Financial Literacy for Home Loan Qualification Quiz

Marital status is generally not a factor in home loan qualification, as lenders focus on financial factors such as credit score and income.

APR stands for Annual Percentage Rate, representing the total cost of borrowing, including interest and fees, expressed as a percentage.

LTV, or Loan-to-Value, is a ratio that represents the percentage of the property's value financed by the loan, crucial for assessing risk.

A down payment is an initial payment made by the homebuyer, representing a percentage of the property's purchase price.

PITI represents Principal, Interest, Tax, and Insurance, encompassing the components of a borrower's monthly mortgage payment.

A fixed-rate mortgage features a stable interest rate that remains constant throughout the entire loan term, providing predictability for borrowers.

PMI is insurance that safeguards the lender in case the borrower defaults on the mortgage, often required for loans with a down payment below 20%.

Conventional mortgages generally demand a higher down payment compared to FHA loans, which are insured by the Federal Housing Administration.

A prepayment penalty is a fee imposed when a borrower pays off the mortgage before the agreed-upon term, discouraging early repayment.

The DTI ratio assesses the proportion of a borrower's income dedicated to debt payments, aiding lenders in evaluating financial stability.

The standard home loan term is typically 30 years, providing borrowers with an extended period to repay the mortgage.

A jumbo mortgage surpasses the loan limits established by Fannie Mae and Freddie Mac, often necessary for high-value properties.

A balloon mortgage requires a large final payment at the end of the loan term, often used in specific financial situations.