Real Estate Trainers, Practice Exam #9 questions with complete solutions

1. All of the following are true regarding the counselor who meets with a prospective borrower for a reverse mortgage, except: A. The counselor explains the cost of the loan and the financial implications of obtaining it. B. The counselor is paid only if the borrower goes through with the reverse mortgage. C. At the end of the session, the counselor will provide a required certification of counseling. D. The counselor will provide guidance and advice on selecting a lender for the reverse mortgage. correct answer: B. The counselor is unbiased and independent, and his/her compensation is not dependent on any decision the borrower makes. 2. All of the following are true regarding the amount that can be borrowed on a reverse mortgage, except: A. The more the home is worth, the more cash can be borrowed. B. The younger the borrower is, the more he/she can borrow because he/she has longer to pay it back. C. The more equity that has been built up, the more cash can be borrowed. D. The location of the home and the particular program that has been selected will determine how much money can be borrowed. correct answer: B. Typically, the principal limit is higher for an older borrower because the shorter the life expectancy, the quicker the loan can be repaid. 3. Which of the following is the most common use of funds from a reverse mortgage: A. To supplement a fixed retirement income. B. To cover costs of healthcare. C. To make home improvements. D. All of the above are common uses of proceeds from reverse mortgages. correct answer: D. These are the common uses of the proceeds, but they can be used for virtually anything. 4. When can the interest that a lender charges for a reverse mortgage be deducted on a borrower's income tax return? A. At the inception of the loan. B. After the first complete year of the loan term. C. When the loan principal and interest are repaid. D. Interest is not deductible on a reverse mortgage. correct answer: C. Yes, at the end of the term on a reverse mortgage. 5. When is the typical reverse mortgage due and payable? A. When the borrower dies. B. When the borrower sells the house.