Loan Proceeds

### What are loan proceeds? - [x] The net amount of money disbursed by a lender after deducting all fees. - [ ] The total loan amount before any deductions. - [ ] The interest earned on the loan amount over time. - [ ] The repayment amount over the life of the loan. > **Explanation:** Loan proceeds refer to the net amount of money the borrower receives after the lender deducts all fees and charges from the total loan amount approved. ### Are origination fees included in loan proceeds? - [ ] Yes, they increase the net loan proceeds. - [ ] No, they are just additional interest on the loan. - [x] No, they are deducted to calculate net loan proceeds. - [ ] Yes, they reduce the loan principal. > **Explanation:** Origination fees are deducted from the total loan amount along with other charges to determine the net loan proceeds the borrower receives. ### If a borrower takes out a $100,000 loan with a 2% origination fee, what will be the loan proceeds? - [ ] $98,000 - [x] $98,000 - [ ] $100,000 - [ ] $102,000 > **Explanation:** The origination fee in this case would be $2,000 (2% of $100,000). The loan proceeds would therefore be $100,000 - $2,000 = $98,000. ### Loan proceeds are synonymous with which of the following? - [ ] Origination fees - [ ] Total loan amount - [ ] Gross loan advances - [x] Net funds available to the borrower > **Explanation:** Loan proceeds are the net funds available to the borrower after the deduction of all loan-associated fees and costs. ### Which fees are typically deducted to calculate loan proceeds? - [x] Origination fees and discount points - [ ] Monthly mortgage payments - [ ] Principal repayment - [ ] Utility expenses > **Explanation:** Origination fees and discount points are typically deducted to calculate the net loan proceeds that will be available to the borrower. ### How are loan proceeds impacted by higher origination fees? - [ ] They increase the proceeds. - [x] They reduce the proceeds. - [ ] They have no impact on the proceeds. - [ ] They only affect the interest rate. > **Explanation:** Higher origination fees reduce the net loan proceeds available to the borrower, as more is deducted from the loan amount. ### Can legal fees be included in the deductions to determine loan proceeds? - [x] Yes, legal fees are sometimes deducted. - [ ] No, legal fees are paid separately. - [ ] No, they only affect the interest rate. - [ ] Yes, but only for commercial properties. > **Explanation:** Legal fees are often included in the costs from which the total loan amount is deducted to determine net loan proceeds. ### What happens if a borrower misuses the loan proceeds? - [ ] They get an additional discount on fees. - [x] They may default or face legal consequences. - [ ] They receive a higher interest rate. - [ ] They are issued a larger loan amount. > **Explanation:** Misuse of loan proceeds can lead to loan default or legal consequences, as funds must be used for their specified purposes. ### Why is it important to compare loan offers from multiple lenders? - [ ] To find the highest interest rate. - [ ] To understand varying legal requirements. - [ ] To locate hidden property liens. - [x] To maximize net loan proceeds by minimizing fees. > **Explanation:** Comparing loan offers helps borrowers minimize fees and costs, which in turn maximizes their net loan proceeds. ### When a lender forgives a portion of the loan, what can happen? - [ ] The borrower receives more loan proceeds. - [ ] The loan tenure decreases. - [x] The forgiven amount may be considered taxable income. - [ ] The borrower’s credit score improves significantly. > **Explanation:** When a lender forgives a part of the loan, the forgiven amount may be considered taxable income and must be reported to the IRS.