Law & Practice 11 Test questions well
answered to pass graded A+
Which statement is true of a VA loan?
A: The original veteran is responsible for an assumption, when the new buyer is a veteran and
arranges for a "substitution of entitlement"
B: The funding fee may be financed
C: The Government guarantees the entire loan amount
D: All VA loans require at least a 3% down payment - correct answer ✔✔B: The funding fee may
be financed
Explanation
The original veteran is responsible for the assumption when the new buyer does a non-
qualifying assumption. The funding fee may be financed.
The amount a qualified lending institution may loan to a qualified veteran, on a VA-guaranteed
loan, is limited by the VA to:
A: the same as FHA loans
B: the amount of the veteran's income
C: the amount shown on the Certificate of Reasonable Value
D: all of the above - correct answer ✔✔C: the amount shown on the Certificate of Reasonable
Value
Explanation
,A VA-guaranteed loan is limited by the VA to the amount of the qualified veteran's entitlement
and the amount shown on the Certificate of Reasonable Value.
What was the original purpose behind the formation of the Federal National Mortgage
Association?
A: To buy existing FHA-insured loans
B: To provide a stimulus to the housing construction market, as well as to the mortgage market
C: To make more funds available to purchasers buying homes
D: All of the above - correct answer ✔✔A: To buy existing FHA-insured loans
Explanation
The Federal National Mortgage Association (Fannie Mae) is an active participant in the
secondary mortgage market.
A note in which the principal amount is systematically reduced through regular payments of
both principal and interest is known as a(n):
A: balloon
B: straight loan
C: amortized loan
D: none of the above - correct answer ✔✔C: amortized loan
Explanation
This is a definition of a amortized loan. Amortization is sometimes referred to as "liquidation" of
a debt.
A package mortgage is one used to finance:
, A: real and personal property with one security instrument
B: more than one property with one security instrument
C: lease-back agreements
D: none of the above - correct answer ✔✔A: real and personal property with one security
instrument
Explanation
A method of financing in which the loan that finances the purchase of a home also finances the
purchase of personal items such as a washer, dryer, refrigerator, air conditioner and other
specified appliances.
The owner of five parcels of land desires to obtain a loan and use all five parcels as security for
the note. The mortgage he will be required to execute will be a:
A: purchase money mortgage
B: amortized mortgage
C: blanket mortgage
D: package mortgage - correct answer ✔✔C: blanket mortgage
Explanation
The blanket mortgage would encumber all five parcels, and in the event of default, all five
would be foreclosed.
Which of the following are synonymous?
A: Take-out loan/ secondary financing
B: Construction loan/ take-out loan
answered to pass graded A+
Which statement is true of a VA loan?
A: The original veteran is responsible for an assumption, when the new buyer is a veteran and
arranges for a "substitution of entitlement"
B: The funding fee may be financed
C: The Government guarantees the entire loan amount
D: All VA loans require at least a 3% down payment - correct answer ✔✔B: The funding fee may
be financed
Explanation
The original veteran is responsible for the assumption when the new buyer does a non-
qualifying assumption. The funding fee may be financed.
The amount a qualified lending institution may loan to a qualified veteran, on a VA-guaranteed
loan, is limited by the VA to:
A: the same as FHA loans
B: the amount of the veteran's income
C: the amount shown on the Certificate of Reasonable Value
D: all of the above - correct answer ✔✔C: the amount shown on the Certificate of Reasonable
Value
Explanation
,A VA-guaranteed loan is limited by the VA to the amount of the qualified veteran's entitlement
and the amount shown on the Certificate of Reasonable Value.
What was the original purpose behind the formation of the Federal National Mortgage
Association?
A: To buy existing FHA-insured loans
B: To provide a stimulus to the housing construction market, as well as to the mortgage market
C: To make more funds available to purchasers buying homes
D: All of the above - correct answer ✔✔A: To buy existing FHA-insured loans
Explanation
The Federal National Mortgage Association (Fannie Mae) is an active participant in the
secondary mortgage market.
A note in which the principal amount is systematically reduced through regular payments of
both principal and interest is known as a(n):
A: balloon
B: straight loan
C: amortized loan
D: none of the above - correct answer ✔✔C: amortized loan
Explanation
This is a definition of a amortized loan. Amortization is sometimes referred to as "liquidation" of
a debt.
A package mortgage is one used to finance:
, A: real and personal property with one security instrument
B: more than one property with one security instrument
C: lease-back agreements
D: none of the above - correct answer ✔✔A: real and personal property with one security
instrument
Explanation
A method of financing in which the loan that finances the purchase of a home also finances the
purchase of personal items such as a washer, dryer, refrigerator, air conditioner and other
specified appliances.
The owner of five parcels of land desires to obtain a loan and use all five parcels as security for
the note. The mortgage he will be required to execute will be a:
A: purchase money mortgage
B: amortized mortgage
C: blanket mortgage
D: package mortgage - correct answer ✔✔C: blanket mortgage
Explanation
The blanket mortgage would encumber all five parcels, and in the event of default, all five
would be foreclosed.
Which of the following are synonymous?
A: Take-out loan/ secondary financing
B: Construction loan/ take-out loan
