#1
What is the definition of a mortgage?
A legal agreement where a bank lends money at interest in exchange for taking title of the debtor's property
A contract where a person sells their property to the bank
A financial instrument for investing in stocks
A document that certifies ownership of a property
#2
Which of the following factors typically affects the interest rate on a mortgage loan?
The borrower's credit score
The color of the house
The number of rooms in the house
The location of the nearest grocery store
#3
In a fixed-rate mortgage, what remains constant throughout the life of the loan?
The principal amount
The interest rate
The monthly payment
The loan term
#4
What is the purpose of a home appraisal in the mortgage process?
To determine the interest rate
To assess the borrower's income
To evaluate the property's value
To calculate property taxes
#5
Which type of mortgage typically has the lowest initial interest rate?
Fixed-rate mortgage
Adjustable-rate mortgage
Balloon mortgage
Reverse mortgage
#6
What is the purpose of a down payment in a mortgage?
To cover closing costs
To reduce the amount borrowed
To pay property taxes
To pay homeowner's insurance
#7
What is an amortization schedule?
A schedule that shows the breakdown of monthly mortgage payments between principal and interest
A schedule for property tax payments
A schedule for home insurance payments
A schedule for home maintenance
#8
What is the debt-to-income ratio (DTI) used for in mortgage calculations?
To assess a borrower's ability to repay a loan
To calculate property taxes
To determine the size of the down payment
To estimate the value of the property
#9
What does the term 'points' refer to in the context of a mortgage?
Upfront fees paid to the lender to reduce the interest rate
Payments made to the real estate agent
Extra payments made towards the principal each month
Payments made to the homeowner's association
#10
What is Private Mortgage Insurance (PMI) used for?
To protect the lender in case the borrower defaults on the loan
To provide life insurance for the homeowner
To pay for property taxes
To cover the cost of home repairs
#11
What is the definition of a balloon mortgage?
A mortgage with a fixed interest rate for the entire loan term
A mortgage where the borrower makes interest-only payments for a certain period and then pays off the entire principal amount in a lump sum
A mortgage offered only to borrowers with excellent credit scores
A mortgage that requires a balloon payment to be made at the beginning of the loan term
#12
What is a reverse mortgage primarily used for?
To purchase a new home
To refinance an existing mortgage
To access the equity in one's home without selling it
To obtain a lower interest rate
#13
What is the concept of loan-to-value (LTV) ratio in mortgage lending?
The ratio of the loan amount to the appraised value of the property
The ratio of the borrower's income to the loan amount
The ratio of the loan amount to the borrower's credit score
The ratio of the loan amount to the down payment
#14
Which of the following is a disadvantage of an adjustable-rate mortgage (ARM)?
The interest rate may increase over time
The interest rate remains fixed for the entire loan term
It requires a higher down payment
It typically has lower closing costs
#15
What is the Debt-Service Coverage Ratio (DSCR) used for in commercial mortgage lending?
To evaluate the borrower's creditworthiness
To determine the size of the down payment
To assess the property's ability to generate enough income to cover debt payments
To calculate property taxes
#16
What is a prepayment penalty in mortgage lending?
A penalty imposed on the borrower for paying off the loan early
A fee paid to the real estate agent
A discount offered by the lender for early repayment
A charge for late payment
#17
What is the role of an escrow account in a mortgage?
To hold funds for home repairs
To hold funds for property taxes and insurance
To hold funds for loan repayments
To hold funds for real estate agent commissions
#18
What is a jumbo mortgage?
A mortgage for a very small property
A mortgage with a high interest rate
A mortgage that exceeds the loan limits set by Fannie Mae and Freddie Mac
A mortgage with a low down payment requirement