#1
What is a mortgage?
A loan for purchasing real estate
ExplanationA mortgage is a loan specifically used to buy a property.
#2
What does APR stand for in the context of mortgages?
Annual Percentage Rate
ExplanationAPR is the annual cost of a loan expressed as a percentage.
#3
What is an amortization schedule?
A schedule showing the breakdown of principal and interest payments over time
ExplanationIt details how loan payments are split between interest and principal.
#4
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM)?
The fixed-rate mortgage has a constant interest rate, while an ARM has a variable interest rate.
ExplanationFixed-rate mortgages have stable interest rates, unlike ARMs, which fluctuate.
#5
What is the loan-to-value (LTV) ratio in mortgage financing?
The ratio of the loan amount to the purchase price of the property
ExplanationLTV ratio is a measure of how much of the property is financed through a loan.
#6
What is the role of escrow in mortgage payments?
To hold funds for property taxes and insurance
ExplanationEscrow accounts manage payments for taxes and insurance on the property.
#7
What is the Debt-to-Income (DTI) ratio used for in mortgage lending?
To assess the borrower's ability to manage monthly payments
ExplanationDTI ratio evaluates if a borrower can afford mortgage payments based on income.
#8
What is a jumbo mortgage?
A mortgage that exceeds the loan limits set by government-sponsored enterprises
ExplanationJumbo mortgages are loans exceeding conventional loan limits.
#9
What is Private Mortgage Insurance (PMI)?
Insurance to protect the lender in case of borrower default
ExplanationPMI safeguards the lender against financial loss if the borrower defaults.
#10
What is a prepayment penalty in mortgage financing?
A fee charged for paying off the mortgage early
ExplanationIt's a charge incurred for settling the mortgage before the agreed term.
#11
What is a balloon payment?
A large, one-time payment due at the end of the loan term
ExplanationBalloon payments are substantial lump sums paid at the conclusion of the loan.
#12
How does a bi-weekly mortgage payment plan differ from a monthly plan?
Bi-weekly payments are made every two weeks instead of monthly
ExplanationBi-weekly plans involve payments every two weeks rather than monthly.
#13
What is a reverse mortgage?
A mortgage for seniors where they receive payments from the lender based on their home equity
ExplanationReverse mortgages provide income to seniors using their home equity as collateral.