Free Virginia Finance Practice Test — LicenseIQ

Question 1

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 2

A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

Accepted Answer

When unpaid interest is added to principal, the balance grows - negative amortization. An interest-only loan pays all interest, so the balance stays flat.

Question 3

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 4

RESPA primarily governs:

Accepted Answer

RESPA requires disclosure of settlement (closing) costs on 1-4 family residential loans and prohibits kickbacks. Rate advertising falls under TILA.

Question 5

A short-term loan used to buy a new home before the borrower's current home sells is a:

Accepted Answer

A bridge loan 'bridges' the gap between buying and selling and is typically repaid within about 12 months when the old home sells.

Question 6

Under a land contract (contract for deed), during the payment period the buyer holds:

Accepted Answer

In an installment/land contract the buyer has equitable title and possession; the seller keeps legal title until the final payment.

Question 7

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 8

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 9

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 10

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 11

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 12

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 13

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 14

An agent tells a buyer he will show homes only if the buyer uses the agent's brother as mortgage broker. This is an illegal:

Accepted Answer

Conditioning one service on the purchase of another is a tying arrangement prohibited by antitrust law.

Question 15

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 16

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 17

In a mortgage, the borrower who pledges the property as security is the:

Accepted Answer

The mortgagor (borrower) gives the mortgage to the mortgagee (lender) in exchange for the loan.

Question 18

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 19

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 20

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 21

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 22

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 23

A buyer purchases a $275,000 home with an 80% LTV loan and pays 2.5 discount points. What do the points cost?

Accepted Answer

Loan = $275,000 x 0.80 = $220,000; points = $220,000 x 0.025 = $5,500. ($6,875 wrongly applies points to the price.)

Question 24

The required disclosure statement is hand-delivered to a buyer the day after ratification. The buyer has not settled, moved in, applied for a loan, or signed a waiver. How long does the buyer have to terminate?

Accepted Answer

Section 55.1-709 B gives the buyer the right to terminate within 3 days after hand or electronic delivery, or 5 days after the postmark if mailed, or sooner upon settlement, occupancy, a qualifying loan application, or a separate written waiver.

Question 25

A settlement agent needs only an update of the financial information on a resale certificate shortly before closing. How quickly must the association provide a financial update after written request?

Accepted Answer

Section 55.1-2311 C requires a financial update within 3 business days after written request. A full updated certificate is due within 10 days.

Virginia real estate finance practice test

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

2. A borrower's monthly payment does not cover the interest due, and the unpaid interest is added to the loan balance. This is:

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

4. RESPA primarily governs:

5. A short-term loan used to buy a new home before the borrower's current home sells is a:

6. Under a land contract (contract for deed), during the payment period the buyer holds:

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

8. 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?

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

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

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

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

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

14. An agent tells a buyer he will show homes only if the buyer uses the agent's brother as mortgage broker. This is an illegal:

15. 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?

16. 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) .

17. In a mortgage, the borrower who pledges the property as security is the:

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

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

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

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

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

23. A buyer purchases a $275,000 home with an 80% LTV loan and pays 2.5 discount points. What do the points cost?

24. The required disclosure statement is hand-delivered to a buyer the day after ratification. The buyer has not settled, moved in, applied for a loan, or signed a waiver. How long does the buyer have to terminate?

25. A settlement agent needs only an update of the financial information on a resale certificate shortly before closing. How quickly must the association provide a financial update after written request?

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