Arizona Real Estate Broker Exam — All Questions
3 questions
What happens in the secondary mortgage market?
- a.Lenders set the interest rates offered to consumers
- b.Appraisers report property values to underwriters
- c.Existing loans are bought and sold by investors✓
- d.Borrowers apply for and receive new mortgage loans
The secondary market is where existing mortgage loans are bought, sold and securitised, with Fannie Mae, Freddie Mac and Ginnie Mae as the dominant participants. Selling loans replenishes the originating lender's capital so it can lend again, which is why secondary market underwriting guidelines shape what the primary market will approve. Origination to the borrower happens in the primary market.
What does a discount point cost the borrower on a mortgage loan?
- a.One tenth of one percent of the loan amount
- b.One percent of the loan amount✓
- c.One percent of the down payment
- d.One percent of the purchase price
A discount point is one percent of the loan amount, paid up front to reduce the note rate. Points are calculated on the loan, not on the sale price or the down payment, so a two-point charge on a $300,000 loan is $6,000 regardless of what the property sold for. Paying points lowers the periodic payment, and whether it pays off depends on how long the borrower keeps the loan.
What does a loan-to-value ratio express?
- a.The borrower's monthly debt as a percentage of income
- b.The loan amount as a percentage of value or price✓
- c.The down payment as a percentage of the loan amount
- d.The interest rate as a percentage of the property value
Loan-to-value compares the loan amount to the property's value, and lenders conventionally use the lesser of the appraised value or the contract price. It measures the lender's exposure: the higher the ratio, the less equity cushion stands between the lender and a loss. Monthly debt against income is a debt-to-income ratio, a separate underwriting test.