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2018 Tennessee Real Estate Exam Prep. Questions and Answers

Study Guide to Passing the Salesperson Real Estate License Exam Effortlessly



Fun Science Group


Copyright Fun Science Group 2018


Published by the Fun Science Group at Smashwords



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Real Estate Exam Professionals, Ltd.

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Disclaimer and Terms of Use: The Author and Publisher has strived to be as accurate and complete as possible in the creation of this book, notwithstanding the fact that he does not warrant or represent at any time that the contents within are accurate due to the rapidly changing nature of the Internet. While all attempts have been made to verify information provided in this publication, the Author and Publisher assumes no responsibility for errors, omissions, or contrary interpretation of the subject matter herein. Any perceived slights of specific persons, peoples, or organizations are unintentional. In practical advice books, like anything else in life, there are no guarantees of income made. This book is not intended for use as a source of legal, business, accounting or financial advice. All readers are advised to seek services of competent professionals in legal, business, accounting, and finance field.

First Printing, 2018

Printed in the United States of America

Table of Contents

Introduction

How to Use this Guide Effectively

Real Estate Vocabulary

Study Section

Real Estate Vocabulary Exam

Tennessee Real Estate Exam #1

Tennessee Real Estate Exam #2

Real Estate Math Exam

Test Section

Real Estate Vocabulary Exam

Tennessee Real Estate Exam #1

Tennessee Real Estate Exam #2

Real Estate Math Exam

Secrets to Passing the Real Estate Exam

Closing

Limits of Liability

Introduction



Thank you for purchasing this Real Estate Exam Prep. book. We hope you will learn a great deal from our study guide and that you will study well and pass your exam. It is our purpose to provide you with the most up to date information for your state real estate exam. We have made every effort to present this material as the closest possible example to what you will see on your actual state exam. At times, it will appear to be exactly what you will see on the exam. We have tried very hard to make this book as error and typo free as possible. However, we are not without our faults. Real estate exam material and the real estate exams change rapidly and we are continuously updating this book as these changes occur. You may find a typo here and there, but do not be alarmed. We assure you that if you find one, it will be obvious and it will not prevent you from being able to tell what the correct answer is.

You will find that after you have studied this material as instructed in the How to Use this Guide Effectively, you will discover that this is all you need to pass the real estate exam. There are many real estate schools out there such as Allied Real Estate School, Anthony Real Estate School and Kaplan that, although they are good schools, also offer exam cram or exam preparation materials, but are extremely overpriced. Their materials can cost into the $100 and $300 ranges and provide a lot of extra “fluff” material that will not help you pass the exam and will waste your time. This book offers all the same materials in a condensed and precise manner with no fluff. Once you have taken the department of real estate certified classes and passed them, qualified to for a state exam date then you do not need those classroom materials anymore. All you will need are the answers to the state and national real estate exam questions. Study those, nothing else, memorize them, and you will pass your exam on the 1st try. There is no need to buy expensive materials from other schools, no need to sit in live exam cram courses, and there is no need for the Real Estate Exam for Dummies books. We have been offering this material to thousands of licensees for over 10 years with a tremendous amount of positive reviews and feedback.

Please be aware that the materials in this book including any bonus item you have received with this book are copyrighted. No part of this book in part or in whole may be duplicated, distributed or resold without consent of the publishers. Our staff actively searches the internet everyday for sales of real estate media on thousands of websites and online auctions. If our program is found being copied, distributed or resold we will prosecute to the fullest extent of the law.

How To Use This Guide Effectively



Here you will find tried and true steps to help you use this guide effectively and to get the best results while minimizing your study time. Please understand that as you go through the real estate questions we have prepared for you, you may come across a few that you have never seen before. Do not be alarmed. These are questions that are on the state exam, but were never given to you in the real estate class you took or in your class textbooks. This is why there is such a high failure rate for the real estate exam. The actual questions on the state or national real estate exams are NOT created by the same agency that created the college courses or text books. These college courses are designed by regional college accreditation agencies and the state real estate exams are created by the individual state’s department of real estate or real estate commissions. It is very frustrating, we know. That is why there publishers like us who create exam cram courses and applications to “bridge the gap” of knowledge for the real estate exams.



STEP 1: Read and understand the VOCABULARY section first. These are very important terms. The key to successful knowledge of real estate is understanding and knowing the vocabulary used. Review them until you are confident to go onto the questions. Do not continue to the questions until you know these terms well.



STEP 2: Now go to the STUDY SECTION and read all the real estate questions with their correct answers and explanations in each exam. There are a lot of questions. Pace yourself and allow time to understand and memorize the correct answers.



STEP 3: Go back to the VOCABULARY section and review. Again, they are VERY important. You must know these forwards and backwards.



STEP 4: Repeat step 2 until you feel you are scoring 90% or better. Then review the VOCABULARY section again.



STEP 5: Now begin the MATH only portion of the STUDY SECTION. Read the questions with the answers and explanations until you have mastered them just as you did with the regular real estate questions. Make sure you set aside a separate time of the day to ONLY study the math. The reason for this is that the analytical/math function of the human brain works on math problems from different areas of the brain than word problems. When studying it takes approx. 10 min. for the brain to fully switch to a pure analytical/math function. If you are studying word problems and math problems in the same study session, you will be wasting a lot of time and overworking your brain. Time is key here, especially when it comes to the day of the exam, more about that later.



STEP 6: Repeat the MATH ONLY portion in the STUDY SECTION until you feel you are scoring at least 90% or better.



STEP 7: Now you are ready to go on to the TEST SECTION of this book. These questions will simulate what you will find on the actual state exam. You will have a limited time to complete the exam. Set a timer to the amount of time that your state allows for you to complete the state exam. Begin taking one of the exams and write your answers on a blank sheet of paper. When you are finished, check your answers with the correct answers shown in the same exams from the STUDY SECTION and score yourself. Now continue to Step 8.



STEP 8: Did you score 90% or better? If so, congratulations! You are ready to take the actual state exam and pass on your first try. If you did not score 90% or better, review the questions you missed using the STUDY SECTION. Study them, and retake the corresponding exam in the TESTING SECTION. Continue doing this and review the Vocabulary, if needed, until you are scoring 90% or better.



IMPORTANT!!!

REMEMBER THIS ON THE DAY YOU TAKE YOUR STATE EXAM…



DO NOT ANSWER, OR EVEN READ, THE FIRST 5 QUESTIONS OF THE EXAM. DO THOSE SECOND TO LAST AND ANY MATH RELATED QUESTIONS, VERY LAST!!!



Write the numbers to these questions on a piece of paper to remember to do them later. The reason is that they have placed the hardest questions in the first 5 spots to distract you, make you nervous and frustrated while taking the test. So, do those just before doing the math questions. Do the math questions very last because as we explained earlier, psychologically it takes the brain about 5-10 minutes to go from comprehensive thinking to analytical mathematical thinking. You only have a limited amount of time to complete the real estate exam. Therefore, your time will be very valuable. Do not leave any question unanswered. An unanswered question will be scored as a wrong answer.

Be sure to read the section “Secrets to Passing the Real Estate Exam” this section was developed by ex-real estate exam proctors. It will give you more detailed steps and inside information on how to use the above method on the day of your exam. It will also show you how to answer a question correctly even if you have completely forgotten the answer.



Good luck and study well!

Real Estate Vocabulary



Due to the length of this Real Estate Glossary, we have included it as a link below. Please understand these are general real estate terms used in almost every state. This is here for review purposes and reference only.

http://www.realestateabc.com/glossary/



You may also download a PDF version here:

http://tinyurl.com/realestatevocab

Study Section



In this section you will have the Real Estate Vocabulary Exam, Tennessee Real Estate Exam and Real Estate Math Exam. Read through all the questions in each exam according to the How to Use this Guide Effectively chapter and ONLY look at the correct answers in each exam. Start with the Vocabulary Exam and read question number one and then read ONLY the correct answer immediately. Continue to do this for each question until you have read all the questions in the first exam. If you go through each exam 3-4 times in this manner, you will then be able to recognize the correct answer right away when it comes to taking the actual exam. If your reading device has the ability to highlight the correct answer in each question, please utilize this feature. It will make it a little easier each time when reading through the exams in this section.

Real Estate Vocabulary Exam



Please understand these are general real estate terms used in almost every state. This is here for practice and review purposes only. Some terms may not be on your exam.



1. Which of the following describes the term “appreciation”?

A. Kind words expressed to someone about something they did
B. An increase in the value of property
C. An item of value owned by an individual
D. None of the above

Answer:
B. Appreciation is the increase in the value of a property due to changes in market conditions, inflation, or other causes.


2. When ownership of a mortgage is transferred from one company or individual to another, it is called

A. an assumption
B. an assignment
C. an assessment
D. all of the above

Answer:
B. When ownership of a mortgage is transferred (assigned) from one company or individual to another, it is called an assignment.



3. A mortgage loan which requires the remaining balance be paid at a specific point in time is called a/an

A. balloon mortgage
B. early due mortgage
C. mortgage of convenience
D. promissory note

Answer:
A. A mortgage loan that requires the remaining principal balance be paid at a specific point in time is a balloon mortgage.


4. The following reason accounts for why bridge loans are not used much anymore:

A. More second mortgage lenders now will lend at a high loan to value
B. Sellers would rather accept offers from Buyers who have already sold their property
C. Neither A or B
D. Both A and B

Answer:
D. Bridge loans are not used much anymore because more second mortgage lenders now will lend at a high loan to value and sellers often prefer to accept offers from buyers who have already sold their property.


5. A title which is free of liens or legal questions as to ownership of the property is called a __________ title.

A. good
B. cloudy
C. clear
D. free

Answer:
C. A title free of liens or legal questions as to ownership of the property is called a clear title. It is clear because there can be no challenges made to its legality.


6. What is the collateral in a home loan?

A. The property itself
B. A person’s good name
C. The amount of savings a person has
D. The current automobile the person owns

Answer:
A. The property itself is the collateral, and the borrower risks losing it if he does not repay according to the terms of the mortgage or deed of trust.

7. The adjustment date on an adjustable-rate mortgage is


A. the date the interest rate changes
B. the date the stock market goes up
C. 30 days from the date the mortgage was taken out
D. all of the above

Answer:
A. The adjustment date is the date the interest rate changes (adjusts).


8. What is the deposit made by a potential buyer to show he is serious about buying a house called?

A. Serious money deposit
B. Earnest money deposit
C. “Nothing ventured, nothing gained” deposit
D. Down payment

Answer:
B. The deposit made by a potential buyer to show they are in earnest about purchasing a house is called an earnest money deposit.

9. A right-of-way which gives persons other than the owner access to or over a property is known as an

A. easement
B. ingress
C. egress
D. none of the above

Answer:
A. An easement is a right-of-way to persons other than the owner and gives them legal access.


10. Which best describes a “subdivision”?

A. Houses in the same neighborhood similar in style and size
B. A housing development created by dividing a tract of land into individual lots
C. A development which is “substandard”
D. None of the above

Answer:
B. A subdivision consists of individual lots created from a larger tract (subdivided) and are offered for sale or lease.

11. When someone contributes to the construction or rehabilitation of a property with labor or services rather than cash, that contribution is called

A. a personal contribution
B. sweat equity
C. a big help to the contractors
D. toil and labor

Answer:
B. Sweat equity is the contribution to the construction of or rehabilitation of a property in the form of labor or services rather than cash.

12. A two-step mortgage is defined as


A. an adjustable rate mortgage with one interest rate for the first five or seven years and a different rate for the remainder of the term.
B. a mortgage which is both adjustable and fixed
C. a mortgage which is named after a dance step
D. all of the above

Answer:
A. A two-step mortgage starts out with one rate for the first five or seven years and then changes to a different rate for the remainder of the term of the mortgage amortization.

13. A legal document evidencing a person’s right to or ownership of a property is called a
:

A. quitclaim deed
B. title
C. yearly lease
D. accurate appraisal


Answer: B. A title is a legal document evidencing a person’s right to or ownership of a property.

14. If you were buying a house that included furnishings, you would receive a written document transferring title to the personal property. This document is called a/an


A. title
B. deed
C. bill of sale
D. evidence of payment

Answer:
C. A bill of sale is a written document that transfers personal property from one owner to another.

15. An oral or written agreement that is binding in a court of law is called a:

A. gentlemen’s agreement
B. contract
C. business deal
D. promissory note

Answer:
B. A contract can be oral or written and is binding in a court of law.

16. The part of the purchase price of a property that the buyer pays in cash and does not finance with the mortgage is called the

A. deposit
B. second mortgage
C. down payment
D. deed of trust

Answer:
C. The down payment is the amount paid down in cash as the initial upfront portion of the total amount due. It is usually given in cash at the time of finalizing the transaction.

17. A female named in a will to administer an estate is called an


A. executor
B. executrix
C. individual representative
D. able inheritor

Answer:
B. The female executor named in a will to administer an estate is called an executrix.

18. The greatest possible interest a person can have in real estate is called


A. fee complex
B. fee simple
C. no additional fees
D. ownership

Answer:
B. The greatest possible interest a person can have in real estate is called fee simple.

19. Required for properties located in federally designated flood areas, this type of insurance compensates for physical property damage resulting from flooding. It is called


A. water damage insurance
B. hurricane insurance
C. there’s no such thing
D. flood insurance

Answer:
D. Flood insurance is required in federally designated flood areas and does compensate for physical property damage resulting from flooding.

20. The following is true of a government loan:

A. It is guaranteed by the Department of Veterans Affairs (VA)
B. It is guaranteed by the Rural Housing Service (RHS)
C. It is insured by the Federal Housing Administration (FHA)
D. All of the above

Answer:
D. Government loans are either insured by FHA, guaranteed by VA or RHS. Mortgages that are not government loans are called conventional loans.

21. The person conveying an interest in real property is called

A. the buyer
B. the grantee
C. the grantor
D. the mortgagor

Answer:
C. The grantor is the person conveying an interest in real property to another party.


22. Insurance that covers in the event of physical damage to a property from fire, wind, vandalism, or other hazards is called

A. act of God insurance
B. hazardous insurance
C. hazard insurance
D. there is no such insurance

Answer:
C. Insurance covering physical damage to a property from fire, wind, vandalism, or other hazards is called hazard insurance.

23. A liquid asset is


A. an asset which is not in solid form
B. an asset which cannot be frozen
C. a cash asset or an asset easily turned into cash
D. an asset that is hard to get to

Answer:
C. A liquid asset is either cash or something easily turned into cash.

24. Another term for the lender in a mortgage agreement is the


A. banker
B. mortgagee
C. mortgagor
D. private mortgage company

Answer:
B. The mortgagee is the lender.

25. If you are buying a house and asking the Seller to provide all or part of the financing, you are asking for _________ financing.

A. special
B. owner
C. personal
D. non-bank

Answer:
B. When the Seller provides all or part of the financing it is called owner financing.

26. A point is


A. the part of the pen you sign a contract with
B. a score in a basketball game
C. the reason for telling the story
D. 1% of the amount of the mortgage

Answer:
D. A point is 1% of the amount of the mortgage.

27. What does a power of attorney grant someone?


A. The ability to attend law school
B. Complete or limited authority on behalf of someone else
C. Complete control over which medical facility someone uses
D. The right to inherit an estate

Answer:
B. A power of attorney derives power from a legal document and grants someone complete or limited authority on behalf of someone.

28. The principal is


A. the amount borrowed or remaining unpaid
B. part of the monthly payment that reduces the remaining balance of a mortgage
C. an ethic or value
D. both A and B

Answer:
D. The principal is the amount borrowed or remaining unpaid, as well as the part of the monthly payment that reduces the remaining balance of a mortgage.

29. A promissory note is


A. a written promise to repay a specified amount over a specified period of time
B. an oral promise to repay a specified amount over a specified period of time
C. a note passed back and forth in class
D. a note you deliver to another telling them of your intentions

Answer:
A. A promissory note is a written promise to repay a specific amount over a specified period of time.

30. Which of the following best describes a real estate agent?


A. A licensed person who negotiates and transacts the sale of real estate
B. The owner of a real estate firm
C. A person who negotiates and transacts the sale of real estate but is not licensed
D. A person who sells both property and insurance

Answer:
A. A real estate agent is a licensed person who negotiates and transacts the sale of real estate.

31. When does an assumption take place?


A. When someone believes something and it turns out to be true
B. When the buyer assumes the seller’s mortgage
C. When the seller assumes the buyer’s mortgage
D. All of the above

Answer:
B. When the buyer assumes the seller’s mortgage is a transaction called an assumption.


32. A legal document conveying title to a property is called a/an

A. sales contract
B. option to purchase
C. deed
D. contract for deed

Answer:
C. A deed is a legal document conveying title to property.

33. If you have a loan and transfer the title to another individual without informing the lender, it is likely that the lender will demand payment of the outstanding loan balance. He is able to do this because of a clause in your mortgage called the


A. due on demand clause
B. acceleration clause
C. amortization schedule
D. both A and B

Answer:
B. An acceleration clause allows the lender to demand payment, most commonly if the borrower defaults on the loan or transfers title to someone without informing the lender.

34. The most common type of bankruptcy is called


A. Chapter 11 bankruptcy
B. Chapter 11 no asset bankruptcy
C. Chapter 7 no asset bankruptcy
D. Chapter 7 bankruptcy

Answer:
C. The most common type for an individual is a “Chapter 7 No Asset” bankruptcy, which relieves the borrower of most types of debts.

35. Which of the following best describes a “broker”?


A. Someone who owns a real estate firm
B. Some real estate agents working for brokers
C. Someone who acts as an agent and brings two parties together for a transaction and earns a fee for this
D. All of the above

Answer:
D. A broker can own a real estate firm, work for another broker who owns the firm, broker loans in the mortgage industry, but basically is defined as anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee.

36. A normal contingency in a real estate contract would be that the


A. purchaser is able to obtain a satisfactory home inspection from a qualified inspector.
B. seller is allowed to come back and spend 2 weeks in the house each year
C. purchaser is able to have occupancy as soon as the sales contract is signed
D. seller is allowed to dig up some of the landscaping and take it with him

Answer:
A. A normal contingency in a sales contract would be that the purchaser is able to obtain a satisfactory home inspection from a qualified inspector. This condition has to be met before the contract is legally binding.

37. If you go to a bank or mortgage company to apply for a home, what type of mortgage would you be applying for?

A. Government
B. Conventional
C. American
D. Adjustable rate

Answer:
B. Home loans which are not VA or FHA are called conventional loans.

38. A report of someone’s credit history which is prepared by a credit bureau and used by a lender in the loan qualification process is called a

A. personal affidavit
B. credit card history
C. savings account history
D. credit report

Answer:
D. A report of an individual’s credit prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness is called a credit report.

39. If you have not made your mortgage payment within 30 days of the due date, the mortgage is considered to be in


A. arrears
B. default
C. trouble
D. bankruptcy

Answer:
B. Failure to make the mortgage payment within a specified period of time, usually 30 days for first mortgages or first trust deeds, causes the loan to be in default.

40. A term used by appraisers to estimate the physical condition of a building. It may be different from the building’s actual age.


A. Estimated age
B. Longevity
C. Preferred age
D. Effective age

Answer:
D. An appraiser’s estimate of the physical condition of a building is called effective age. Its actual age may be shorter or longer than the effective age.

41. The difference between the fair market value of a property and the amount still owed on the mortgage and other liens is the owner’s financial interest in the property and is called his


A. equity
B. balance due
C. indebtedness
D. none of the above

Answer:
A. A homeowner’s financial interest in a property is called his equity. It is the difference between fair market value and what is still owed on the mortgage and any other liens.

42. You put in a new driveway to your property, but in the process the paving goes across your property line onto your neighbor’s property a few inches. This is called an

A. illegal driveway
B. extra benefit for your neighbor
C. encroachment
D. easement

Answer:
C. An improvement that intrudes illegally on another’s property is called an encroachment. An easement would be a LEGAL intrusion.

43. A government loan that is not a VA loan would be a/an

A. FHA mortgage
B. FDA mortgage
C. This type loan does not exist
D. ARM mortgage

Answer:
A. A mortgage which is insured by the Federal Housing Administration (FHA) and is the other type of government loan besides a VA loan is an FHA mortgage.

44. If you convey an interest in real property to a relative, that person is known as the


A. receiver
B. mortgagor
C. grantee
D. lucky relative

Answer:
C. The person to whom an interest in real property is conveyed is the grantee.


45. You decide you want to buy a boat and you want to borrow against the equity in your home. You would get a mortgage loan up to a specified amount which is in second position to your first mortgage. This arrangement is called a

A. perfectly acceptable way to buy a boat
B. leverage against your house
C. home equity line of credit
D. line of credit for personal purposes

Answer:
C. A mortgage loan, usually in second position, which allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount, is known as a home equity line of credit.

46. You are your sister are joint tenants in a home your mother left you. Your sister has three children in her will and you have one. If she dies first, who does the property go to?


A. It is divided equally between her three children
B. It goes entirely to you
C. It is divided equally between her three children and your one
D. It goes into her estate

Answer:
B. In the event of death in joint tenancy, the survivor owns the property in its entirety.

47. What is the best description of a lien?


A. Something that doesn’t stand up straight in a house
B. Something that’s illegal
C. A legal claim against property that must be paid off when it’s sold
D. None of the above

Answer:
C. A lien, such as a mortgage or first trust deed, is a legal claim against a property that must be paid off when it is sold.

48. What is a lock-in?


A. A gated community which locks the gate at midnight
B. An agreement from a lender guaranteeing a specific interest rate for a specific time at a certain cost
C. What parents do with wayward children
D. A type of key available at most hardware stores

Answer:
B. A lock-in is a rate guaranteed by the lender for a certain period of time at a certain cost to the buyer.

49. The right of a government to take private property for public use upon payment of its fair market value. It is the basis for condemnation proceedings
.

A. Eminent domain
B. Governmental domain
C. Encroachment
D. Both A and B

Answer:
A. Eminent domain is the right of the government to take private property for public use upon payment of its fair market value.

50. A mortgage with a lien position subordinate to the first mortgage on a piece of property is called a


A. second mortgage
B. first subordinate mortgage
C. mortgage which isn’t legal
D. lien position mortgage

Answer:
A. A second mortgage is a mortgage with a lien position subordinate to the first mortgage.


51. An adjustable-rate mortgage, also known as an ARM is

A. one in which the interest rate is fixed over time
B. one in which the interest rate changes periodically, depending on index changes
C. one in which the interest rate changes periodically, depending on the stock market
D. a type of mortgage that the mortgagor can adjust himself

Answer:
B. An adjustable rate mortgage in one in which the interest rate adjusts periodically, according to corresponding fluctuations in an index.

52. A schedule that shows how much of each payment will be applied to principal and how much toward interest over the life of the loan is called a/n


A. amortization schedule
B. annual percentage rate
C. assumption
D. both A and C

Answer:
A. An amortization schedule is a table showing how much of each payment is applied to interest and how much to principal. It also shows the gradual decrease of the loan balance until it reaches zero.

53. The term applied to a mortgage in which you make the payments every two weeks, thereby making thirteen payments a year rather than twelve. This mortgage is paid off faster than a normal mortgage
.

A. Twice-monthly mortgage
B. Accelerated mortgage
C. Bi-weekly mortgage
D. None of the above

Answer:
C. A mortgage in which you make payments every two weeks instead of once a month is called a bi-weekly mortgage.

54. The limitation of how much an adjustable rate mortgage may adjust over a six-month period, annual period, and over the life of the loan is called
a

A. buy-down
B. high point
C. top stop
D. cap

Answer:
D. The limitation on how much the loan may adjust over a period of time and for the life of the loan is a cap.


55. When is a real estate transaction considered to be “closed”?


A. When the buyer has signed all the sales contracts
B. When the closing documents have been recorded at the local recorder’s office
C. When all the documents are signed and money changes hands
D. Both B and C.

Answer:
D. In some states “closed” means when the documents are recorded at the courthouse, and in others it is a meeting where the documents are signed and money changes hands.

56. A record of an individual’s repayment of debt, reviewed by mortgage lenders in determining credit risk is called a


A. credit affidavit
B. credit history
C. there is no such record
D. credit worthiness

Answer:
B. A record of an individual’s repayment of debt is called a credit history.

57. If you sell your property to a neighbor and the lender demands repayment in full, this means you have a _________________ in your mortgage.


A. seller pays all provision
B. buyer pays all provision
C. due-on-sale provision
D. none of the above

Answer:
C. A provision in a mortgage which allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage is called a due-on-sale provision.

58. The sum total of all the real and personal property owned by an individual at time of death is called their


A. estate
B. probate
C. will
D. all of the above.

Answer:
A. The sum total of all the real and personal property owned by an individual at time of death is called an estate.


59. If you list your property with a real estate agent and sign a written agreement that they are the only ones entitled to a listing for a specific time you have given them an

A. exclusive listing
B. exclusive right to advertise
C. exclusive right to show
D. inclusive listing

Answer:
A. A written contract giving a licensed real estate agent the exclusive right to sell a property for a specified time is called an exclusive listing.

60. Fair market value could be defined as


A. how much a property is worth, determined by a realtor’s market analysis
B. the most a buyer, willing, but not compelled to buy, would pay
C. the least a seller, willing, but not compelled to sell, would take
D. both B and C

Answer:
D. Fair market value is the highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.


61. If a lender agrees to make a loan to a specific borrower on a specific property, he has made a

A. decision to make the loan
B. statement that both the buyer and the property pass inspection
C. firm commitment
D. both B and C

Answer:
C. A lender’s agreement to make a loan to a specific borrower on a specific property is called a firm commitment.

62. If you buy a house and build cabinets into the wall, then sell that house, the cabinets stay because they have become a


A. type of attachment
B. fixture
C. part of the house
D. none of the above

Answer:
B. Personal property becomes real property when attached in a permanent manner to real estate and is called a fixture.

63. A home inspection is


A. a thorough inspection by a professional which evaluates the structural and mechanical condition of a property
B. not required by law
C. often a contingency in a contract that it turns out satisfactorily
D. both A and C

Answer:
D. A home inspection is a thorough inspection by a professional that evaluates the structural and mechanical condition of the property. A satisfactory home inspection is often a contingency.


64. An insurance policy which combines personal liability insurance and hazard insurance coverage for a dwelling and its contents is called

A. homeowner’s insurance
B. buyer’s insurance
C. errors and omissions insurance
D. all of the above

Answer:
A. Homeowner’s insurance combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

65. Which of the following is true of a lease-option?


A. It is an alternative financing option
B. Each month’s rent may also consist of an additional amount applied toward the purchase
C. The price is already set in the beginning
D. All of the above

Answer:
D. A lease-option is an alternative financing option that allows home buyers to lease a home with an option to buy. Each month’s rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.

66. In simple terms, a sum of borrowed money (principal) usually repaid with interest is called a


A. mortgage
B. loan
C. conventional loan
D. alternative mortgage

Answer:
B. A sum of borrowed money generally repaid with interest is simply a loan.

67. A property description which is recognized by law and is sufficient to locate and identify the property without oral testimony is known as the property’s


A. address
B. 911 address
C. legal description
D. identifying information

Answer:
C. A legal description describes the property and is recognized by law. It is sufficient to locate and identify the property without oral testimony.

68. The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable is called


A. its due date
B. maturity
C. end of the paper trail
D. delivery

Answer:
B. The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable is called maturity.

69. The person borrowing money in a mortgage agreement is called the


A. mortgagor
B. mortgagee
C. borrower
D. lessee

Answer:
A. The borrower in a mortgage agreement is called the mortgagor.


70. Which of the following is true about an origination fee?

A. It applies to both government and conventional loans
B. It is usually 1% on a government loan
C. It is usually 2% on a conventional loan
D. Both A and B


Answer:
D. Origination fees apply to government and conventional loans. A government loan origination fee is one percent of the loan amount, but additional points may be charged which are called “discount points”. In a conventional loan, the origination fee refers to the total number of points a borrower has to pay.

71. Which of the following falls under the term “personal property”?


A. A garage attached to a house
B. A sofa
C. The front porch of a home
D. The windows in a home

Answer:
B. Personal property is any property that is not part of the real property. A, C, an D are all parts of the house.

72. In some cases if a borrower pays off a loan before it is due he may encounter a penalty called a


A. penalty for early withdrawal
B. loan to value penalty
C. prepayment penalty
D. there is never a penalty for paying a loan off early

Answer:
C. A fee that may be charged to a borrower who pays off a loan before it is due is known as a prepayment penalty.

73. Which of the following statements is true regarding the term “pre-approval”?


A. It applies only to the property
B. It is done before the loan application is complete
C. It s a loosely used term
D. None of the above

Answer:
C. Pre-approval is a loosely used term generally taken to mean a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved.


74. PITI reserves applies to

A. a cash amount the borrower must have on hand after down payment and closing Costs.
B. an amount which is financed with the mortgage
C. both A and B
D. none of the above

Answer:
A. PITI reserves must equal the cash amount that the borrower would have to pay for principal, interest, taxes, and insurance for a predefined number of months.

75. Why would a public auction take place?


A. It’s a good way to buy property
B. To inform the public about property for sale
C. To help auctioneers get employment
D. To sell property to repay a mortgage in defaults

Answer:
D. A public auction is a meeting in an announced public location to sell property to repay a mortgage that is in default.

76. The term “realtor” applies to


A. any real estate agent who has passed the state exam
B. any real estate agent whose license is active
C. any real estate agent who is a member of a local real estate board affiliated with the National Association of Realtors.
D. any real estate agent who belongs to his local board

Answer:
C. A realtor is defined as an agent, broker, or associate who holds active membership in a local real estate board which is affiliated with the National Association of Realtors.

77. “Remaining term” refers to


A. the remaining school term for a real estate class
B. the original amortization term minus the number of payments that have been applied
C. the months left in a pregnancy
D. all of the above

Answer:
B. The remaining term applies to the original amortization term minus the number of payments that have been applied.


78. Which of the following is not true of a “revolving debt”?

A. It is a type of credit arrangement, like a credit card
B. It revolves around no interest for the first six months
C. A customer borrows against a pre-approved line of credit
D. The customer is billed for the amount borrowed plus any interest due

Answer:
B. Revolving debt is a credit arrangement, such as a credit card, which allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.


79. Which of the following does a survey not show?

A. Precise legal boundaries of a property
B. Location of improvements, easements, rights of way
C. Encroachments
D. Location of furnishings within the dwelling

Answer:
D. A survey is a drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.


80. What is meant by “seller carry-back”?

A. The seller physically carries his furnishings out of the house on the day of closing
B. The seller agrees to be on the mortgage with the buyer
C. the seller provides financing, often in combination with an assumable mortgage
D. The seller carries the principal, but not the interest on a loan

Answer:
C. A seller carry-back is an agreement in which the owner of a property provides financing, often in combination with an assumable mortgage.


81. A title company is one which

A. is usually not needed in a real estate transaction
B. is not called upon until one year after the sale is closed
C. specializes in examining and insuring titles to real estate
D. specializes in preparing deeds and deeds of trust

Answer:
C. A title company specializes in examining and insuring titles to real estate.

82. A state or local tax which is payable when title passes from one owner to another is called a


A. title tax
B. transfer tax
C. revenue stamps
D. real estate tariff

Answer:
B. State or local tax payable when title passes from one owner to another is called a transfer tax.

83. What is Truth-in-Lending?


A. A state law requiring lenders to fully disclose in writing all terms and conditions of a mortgage
B. A federal law requiring lenders to fully disclose in writing all terms and conditions of a mortgage
C. A local law requiring lenders to fully disclose in writing all terms and conditions of a mortgage
D. None of the above

Answer:
B. Truth-in-Lending is a federal law requiring lenders to fully disclose in writing the terms and conditions of a mortgage, including the annual percentage rate and other charges.

84. A VA mortgage


A. is a conventional mortgage for the state of Virginia
B. is guaranteed by the Department of Veterans Affairs
C. originates in Texas but ends up in Virginia
D. in available to anyone applying for a mortgage

Answer:
B. A VA mortgage is guaranteed by the Department of Veterans Affairs.

85. Which of the following is not true of “amortization”?


A. Over time the interest portion increases as the loan balance decreases
B. Over time the interest portion decreases as the loan balance decreases
C. Over time the amount applied to principal increases so the loan is paid off in the specified time
D. None of the above

Answer:
A. The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time the interest portion decreases as the loan balance decreases and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.


86. The valuation placed on property by a public tax assessor for taxation purposes is called

A. real value
B. fair market value
C. assessed value
D. predicted value

Answer:
C. The valuation placed on property by a public tax assessor for purposes of taxation is called assessed value.


87. If a veteran is eligible for a VA loan, he or she would receive a document from the VA called

A. Certificate of Authenticity
B. Certificate of Approval
C. Certificate of Met Requirements
D. Certificate of Eligibility

Answer:
D. A certificate of eligibility is a document issued by the Veteran’s Administration that certifies a veteran’s eligibility for a VA loan.

88. Which of the following usually earns the largest commissions in a real estate transaction?


A. Attorneys
B. Realtors
C. Loan officers
D. Home warranty companies

Answer:
B. Realtors generally earn the largest commissions, followed by lenders.

89. An unwritten body of law based on general custom in England and used to an extent in some states is called


A. common law
B. uncommon law
C. casual law
D. it isn’t law if it’s not written down

Answer:
A. An unwritten body of law based on general custom in England and used to an extent in some states is called common law.

90. If a real estate agent is trying to determine the market value of a property, one thing they would use is recent sales of similar properties or


A. neighbors’ estimates of the value of the property
B. records from several years back in the same neighborhood
C. comparable sales
D. sales they estimate to happen in the future

Answer:
C. Recent sales of similar properties in nearby areas and used to help determine the market value of a property are called comparable sales, or “comps.”


91. A person to whom money is owed is known as a

A. debtor
B. creditor
C. mortgagee
D. lender

Answer:
B. A creditor is a person to whom money is owed.

92. Discount points refer to


A. a system of figuring out how much the property will be discounted
B. points paid in addition to the one percent loan origination fee
C. usually only FHA and VA loans
D. both B and C


Answer:
D. This term is usually used in reference to only government loans (FHA and VA). Discount points are any points paid in addition to the one percent loan origination fee.


93. Which of the following can the Equal Credit Opportunity Act (ECOA) not discriminate against?


A. Race, color or religion
B. National origin
C. Age, sex, or marital status
D. All of the above

Answer:
D. ECOA is a federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.


94. An exclusive listing is one which gives a licensed real estate agent the exclusive right to sell a property

A. until it sells
B. until the owner takes it off the market
C. for a specified period of time
D. none of the above

Answer:
C. An exclusive listing gives a licensed real estate agent the exclusive right to sell a property for a specified period of time.


95. Which of the following is true about Fannie Mae’s Community Home Buyer’s Program?

A. It is an income-based community lending model
B. It has flexible underwriting guidelines to increase low to moderate income family’s buying power
C. Borrows who participate must attend pre-purchase home-buyer education sessions
D. All of the above

Answer:
D. Fannie Mae’s Community Home Buyer’s Program is an income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low or moderate income family’s buying power and to decrease the total amount of cash needed to purchase a home. Participating borrows are required to attend pre-purchase home-buyer education sessions.


96. The mortgage that is in first place among any loans recorded against a property and usually refers to the date in which loans are recorded, but not always, is called a

A. primary mortgage
B. first in line mortgage
C. first mortgage
D. both A and B

Answer:
C. The mortgage that is in first place is a first mortgage.


97. The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property is called a

A. takeover by the mortgage company
B. public auction
C. foreclosure
D. proceeds sale

Answer:
C. The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property is called a foreclosure.

98. Loans against 401K plans are


A. not allowed for down payments on property
B. an acceptable source of down payment for most types of loans
C. too great a risk for most people to take
D. only allowed if you’re accumulated $50,000 in the plan

Answer:
B. Some administrators of 401(k)/403B plans allow for loans against the monies you have accumulated in these plans. Loans against 401k plans are an acceptable source of down payment for most types of loans.


99. A late charge is

A. the penalty a borrower pays when a payment is late a stated number of days
B. usually put into play when the payment is fifteen days late on a first mortgage
C. usually not applicable to most people
D. both A and B


Answer:
D. A late charge usually kicks in after fifteen days on a first mortgage and is a penalty a borrower must pay.


100. A person’s financial obligations are known as his

A. payments
B. assets
C. liabilities
D. credit risks

Answer:
C. A person’s financial obligations are called liabilities and include long-term and short-term debt and any other amounts owed to others.


101. Which of the following is not true of annual percentage rate (APR)?

A. It is the note rate on your loan
B. It is not the note rate on your loan
C. It is a value created according to a government formula intended to reflect the true cost of borrowing and expressed as a percentage
D. It is always higher than the actual note rate on your loan

Answer:
A. Annual percentage rate is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. The APR is always higher than the actual note rate on your loan.


102. An individual qualified by education, training, and experience to estimate the value of real property and personal property and who usually works independently is called an

A. estimator of value
B. appraiser
C. on-site inspector
D. underwriter

Answer:
B. An appraiser is an individual qualified by education, training, and experience to estimate the value of real and personal property. Some work for lenders, but most are independent.

103. Which of the following best describes a “balloon payment”?


A. Payment delivered with a “bang”
B. First of many payments on a mortgage
C. The final lump sum payment due at the termination of a balloon mortgage
D. Payments which go higher and higher each year

Answer:
C. A balloon payment is the final lump sum payment due at the termination of a balloon mortgage.


104. When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a


A. refinance extra
B. cash-out refinance
C. home equity refinance
D. adjustable lump sum refinance

Answer:
B. A cash-out refinance is when a borrow refinances his mortgage at a higher amount than the current loan balance because he wants to pull our money for personal use.


105. A certificate of deposit is

A. the same as a down payment
B. a liquid asset
C. a deposit held in a bank paying a certain amount of interest to the depositor over a certain time
D. a deposit held in a bank which pays double the amount of normal interest over time

Answer:
C. A certificate of deposit is a time deposit held in a bank which pays a certain amount of interest to the depositor.


106. Common area assessments are

A. sometimes called Homeowners Association Fees
B. paid by individual owners of condominiums or planned unit developments
C. used to maintain the property and common areas
D. all of the above

Answer:
D. Common area assessments are also sometimes called Homeowners Association Fees and are paid by the individual owners of condos or planned unit developments and are used to maintain the property and common areas.

107. A short-term interim loan for financing the cost of construction is called a


A. flexible loan
B. convertible loan
C. construction loan
D. not a loan, but a promissory note

Answer:
C. A short-term interim loan for financing the cost of construction is called a construction loan. The lender makes payments to the builder at periodic intervals as the work progresses.


108. In simple terms, debt is

A. credit extended to someone
B. an amount owed to another
C. an amount owed to another with interest
D. repayable

Answer:
B. Debt is an amount owed to another


109. Which of the following is not true of the term “depreciation”?

A. It is a decline in the value of property
B. It is an accounting term showing the declining monetary value of an asset
C. It is a true expense where money is actually paid
D. Lenders add back depreciation expense for self-employed borrowers and count it as income

Answer:
C. Depreciation is not a true expense where money is actually paid. It is a decline in the value of property and an accounting term showing the declining monetary value of an asset. Lenders add back depreciation expense for self-employed borrowers and count it as income.

110. Which of the following would not be paid by escrow disbursements?


A. Real estate taxes
B. Hazard insurance
C. Mortgage insurance
D. Personal property taxes

Answer:
D. Personal property taxes are not a typical escrow disbursement, but real estate taxes, hazard insurance and mortgage insurance are.


111. The lawful expulsion of an occupant from real property is called

A. conviction
B. divorce from bed and board
C. eviction
D. there is no way to lawfully remove an occupant from real property

Answer:
C. The lawful expulsion of an occupant from real property is called eviction.


112. If you have a loan in which the interest rate does not change during the term of the loan you have a _____________ mortgage.

A. fixed-rate
B. conventional fixed-rate
C. owner financing
D. all of the above

Answer:
A. A loan in which the interest rate does not change during the term is called a fixed-rate mortgage.


113. The following is true of a Home Equity Conversion Mortgage (HECM).

A. It is also known as reverse annuity mortgage
B. You don’t make payments to the lender, the lender makes payments to you
C. It enables older homeowners to convert their equity into cash
D. All of the above

Answer:
D. Usually called a reverse annuity mortgage, this mortgage is unique in that instead of making payments to a lender, the lender makes payments to you, allowing older homeowners to convert their equity to cash. The loan does not have to be repaid until the borrower no longer occupies the property.

114. A written agreement between property owner and tenant stipulating the conditions under which the tenant may possess the property for a specified period of time and the payment due is called a/an


A. contract
B. option
C. lease
D. lease-option

Answer:
C. A written agreement between property owner and tenant laying out the terms of the agreement including payment and period of time is called a lease.

115. A lender is


A. the firm making the loan
B. the individual representing the firm making the loan
C. the individual offering owner financing
D. both A and B

Answer:
D. A lender is the firm making the loan or an individual representing the firm making the loan.

116. A margin is


A. a measurement of error
B. an artificial line not to write in on a loan document
C. both A and B
D. the difference between the interest rate and the index on an adjustable rate mortgage

Answer:
D. A margin is the difference between the interest rate and the index on an adjustable rate mortgage which remains stable over the life of the loan.


117. Which of the following is the best definition of a mortgage broker?

A. A mortgage company which originates loans, then places with other lending institutions
B. A mortgage company which originates loans, then keeps them in house
C. An individual which originates loans, then sells on the secondary market
D. Much like a real estate broker, receives a commission on loans

Answer:
A. A mortgage broker is a mortgage company which originates loans, then places with a variety of other lending institutions with whom they usually have pre-established relationships.


118. The term “note rate” refers to:

A. the speed at which a musician plays scales
B. the interest rate stated on a mortgage note
C. the interest rate stated on a personal loan
D. the rate at which a note is amortized

Answer:
B. Note rate means the interest rate stated on a mortgage note.

119. If you have not made your mortgage payment, you are likely to receive which of the following?


A. Notice of non-payment
B. A written eviction notice
C. Notice of default
D. A letter from an attorney

Answer:
C. You are likely to receive a formal written notice, called a notice of default, that a default has occurred and legal action may be taken.

120. A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan is called a


A. late payment
B. partial payment
C. “too little, too late” payment
D. a drop in the bucket

Answer:
B. A payment insufficient to cover the scheduled monthly payment on a mortgage loan is a partial payment, normally not accepted by the lender, but in times of hardship a borrower can make a request of the loan servicing collection department.


121. PITI stands for

A. principal, interest, taxes and insurance

B. principle, interest, taxes and insurance
C. prepayment, interest, tariff and insurance
D. none of the above

Answer:
A. PITI is principal, interest, taxes and insurance.


122. Which of the following describes “prepayment”?

A. An amount paid to reduce the interest on a loan before the due date
B. An amount paid to reduce the principal on a loan before the due date
C. Can result from a sale, owner’s decision to pay off the loan, or foreclosure
D. Both B and C

Answer:
D. A prepayment reduces the principal on a loan before the due date and can result from a sale, the owner’s decision to pay off the loan early, or foreclosure.

123. What is private mortgage insurance?


A. Mortgage insurance that is arranged for by the buyer privately

B. Mortgage insurance provided by a private mortgage insurance company
C. Insurance required for loans with a loan-to-value percentage in excess of 80%
D. Both B and C

Answer:
D. A prepayment reduces the principal on a loan before the due date and can result from a sale, the owner’s decision to pay off the loan early, or foreclosure.


124. If you were trying to buy a home you and the seller would need to sign a written contract called a/an

A. purchase agreement
B. down payment agreement
C. option to purchase
D. all of the above

Answer:
A. A written contract signed by buyer and seller stating the terms and conditions under which a property will be sold is called a purchase agreement.


125. What is a recorder?

A. A public official who keeps records of real property transactions
B. The county clerk
C. The registrar of deeds
D. All of the above.

Answer:
D. A recorder is a public official who keeps records of real property transactions in their area and is also known by the names “county clerk” and “registrar of deeds”.



126. The principal balance on a mortgage is

A. the outstanding balance of principal and interest
B. the outstanding balance of principal only
C. the amount the mortgage has been paid down
D. none of the above

Answer:
B. The principal balance is the outstanding balance of principal only on a mortgage and does not include interest or any other charges.


127. Which of the following is not true about qualifying ratios?

A. There are two types of ratios—“top” or “front” and “back” or “bottom”
B. The “top” ratio is a calculation of the borrower’s monthly housing costs (principal, taxes, insurance, mortgage insurance, homeowners’ association fees) as a percentage of monthly income
C. the “back” ratio includes all monthly costs as well as “back” taxes
D. Both calculations are used in determining whether a borrower can qualify for a mortgage

Answer:
C. The “back” or “bottom” ratio includes housing costs as well as all other monthly debt.



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