#1
What is a mortgage loan?
A loan used to purchase real estate
ExplanationLoan for purchasing property.
#2
Which entity typically provides funding for mortgage loans?
Commercial banks
ExplanationCommercial banks provide mortgage funds.
#3
What is a jumbo mortgage?
A mortgage loan exceeding the conforming loan limits set by government-sponsored enterprises
ExplanationLoan exceeding government loan limits.
#4
What does the term 'closing costs' refer to in mortgage financing?
Expenses associated with finalizing the mortgage loan, such as appraisal fees and title insurance
ExplanationCosts for finalizing mortgage.
#5
What is a conforming loan?
A loan that meets the guidelines set by government-sponsored enterprises
ExplanationLoan meeting government guidelines.
#6
What is a home appraisal in the context of mortgage financing?
An evaluation of the property's market value by a licensed appraiser
ExplanationAssesses property value.
#7
What is the role of the Federal Housing Administration (FHA) in mortgage lending?
To provide insurance on mortgage loans made by approved lenders
ExplanationInsures mortgages from approved lenders.
#8
What is mortgage default?
A situation where the borrower fails to make mortgage payments as agreed
ExplanationFailure to make mortgage payments.
#9
What is the loan-to-value ratio (LTV) in mortgage financing?
The ratio of the loan amount to the appraised value of the property
ExplanationRatio of loan to property value.
#10
What is private mortgage insurance (PMI)?
Insurance protecting the lender if the borrower defaults on the loan
ExplanationInsurance for lender against borrower default.
#11
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM)?
Fixed-rate mortgage has a constant interest rate, while ARM's interest rate can fluctuate
ExplanationFixed vs. variable interest rates.
#12
What is a prepayment penalty in mortgage loans?
A fee charged when the borrower pays off the loan before the scheduled term
ExplanationFee for early loan payoff.
#13
What is the role of a mortgage broker in the loan origination process?
To connect borrowers with lenders and assist in the loan application process
ExplanationConnects borrowers with lenders.
#14
What is a mortgage underwriter's primary responsibility?
Evaluating loan applications and determining their risk
ExplanationEvaluates loan applications.
#15
What is the purpose of a title search in the mortgage loan process?
To ensure there are no existing liens or legal issues with the property's title
ExplanationChecks property title for issues.
#16
What is the purpose of escrow in mortgage financing?
To hold funds for property taxes and insurance payments
ExplanationHolds funds for taxes and insurance.
#17
What is a mortgage amortization schedule?
A schedule showing the breakdown of each mortgage payment, including principal and interest
ExplanationBreakdown of mortgage payments.
#18
What is the difference between a mortgage lender and a mortgage servicer?
A lender provides the initial loan, while a servicer collects payments and manages the loan afterward
ExplanationLender vs. payment collector.
#19
What is a cash-out refinance?
A refinancing option where the borrower receives cash based on the equity in their home
ExplanationRefinance for cash based on home equity.
#20
What is a subprime mortgage?
A mortgage offered to borrowers with poor credit history
ExplanationMortgage for poor credit borrowers.
#21
What is a reverse mortgage?
A mortgage where the lender pays the borrower, typically used by seniors to convert home equity into cash
ExplanationLender pays borrower based on home equity.
#22
What is the role of Fannie Mae and Freddie Mac in the mortgage market?
To purchase and guarantee mortgages from lenders, thereby providing liquidity to the mortgage market
ExplanationPurchase and guarantee mortgages for liquidity.
#23
What is a balloon mortgage?
A mortgage where the borrower makes small payments initially, then a large final payment
ExplanationSmall initial payments, large final payment.
#24
What is the role of underwriting in mortgage loan origination?
Assessing the borrower's creditworthiness and the risk associated with the loan
ExplanationAssessing borrower's risk and credit.
#25
What is the debt-to-income ratio (DTI) used for in mortgage underwriting?
To determine the loan amount the borrower can afford based on income and existing debt
ExplanationDetermines affordable loan amount based on income and debt.