question 2

Under the Truth in Lending Act (Regulation Z), which phrase in an ad is a 'trigger term' requiring full credit disclosures?

Accepted Answer

Specific terms like the down payment amount, number or amount of payments, finance charge or repayment period trigger full disclosure (including APR). General statements do not.

Question 3

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 4

A chronological summary of all recorded documents affecting a property's title, such as deeds, mortgages and liens, is a(n):

Accepted Answer

The abstract summarizes the recorded history; the chain of title lists successive owners; an attorney's opinion of title evaluates it.

Question 5

A buyer purchases a home for $425,000 with a loan of $361,250. What is the LTV?

Accepted Answer

LTV = loan / price = $361,250 / $425,000 = 0.85 = 85%. (15% is the down payment percentage.)

Question 6

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 7

A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

Accepted Answer

USDA Rural Development loans serve eligible rural buyers who meet income limits, often with no down payment.

Question 8

A seller wants the buyer to take over her low-rate mortgage, but the mortgage contains an alienation clause. This clause allows the lender to:

Accepted Answer

An alienation (due-on-sale) clause lets the lender call the loan due upon transfer, preventing assumption without lender approval.

Question 9

A buyer pays $180,000 for a condominium that will be her principal residence (no special financing). What transfer tax is due, including any clean water surcharge?

Accepted Answer

The entire price falls in the first $200,000 tier: 0.5% × $180,000 = $900, and the surcharge does not apply to the first $200,000 of a principal residence. $2,646 wrongly applies the 1.47% combined rate.

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

A borrower pays $4,500 for 1.5 discount points. What is the loan amount?

Accepted Answer

Loan = cost of points / points as a percentage = $4,500 / 0.015 = $300,000.

Question 12

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 13

The reasonably probable use of a property that is legally permissible, physically possible, financially feasible and maximally productive is its:

Accepted Answer

Highest and best use is the use producing the greatest value that meets the four tests.

Question 14

Which document is recorded in the county records and makes the property collateral for a loan?

Accepted Answer

The mortgage creates the lien and is recorded. The promissory note is the borrower's personal promise to repay and is not recorded.

Question 15

Which federal law requires disclosure of the true cost of credit, including APR?

Accepted Answer

The Truth in Lending Act (Regulation Z) requires disclosure of finance charges and the APR. RESPA covers settlement costs.

Question 16

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 17

Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

Accepted Answer

PMI protects the lender and is generally required when the borrower puts down less than 20% (LTV over 80%).

Question 18

On a $250,000 loan, how much is 2 discount points?

Accepted Answer

1 point = 1% of the loan. 2 points = 0.02 x $250,000 = $5,000.

Question 19

A lender approves a $276,000 loan and the buyer wants to keep an 80% LTV. What is the maximum purchase price?

Accepted Answer

Purchase price = loan / LTV = $276,000 / 0.80 = $345,000. ($220,800 wrongly multiplies by 0.80.)

Question 20

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 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

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 23

A buyer purchases a $350,000 home as a principal residence with conventional financing. What is the total property transfer tax including the clean water surcharge?

Accepted Answer

0.5% × $200,000 = $1,000; 1.25% × $150,000 = $1,875; surcharge 0.22% × $150,000 = $330; total $3,205. $4,375 applies 1.25% to the whole price, ignoring the lower first tier.

Question 24

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 25

A first-time buyer finances a $300,000 principal residence with a qualifying VHFA purchase money mortgage. What transfer tax, including surcharge, is due?

Accepted Answer

With qualifying VHFA, USDA Rural Development or VHCB-assisted financing, the first $250,000 is exempt, and the remaining $50,000 is taxed at 1.47%, which is $735. $1,735 wrongly applies the standard principal-residence tiers.

Vermont real estate finance practice test

1. A mortgage lender offers a salesperson $200 for every client referred. Under RESPA this is:

2. Under the Truth in Lending Act (Regulation Z), which phrase in an ad is a 'trigger term' requiring full credit disclosures?

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

4. A chronological summary of all recorded documents affecting a property's title, such as deeds, mortgages and liens, is a(n):

5. A buyer purchases a home for $425,000 with a loan of $361,250. What is the LTV?

6. 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?

7. A zero-down-payment government loan program aimed at low- and moderate-income buyers in eligible rural areas is offered through the:

8. A seller wants the buyer to take over her low-rate mortgage, but the mortgage contains an alienation clause. This clause allows the lender to:

9. A buyer pays $180,000 for a condominium that will be her principal residence (no special financing). What transfer tax is due, including any clean water surcharge?

10. A VA loan is:

11. A borrower pays $4,500 for 1.5 discount points. What is the loan amount?

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

13. The reasonably probable use of a property that is legally permissible, physically possible, financially feasible and maximally productive is its:

14. Which document is recorded in the county records and makes the property collateral for a loan?

15. Which federal law requires disclosure of the true cost of credit, including APR?

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

17. Private mortgage insurance (PMI) is typically required on a conventional loan when the down payment is:

18. On a $250,000 loan, how much is 2 discount points?

19. A lender approves a $276,000 loan and the buyer wants to keep an 80% LTV. What is the maximum purchase price?

20. 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?

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

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

23. A buyer purchases a $350,000 home as a principal residence with conventional financing. What is the total property transfer tax including the clean water surcharge?

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

25. A first-time buyer finances a $300,000 principal residence with a qualifying VHFA purchase money mortgage. What transfer tax, including surcharge, is due?

Sources