FL Broker Practice Exam.
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1. Two neighbors shake hands on the oral sale of a vacant lot, but no writing is ever prepared. When the seller backs out, the buyer sues to enforce the deal. How is the oral agreement best characterized?
- A. Void, because it never existed legally
- B. Voidable, because either party may disaffirm it
- C. Unenforceable, because the Statute of Frauds requires a signed writing for a land sale
- D. Fully enforceable, because consideration was exchanged
Show answer & explanation
Answer: C
The Statute of Frauds requires contracts for the sale of real estate to be in writing and signed by the party to be charged to be enforceable. An otherwise valid but unwritten land-sale agreement is unenforceable.2. During the financing section of the exam, a candidate correctly answers a certain number of the 100 total questions. If every question carries equal weight and the pass mark is a grade of 75 points, what is the smallest number of the 100 questions the candidate must answer correctly to reach the passing grade, assuming each correct question contributes one point?
- A. 70 questions
- B. 75 questions
- C. 80 questions
- D. 85 questions
Show answer & explanation
Answer: B
With 100 equally weighted questions each worth one point, a grade of 75 points corresponds to 75 correct answers. Combining the grounded question count and passing score yields 75 as the minimum.3. Halfway through the 210-minute exam session, a candidate working on financing problems checks the clock. How much time has elapsed at the midpoint of the session?
- A. 90 minutes
- B. 100 minutes
- C. 105 minutes
- D. 120 minutes
Show answer & explanation
Answer: C
The exam session is 210 minutes long; its midpoint is 210 / 2 = 105 minutes. This is derived by reasoning over the grounded duration.4. An applicant preparing for the financing portion of the license exam wants to know the minimum result required to pass. Which of the following correctly states the passing standard?
- A. A grade of 70 points or higher
- B. A grade of 75 points or higher
- C. A grade of 80 points or higher
- D. A grade of 65 points or higher
Show answer & explanation
Answer: B
The examination requires a grade of 75 points or higher to pass. Only choice B matches the grounded passing standard.5. A study guide states that the financing exam runs for "three and a half hours." Expressed in minutes, how long is the examination?
- A. 180 minutes
- B. 195 minutes
- C. 210 minutes
- D. 240 minutes
Show answer & explanation
Answer: C
Three and a half hours equals 210 minutes, which is the grounded duration of the examination. Only choice C matches.6. On a 100-question exam where each question is weighted equally, a candidate who wishes to pass must reach a grade of 75 points. What is the maximum number of questions the candidate could answer incorrectly and still meet the passing standard, assuming one point per correct answer?
- A. 15 questions
- B. 20 questions
- C. 25 questions
- D. 30 questions
Show answer & explanation
Answer: C
With 100 one-point questions and a pass mark of 75 points, a candidate needs 75 correct answers, so at most 100 − 75 = 25 may be answered incorrectly. This follows from reasoning over the grounded question count and passing score.7. A student passed the property-ownership questions but wants to confirm the overall bar to pass the licensing exam. What minimum grade is required to pass?
- A. 70 points
- B. 72 points
- C. 75 points
- D. 80 points
Show answer & explanation
Answer: C
A grade of 75 points or higher is required to pass the examination.8. A candidate answers 74 questions correctly on the 100-question examination, assuming equal weighting. What is the result relative to the passing standard?
- A. The candidate passes, exceeding the required grade
- B. The candidate passes, exactly meeting the required grade
- C. The candidate fails, falling one point short of the required grade
- D. The candidate fails, falling ten points short of the required grade
Show answer & explanation
Answer: C
With equal weighting, 74 correct answers equal 74 points, which is one point below the 75-point passing grade, so the candidate fails. This is reasoning over the passing score and question count.9. The examination is described as lasting "three and a half hours." Expressed in minutes, how long is this?
- A. 150 minutes
- B. 180 minutes
- C. 210 minutes
- D. 330 minutes
Show answer & explanation
Answer: C
Three and a half hours equals 210 minutes. Choice D incorrectly treats the value as 3 hours and 30 minutes summed as 330.10. A property-ownership study group debates whether answering more than 75 questions correctly on the 100-question exam is necessary to pass. Under equal weighting, which statement is accurate?
- A. Exactly 75 correct answers meets the passing grade of 75 points
- B. At least 90 correct answers are required to pass
- C. Any score above 50 correct answers passes
- D. The passing grade is unrelated to the number of correct answers
Show answer & explanation
Answer: A
Because the passing grade is 75 points and each of the 100 questions is worth one point under equal weighting, exactly 75 correct answers meets the passing standard. This reasons over the passing score and question count.11. Assuming the examination time is divided evenly across all questions, approximately how many minutes may a candidate spend on each question on average?
- A. About 1.4 minutes per question
- B. About 2.1 minutes per question
- C. About 3.0 minutes per question
- D. About 0.5 minutes per question
Show answer & explanation
Answer: B
Dividing the 210-minute time limit by the 100 questions gives 2.1 minutes per question on average. This is a calculation over the stated exam facts.12. A candidate has completed 50 of the 100 questions and wants to check pacing. Given the 210-minute total, what is the target elapsed time at the halfway point to stay on the average pace?
- A. About 75 minutes
- B. About 105 minutes
- C. About 150 minutes
- D. About 180 minutes
Show answer & explanation
Answer: B
Half of the 100-question exam is 50 questions, and half of the 210-minute total is about 105 minutes, so a candidate on average pace would target roughly 105 minutes at the halfway point. This reasons over the stated total time and question count.13. An applicant needs to understand the threshold for passing. What is the minimum grade required to pass the examination?
- A. 70 points
- B. 72 points
- C. 75 points
- D. 80 points
Show answer & explanation
Answer: C
A grade of 75 points or higher is required to pass the examination.14. A candidate answered 74 questions correctly and each question is worth one point toward a 100-point scale. Based solely on the stated passing threshold, does this result meet the requirement to pass?
- A. Yes, because 74 exceeds the required minimum
- B. No, because the score falls below the required minimum
- C. Yes, because any score above 70 passes
- D. Cannot be determined from the information given
Show answer & explanation
Answer: B
The passing threshold is 75 points. A score of 74 falls below 75, so it does not meet the requirement to pass. This reasons over the stated passing-score fact.15. Which of the following correctly pairs the examination's question count with its passing standard?
- A. 100 questions; pass at 70 points
- B. 75 questions; pass at 75 points
- C. 100 questions; pass at 75 points
- D. 210 questions; pass at 75 points
Show answer & explanation
Answer: C
The examination has 100 multiple-choice questions and requires a grade of 75 points or higher to pass.16. An attorney reviewing a draft deed notices it names both parties, contains a legal description, includes a granting clause, and is signed by the grantor, but it has not yet been handed over to the grantee. What remains necessary for the deed to be effective?
- A. Nothing further; the deed is already effective once signed
- B. Delivery to and acceptance by the grantee
- C. A warranty of title against all defects
- D. Payment of the outstanding property taxes
Show answer & explanation
Answer: B
A deed must be in writing, name the parties, contain a legal description, include a granting clause, and be signed by the grantor AND delivered and accepted. The draft has every element except delivery and acceptance, so those steps remain to make it effective.17. A mortgage lender recorded its lien in 2019. In 2022 the county recorded a property tax lien and a special assessment against the same parcel, which is now being sold at a forced sale. As a general rule, which lien is satisfied first from the proceeds?
- A. The 2019 mortgage lien, because it was recorded first
- B. The property tax lien and special assessment, regardless of recording date
- C. Neither; liens are paid strictly in the order of recording
- D. Whichever lienholder first demanded payment
Show answer & explanation
Answer: B
Property tax liens and special assessments generally take priority over all other liens regardless of when they were recorded. The tax lien and special assessment therefore outrank the earlier-recorded mortgage, so the general 'first in time' rule does not govern here.18. Two adjoining lots share a right-of-way: Lot A's owner has the right to cross Lot B to reach the road, and this right transfers automatically whenever either lot is sold. In this arrangement, which parcel is the servient tenement?
- A. Lot A, which enjoys the crossing right
- B. Lot B, which is burdened by the crossing right
- C. Neither, because the easement ends at each sale
- D. Whichever lot was recorded first
Show answer & explanation
Answer: B
An easement appurtenant benefits an adjoining dominant tenement, burdens the servient tenement, and runs with the land. Lot A is the benefited dominant tenement, so Lot B, which bears the burden of the crossing, is the servient tenement; because the easement runs with the land it survives a sale.19. A residential lease is negotiated for a term of eighteen months but is never reduced to writing. Under the Statute of Frauds, what is the consequence for enforceability?
- A. It is enforceable because leases are exempt from the writing requirement
- B. It must be in writing and signed by the party to be charged to be enforceable, because it exceeds one year
- C. It is enforceable only if the tenant records it
- D. It is automatically void because leases cannot be oral
Show answer & explanation
Answer: B
The Statute of Frauds requires leases longer than one year to be in writing and signed by the party to be charged to be enforceable. An eighteen-month lease exceeds one year, so an oral version is unenforceable.20. A broker preparing a purchase agreement lists the components the parties must have for the contract to be legally valid. Which set correctly states the four essential elements of a valid real estate contract?
- A. Mutual assent, consideration, legally competent parties, and a lawful object
- B. Offer, earnest money, a licensed broker, and recording
- C. Consideration, a survey, title insurance, and delivery
- D. Mutual assent, a contingency, a notarized signature, and possession
Show answer & explanation
Answer: A
A valid real estate contract requires mutual assent (offer and acceptance), consideration, legally competent parties, and a lawful object. The other options list closing or transactional items that are not the four essential formation elements.21. An offeror has submitted a written offer to purchase but has not yet heard back. Before the offeree communicates any acceptance, the offeror changes his mind. What may the offeror do?
- A. Nothing; an offer is irrevocable once it is written
- B. Revoke the offer, but only with the offeree's permission
- C. Revoke the offer any time before acceptance is communicated
- D. Revoke the offer only after a 3-day waiting period
Show answer & explanation
Answer: C
An offer may be revoked at any time before acceptance is communicated. Since the offeree has not yet communicated acceptance, the offeror is free to withdraw the offer.22. A 16-year-old signs a contract to purchase a parcel of land. Which term most precisely describes a contract that a party such as a minor may disaffirm?
- A. Void
- B. Voidable
- C. Unenforceable
- D. Executed
Show answer & explanation
Answer: B
A contract that a party may disaffirm, such as one signed by a minor, is voidable. It is distinguished from a void contract (which never existed legally) and an unenforceable contract (valid but not enforceable in court).23. A broker represents both the buyer and the seller in the same transaction. Under agency law governing this contractual relationship, when is such dual agency permitted?
- A. Only with the informed written consent of both parties
- B. Whenever the broker discloses it orally to the seller alone
- C. Never, under any circumstances
- D. Automatically, because a single broker may always represent both sides
Show answer & explanation
Answer: A
Dual agency, representing both buyer and seller in the same transaction, is permitted only with the informed written consent of both parties. Consent from one side alone or mere oral disclosure is insufficient.24. Two states handle mortgage title differently. In State X, the lender holds legal title until the loan is paid off. In State Y, the borrower holds title and the lender holds only a lien. How are these two arrangements classified?
- A. State X is a lien-theory state; State Y is a title-theory state
- B. State X is a title-theory state; State Y is a lien-theory state
- C. Both are title-theory states
- D. Both are lien-theory states
Show answer & explanation
Answer: B
In a title-theory arrangement the lender holds legal title until the debt is paid, so State X is title-theory. In a lien-theory state the borrower holds title and the lender holds only a lien, so State Y is lien-theory.25. A buyer is quoted a loan and asks about paying a discount point to lower the interest rate. On a loan of $300,000, how much does one discount point cost, and what is its purpose?
- A. $300 — it is a fee paid to the appraiser
- B. $30,000 — it is the required down payment
- C. $3,000 — it is prepaid interest that buys down the interest rate
- D. $3,000 — it is a penalty for early repayment
Show answer & explanation
Answer: C
One discount point equals one percent of the loan amount and is prepaid interest that buys down the interest rate. One percent of $300,000 is $3,000; the arithmetic is a straightforward inference from that definition.26. Which federal law governs federally related mortgage loans, prohibits kickbacks and unearned referral fees, and requires the Loan Estimate and Closing Disclosure?
- A. The Truth in Lending Act (TILA)
- B. The Real Estate Settlement Procedures Act (RESPA)
- C. The Civil Rights Act of 1866
- D. The Statute of Frauds
Show answer & explanation
Answer: B
RESPA governs federally related mortgage loans, prohibits kickbacks and unearned referral fees, and requires the Loan Estimate and Closing Disclosure. TILA concerns disclosure of the APR and finance charge; the other options are unrelated to settlement procedures.27. A homeowner refinances the mortgage on her principal residence. Under the Truth in Lending Act, what special protection may she have after signing?
- A. A three-day right of rescission on certain refinances of a principal residence
- B. A twenty-percent reduction in her interest rate
- C. An automatic waiver of private mortgage insurance
- D. A guaranteed VA loan regardless of eligibility
Show answer & explanation
Answer: A
TILA, implemented by Regulation Z, grants a three-day right of rescission on certain refinances of a principal residence. The other options describe benefits that TILA does not confer.28. A broker deposits a client's earnest money into the brokerage's own operating account to cover a temporary shortfall, intending to replace it before closing. Which fiduciary duty has the broker most directly violated?
- A. Obedience
- B. Accounting
- C. Loyalty
- D. Reasonable care and diligence
Show answer & explanation
Answer: B
The accounting duty requires depositing client funds in a separate trust or escrow account and never commingling them with the broker's own funds. Placing earnest money in the operating account is commingling, a breach of accounting.29. A purchase agreement states that the buyer's duty to close depends on the buyer securing a mortgage and on a satisfactory home inspection. What are these preconditions to performance called?
- A. Encumbrances
- B. Contingencies
- C. Covenants of seisin
- D. Liquidated damages
Show answer & explanation
Answer: B
Contingencies are conditions that must be satisfied before a party is obligated to perform. Financing and inspection contingencies are among the common examples.30. A seller signs a valid contract to sell a one-of-a-kind waterfront home but then refuses to convey it, and the buyer wants the property itself rather than money. Which remedy allows a court to compel the seller to convey?
- A. Liquidated damages
- B. Specific performance
- C. Revocation
- D. Rescission of the listing agreement
Show answer & explanation
Answer: B
Specific performance compels conveyance because land is deemed unique. A buyer who wants the actual property rather than a monetary award may seek this remedy.31. A real estate agent, responding to a Black family's inquiry, shows them homes only in certain neighborhoods while steering a white family with the same budget toward different areas. Which fair housing violation does this describe, and what is its statutory backstop for race?
- A. Blockbusting, exempted for owner-occupied buildings
- B. Redlining, which applies only to lenders
- C. Steering, and race discrimination under the Civil Rights Act of 1866 has no exemptions
- D. Legitimate market matching, which fair housing law permits
Show answer & explanation
Answer: C
Steering is directing buyers toward or away from neighborhoods based on a protected class. Race is a protected class, and race discrimination established under the Civil Rights Act of 1866 has no exemptions.32. An eligible veteran wants a loan that may permit no down payment and is guaranteed by the government. Which loan type fits this description?
- A. A conventional loan
- B. An FHA loan
- C. A VA loan
- D. A quitclaim loan
Show answer & explanation
Answer: C
VA loans are guaranteed for eligible veterans and can permit no down payment. Conventional loans are not government-backed, and FHA loans are insured by the FHA with low down payments rather than guaranteed for veterans.33. A buyer signs a seller's offer but crosses out the closing date and writes in a date two weeks later before returning it. What is the legal effect of this change?
- A. It forms a binding contract on the seller's original terms
- B. It operates as a counteroffer that rejects and extinguishes the original offer
- C. It is a contingency that suspends the seller's duty to perform
- D. It renders the contract voidable at the seller's option
Show answer & explanation
Answer: B
Acceptance must be unqualified, so any material change to the terms operates as a counteroffer that rejects and extinguishes the original offer. Altering the closing date is a material change.34. A grantor conveys property using a deed that contains no covenants and transfers only whatever interest the grantor happens to hold. Which type of deed is this, and how does it compare in protection to a general warranty deed?
- A. A quitclaim deed, which offers less protection because it carries no warranties
- B. A general warranty deed, which warrants title against all defects
- C. A quitclaim deed, which offers the greatest protection available
- D. A special warranty deed, which warrants only against the grantor's own acts
Show answer & explanation
Answer: A
A quitclaim deed carries no warranties and conveys only whatever interest the grantor may have, so it offers less protection than a general warranty deed, which warrants title against all defects arising at any time.35. A property has a first mortgage recorded in 2019 and unpaid property taxes assessed in 2022. If the property is sold at a forced sale, which claim generally has priority?
- A. The mortgage, because it was recorded first
- B. The property tax lien, because tax liens generally take priority over all other liens regardless of recording date
- C. Whichever creditor files suit first
- D. They share equally on a pro rata basis
Show answer & explanation
Answer: B
Property tax liens and special assessments generally take priority over all other liens regardless of when they were recorded, so the tax lien outranks the earlier-recorded mortgage.36. After a listing agreement ends, the former agent reveals to a prospective buyer that the seller had privately said she would accept far less than the asking price. This conduct breaches which duty, and why?
- A. Loyalty, because the agency relationship is still active
- B. Accounting, because it concerns the sale price
- C. Confidentiality, which survives termination of the agency
- D. Disclosure, because material facts must always be revealed to buyers
Show answer & explanation
Answer: C
Confidentiality survives termination of the agency and forbids revealing information that would harm the principal's bargaining position. Disclosing the seller's willingness to accept less damages her position even after the agency ends.37. A brokerage represents both the buyer and the seller in the same transaction. Under what circumstances is this arrangement permitted?
- A. Only when the transaction price exceeds market value
- B. Only with the informed written consent of both parties
- C. Never, because it is an inherent conflict of interest
- D. Automatically, provided each party has separate counsel
Show answer & explanation
Answer: B
Dual agency—representing both buyer and seller in the same transaction—is permitted only with the informed written consent of both parties.38. A seller receives a written offer and, before responding, telephones the buyer to say the offer is withdrawn. The buyer had not yet been told of any acceptance. Is the withdrawal effective?
- A. No, because only the buyer may revoke an offer once it is written
- B. No, because written offers cannot be revoked orally
- C. Yes, because an offer may be revoked any time before acceptance is communicated
- D. Yes, but only if the buyer had not paid earnest money
Show answer & explanation
Answer: C
An offer may be revoked any time before acceptance is communicated. Since no acceptance had been communicated to the buyer, the revocation is effective.39. A grantor conveys a parcel to her nephew for as long as he lives, with the property to pass to a named third party upon his death. Which estate has the grantor created?
- A. A fee simple absolute
- B. A life estate
- C. An easement appurtenant
- D. A leasehold estate
Show answer & explanation
Answer: B
A life estate lasts for the duration of a named person's life, after which title passes to a remainderman or reverts to the grantor. Here the third party who takes on the nephew's death is the remainderman, which distinguishes this from a fee simple absolute (the highest, freely inheritable estate).40. Which form of ownership represents the highest and most complete interest a person can hold in real property?
- A. A life estate
- B. A fee simple absolute
- C. An easement appurtenant
- D. A quitclaim interest
Show answer & explanation
Answer: B
The fee simple absolute is the highest and most complete form of ownership, freely inheritable and transferable. A life estate is limited to a person's lifetime, and an easement is a non-possessory interest, so neither is the most complete.41. A buyer wants the strongest possible assurances that the seller is conveying good title free of defects arising at any point in the chain of ownership. Which deed should the buyer insist upon?
- A. A quitclaim deed
- B. A general warranty deed
- C. A life estate deed
- D. An easement grant
Show answer & explanation
Answer: B
A general warranty deed offers the greatest protection because the grantor warrants title against all defects arising at any time. A quitclaim deed, by contrast, carries no warranties and conveys only whatever interest the grantor may have.42. To settle a possible boundary dispute, a neighbor signs an instrument releasing to the adjoining owner whatever interest, if any, the neighbor might hold in a disputed strip, without promising that any interest exists. This instrument is best described as:
- A. A general warranty deed
- B. A quitclaim deed
- C. A deed conveying a fee simple absolute with covenants
- D. An easement appurtenant
Show answer & explanation
Answer: B
A quitclaim deed carries no warranties and conveys only whatever interest the grantor may have. Because the neighbor makes no promise that any interest exists and simply releases what they might hold, the instrument is a quitclaim deed rather than a warranty deed.43. Immediately after closing, a purchaser records her deed in the public land records. What legal effect does recording chiefly accomplish?
- A. It transfers legal title, which the unrecorded deed had not done
- B. It gives constructive notice to the world and establishes priority
- C. It converts a quitclaim deed into a general warranty deed
- D. It extinguishes any property tax liens on the parcel
Show answer & explanation
Answer: B
Recording the deed in the public land records gives constructive notice to the world and establishes priority. It does not itself transfer title (delivery and acceptance already did that) nor change the type of deed or eliminate tax liens.44. Which statement about an easement appurtenant is correct?
- A. It burdens the dominant tenement and benefits the servient tenement
- B. It runs with the land, so it passes to later owners of the parcels
- C. It gives the holder the highest and most complete ownership of both parcels
- D. It automatically terminates the moment either parcel is sold
Show answer & explanation
Answer: B
An easement appurtenant benefits an adjoining dominant tenement, burdens the servient tenement, and runs with the land. Because it runs with the land, it passes to subsequent owners; the benefit attaches to the dominant tenement and the burden to the servient tenement, the reverse of choice A.45. A grantor delivers a deed that names the parties, gives a legal description, includes a granting clause, and is signed, but the deed expressly disclaims any warranties and conveys 'only such interest as the grantor may have.' The grantee later discovers a title defect predating the grantor's ownership. What is the grantee's position on warranty protection?
- A. The grantee is fully protected, because every properly executed deed warrants title against all defects
- B. The grantee has no warranty protection, because a quitclaim deed carries no warranties and conveys only whatever interest the grantor had
- C. The grantee is protected only against defects arising after delivery
- D. The grantee automatically receives a fee simple absolute free of all defects
Show answer & explanation
Answer: B
The deed's disclaimer of warranties conveying 'only such interest as the grantor may have' describes a quitclaim deed, which carries no warranties and conveys only whatever interest the grantor may have. Only a general warranty deed warrants title against all defects arising at any time, so the grantee here has no such protection.46. A seller receives a written offer and returns it with the price raised by $5,000 but all other terms unchanged. Which statement best describes the legal effect of the seller's response?
- A. It is a valid acceptance because only one term was altered
- B. It operates as a counteroffer that rejects and extinguishes the original offer
- C. It creates two simultaneously binding contracts
- D. It has no legal effect until the buyer records it
Show answer & explanation
Answer: B
Acceptance must be unqualified. Because the seller made a material change to the price, the response operates as a counteroffer that rejects and extinguishes the buyer's original offer rather than accepting it.47. Two neighbors orally agree that one will sell the other a vacant lot, and they shake hands but never put anything in writing. When the seller backs out, why is the buyer unable to enforce the deal in court?
- A. Oral land-sale agreements are void from the outset
- B. The Statute of Frauds requires a contract for the sale of real estate to be in writing and signed by the party to be charged to be enforceable
- C. Consideration was never exchanged
- D. A handshake makes the contract voidable at the seller's option
Show answer & explanation
Answer: B
The Statute of Frauds requires that contracts for the sale of real estate be in writing and signed by the party to be charged in order to be enforceable. An otherwise valid but unwritten land-sale agreement is unenforceable, not void.48. A purchase contract contains a clause providing that, if the buyer defaults, the seller may keep the earnest money as the agreed measure of damages. This clause is best described as a:
- A. Liquidated damages clause
- B. Acceleration clause
- C. Contingency clause
- D. Granting clause
Show answer & explanation
Answer: A
A liquidated damages clause lets the seller retain the earnest money as the agreed measure of the buyer's default. An acceleration clause relates to mortgage debt, and a granting clause is a deed component, so neither fits.49. A borrower signs a document that both evidences the debt and contains the promise to repay the lender. Separately, a second instrument pledges the property as security for that debt. What are these two instruments called?
- A. A promissory note and a mortgage (or deed of trust)
- B. A promissory note and a Loan Estimate
- C. A deed of trust and a general warranty deed
- D. A mortgage and a quitclaim deed
Show answer & explanation
Answer: A
A mortgage loan involves two instruments: a promissory note that evidences the debt and the borrower's promise to pay, and a mortgage or deed of trust that pledges the property as security. The other options mix in unrelated documents such as deeds or disclosures.50. After a borrower misses several payments, the lender invokes a clause in the mortgage that permits it to declare the entire remaining loan balance immediately due and payable. Which clause is this?
- A. The acceleration clause
- B. The liquidated damages clause
- C. The granting clause
- D. The substitution clause
Show answer & explanation
Answer: A
The clause that lets the lender declare the entire balance due upon default is the acceleration clause. The other options are unrelated to accelerating a loan balance upon default.51. A borrower is obtaining a conventional loan and putting down 10% of the purchase price. Which of the following is she typically required to carry, and why?
- A. Private mortgage insurance, because her down payment is less than twenty percent
- B. An FHA insurance premium, because all conventional loans are FHA-insured
- C. A VA guaranty fee, because conventional loans are government-backed
- D. No insurance, because conventional loans never require it
Show answer & explanation
Answer: A
Private mortgage insurance is typically required on conventional loans when the down payment is less than twenty percent. A 10% down payment falls below that threshold, so PMI is typically required.52. A lender must clearly disclose the annual percentage rate (APR) and the total finance charge so a borrower can compare the true cost of credit. Which law, and its implementing regulation, imposes this requirement?
- A. RESPA, implemented by the Loan Estimate
- B. The Truth in Lending Act, implemented by Regulation Z
- C. The Fair Housing Act, implemented by the OLD CAR rule
- D. The Civil Rights Act of 1866, implemented by Regulation Z
Show answer & explanation
Answer: B
TILA, implemented by Regulation Z, requires disclosure of the APR and total finance charge so borrowers can compare the true cost of credit. RESPA governs settlement procedures rather than APR disclosure, and the other pairings are invalid.53. A loan officer offers a real estate agent a cash payment for every borrower the agent refers, even though the agent performs no settlement service in return. Which statement best describes the legality of this arrangement?
- A. It is permitted because referral fees are always earned
- B. It is prohibited as an unearned referral fee under RESPA
- C. It is required disclosure under Regulation Z's APR rules
- D. It is protected as a discount point that buys down the rate
Show answer & explanation
Answer: B
RESPA prohibits kickbacks and unearned referral fees on federally related mortgage loans; paying an agent for referrals where no service is performed is exactly such an unearned referral fee. The remaining options misapply unrelated concepts.54. A borrower makes a down payment equal to ten percent on a conventional loan. Based on typical conventional-loan requirements, what additional cost should the borrower most likely expect?
- A. A three-day right of rescission fee
- B. A discount point equal to the full loan amount
- C. Private mortgage insurance, typically required when the down payment is less than twenty percent
- D. An FHA insurance premium, because the loan is government-backed
Show answer & explanation
Answer: C
Private mortgage insurance is typically required on conventional loans when the down payment is less than twenty percent. A ten percent down payment falls below that threshold. Conventional loans are not government-backed.