Types of Mortgages and Financing Practice Questions
Types of mortgages and sources of financing is about 4 questions on the Florida sales associate exam. It covers special mortgage types such as blanket, package, and wraparound loans, plus the primary and secondary mortgage markets and the agencies that buy loans. Work the questions below, then read every explanation.
Exam prep only
This area asks you to match a loan to its purpose, then to place a transaction in the right part of the mortgage market. The names sound technical, but each one describes a specific job.
Use The Name-Tells-the-Job Read. The mortgage type usually names what it does: a blanket covers several parcels, a package wraps in personal property, a construction loan funds building. Read the name and the job follows.
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Types of Mortgages and Financing Practice Questions
7 scenario-based questions on types of mortgages and financing, scored, each with a full explanation after you answer. Every question is also written out below if you would rather study at your own pace.
Every question explained
Prefer to study at your own pace? Here are all 7 questions. Read each one and pick your answer, then reveal the correct answer, the reasoning, and the trap that catches most candidates.
1. A developer borrows against several lots at once under a single loan, with a clause that releases individual lots from the lien as each is sold and paid down. This is a
- A.package mortgage
- B.blanket mortgage with a partial release clause
- C.wraparound mortgage
- D.purchase-money mortgage
Show answer and explanation
Correct answer: B. blanket mortgage with a partial release clause
Why B is correct: A blanket mortgage covers more than one parcel of land under one loan. A partial release clause lets the borrower free individual parcels from the lien as they are sold, which developers use to deliver clear title to each buyer.
Trap: A blanket mortgage covers multiple properties. A package mortgage covers one property plus personal property. Do not confuse them.
Source: Mortgage types, Florida real estate finance
2. A buyer finances a furnished condominium with a loan that covers both the real property and the appliances and furniture inside. This is a
- A.blanket mortgage
- B.package mortgage, which includes real and personal property
- C.construction mortgage
- D.open-end mortgage
Show answer and explanation
Correct answer: B. package mortgage, which includes real and personal property
Why B is correct: A package mortgage finances real property together with personal property, such as appliances and furnishings, under one loan. It is common with furnished condominiums.
Trap: A package mortgage adds personal property to the real estate. A blanket mortgage instead spreads one loan across multiple parcels.
Source: Mortgage types, Florida real estate finance
3. A seller keeps an existing low-rate first mortgage in place and makes a new, larger loan to the buyer that includes the balance of the old loan. The seller collects from the buyer and continues paying the original lender. This is a
- A.wraparound mortgage
- B.blanket mortgage
- C.purchase-money mortgage with no existing loan
- D.reverse mortgage
Show answer and explanation
Correct answer: A. wraparound mortgage
Why A is correct: A wraparound mortgage is a new, larger loan that wraps around an existing loan that stays in place. The buyer pays the seller, and the seller continues to pay the underlying lender. It only works if the existing loan has no enforceable due-on-sale clause blocking it.
Trap: A wraparound keeps the old loan in place and wraps a new larger loan around it. It is not a brand-new single loan that pays off the old one.
Source: Mortgage types, Florida real estate finance
4. A builder obtains short-term financing that is disbursed in stages as construction reaches certain milestones, with the full balance due when the project is complete. This is a
- A.permanent mortgage
- B.construction loan, disbursed in draws
- C.package mortgage
- D.reverse mortgage
Show answer and explanation
Correct answer: B. construction loan, disbursed in draws
Why B is correct: A construction loan is short-term financing released in stages, called draws, as the building reaches set milestones. The balance is typically due when construction is finished, often replaced by permanent financing called a takeout loan.
Trap: A construction loan is short-term and paid out in draws. It is usually replaced by permanent financing once the building is complete.
Source: Mortgage types, Florida real estate finance
5. When a lender makes a loan directly to a borrower to buy a home, that transaction takes place in the
- A.secondary mortgage market
- B.primary mortgage market
- C.intangible market
- D.escrow market
Show answer and explanation
Correct answer: B. primary mortgage market
Why B is correct: The primary mortgage market is where lenders originate loans directly with borrowers. The secondary mortgage market is where those existing loans are bought and sold among investors and agencies after origination.
Trap: Originating a loan with a borrower is the primary market. Buying and selling existing loans is the secondary market.
Source: Mortgage markets, Florida real estate finance
6. Which entity is part of the secondary mortgage market, buying loans from lenders so they have funds to lend again?
- A.The Federal Reserve
- B.Fannie Mae (the Federal National Mortgage Association)
- C.The Department of Business and Professional Regulation
- D.The Florida Real Estate Commission
Show answer and explanation
Correct answer: B. Fannie Mae (the Federal National Mortgage Association)
Why B is correct: Fannie Mae, the Federal National Mortgage Association, operates in the secondary market by purchasing loans from lenders. This gives lenders fresh capital to make more loans. Freddie Mac and Ginnie Mae also operate in the secondary market.
Trap: Fannie Mae, Freddie Mac, and Ginnie Mae are secondary-market entities. They buy loans; they do not regulate Florida licensees.
Source: Secondary mortgage market
7. A homeowner aged 68 converts part of the equity in her paid-off home into payments from a lender, with no monthly repayment required while she lives in the home. This is a
- A.home equity line of credit she must repay monthly
- B.reverse mortgage
- C.wraparound mortgage
- D.blanket mortgage
Show answer and explanation
Correct answer: B. reverse mortgage
Why B is correct: A reverse mortgage lets an eligible older homeowner, generally 62 or older, convert home equity into payments without making monthly repayments while living in the home. The loan is repaid when the owner sells, moves out permanently, or dies.
Trap: A reverse mortgage requires no monthly repayment while the owner lives there. That is what separates it from a standard home equity loan.
Source: Mortgage types, reverse mortgages
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What is the difference between a blanket and a package mortgage?
A blanket mortgage covers more than one parcel of land under a single loan, often with a partial release clause so parcels can be freed as they sell. A package mortgage covers one property plus personal property, such as appliances and furniture, under one loan.
What is the difference between the primary and secondary mortgage markets?
The primary mortgage market is where lenders originate loans directly with borrowers. The secondary mortgage market is where existing loans are bought and sold. Fannie Mae, Freddie Mac, and Ginnie Mae operate in the secondary market, buying loans so lenders can lend again.
How many financing questions are on the Florida exam?
Types of mortgages and sources of financing is about 4 percent of the 100-question Florida sales associate exam, so expect roughly 4 questions on special mortgage types and the mortgage markets.