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REE3043 EXAM QUESTIONS WITH COMPLETE SOLUTIONS
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REE3043 EXAM QUESTIONS WITH COMPLETE SOLUTIONS Gross salary: 50,000 Mortgage debt : .36 Total : 18,000 Divide by 12 to get monthly Gives you 1,500 a month. The bank does not want you total debt ( including the cost of housing ) to be more than 1,500 a month. - Answer-Total debt ratio - school...

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  • September 6, 2024
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  • 2024/2025
  • Exam (elaborations)
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REE3043 EXAM QUESTIONS WITH
COMPLETE SOLUTIONS
Gross salary: 50,000
Mortgage debt : .36
Total : 18,000
Divide by 12 to get monthly
Gives you 1,500 a month. The bank does not want you total debt ( including the cost of
housing ) to be more than 1,500 a month. - Answer-Total debt ratio

- school's
- property tax rate
- driving time to work
- crime in the area
- recreational amenities - Answer-Things to consider about choosing an area in which to
buy a home.

- don't make late payments
- pay your creditors ( don't go more than 50% over your credit limit )
- build your credit
- if you are adding a lot of credit at the same time
- they look at what percentage of credit you're using.
- what is the mix of your credit? School loans, credit cards, auto loans, etc. - Answer-
Components of a FICO score-

This is the company to whom you send your mortgage payments to. - Answer-Servicing
a loan


There will be a fixed payment ( can be a year or monthly ).

, Then the rate is adjusted
- Margin never changes
- Index changes as per the terms of the loan - Answer-ARM - adjustable rate mortgage

Example :
- principle : $400
- interest : $600
- total payment : $1,000
- optional arm allows you to decide how much of your payment you want to send in
- whatever you send it goes to pay down the interest first. Anything left over goes
towards the principle - Answer-Option ARM

When the amount of your payment doesn't even cover the interest portion. So nothing
goes towards principle reduction
- any interest you don't pay gets added onto the principle so the loan balance goes up
every month
- never go into a negative amortization
- a lender would only allow a mortgage to increase by 10% before a pay,net would be
required to reduce the loan balance. - Answer-Negative amortization

Your mortgage payment would be :
- principle P
- interest I
- taxes T
- insurance I
- your taxes and insurance payments would go into an escrow fund so when the bill
comes into the bank for payment, the funds are in the account. - Answer-Property taxes
/ insurance

The timing of when you plan to exit out of the investment - Answer-Exit strategy

Opposite of a payback period
- cash in/ cash out - Answer-Cash on cash return

If NPV is 0, that is also equal to the IRR. Defined as that discount rate that brings the
present value of the cash outflows to $0.00 - Answer-Internal rate of return

Advantages to investing in real estate
- leverage ( the use of other people's money )
- 1031 exchange : the section of the IRS code. whatever you sell the 1st property for
must be spent. ( ex. $1,000,000 on the first property that must be spent when you do
the 1031 exchange.)
Disadvantages -
- leverage
- isn't liquid if you want to sell the property quickly ( except share in a REIT )
- if the property is income producing, you have to pay someone to manage it or it takes
away from your time. - Answer-Internal rate of return

The lender that takes out a insurance policy against the mortgage in case the borrower
defaults. - Answer-PMI - Private Mortgage Insurance

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