#1
Which of the following documents outlines the terms and conditions of a mortgage loan?
Promissory note
ExplanationLegal agreement specifying borrower's promise to repay the loan.
#2
What does LTV stand for in the context of mortgage loans?
Loan-to-Value ratio
ExplanationRatio determining loan amount relative to property's value.
#3
Which type of mortgage loan features a fixed interest rate for the entire loan term?
Fixed-rate mortgage
ExplanationInterest rate remains constant throughout the loan duration.
#4
What is Private Mortgage Insurance (PMI) used for?
To protect the lender in case of borrower default
ExplanationInsurance safeguarding lender against borrower's default.
#5
What is the purpose of an escrow account in the context of mortgage loans?
To manage property insurance and tax payments
ExplanationAccount to handle property-related payments.
#6
Which government-sponsored entity is responsible for providing liquidity to the mortgage market?
Ginnie Mae
ExplanationAgency ensuring mortgage market liquidity.
#7
What is the debt-to-income ratio used for in mortgage lending?
To assess the borrower's ability to manage additional debt
ExplanationDetermines borrower's debt management capability.
#8
What is the purpose of underwriting in the mortgage loan process?
To determine the borrower's eligibility and risk
ExplanationEvaluates borrower's eligibility and risk.
#9
In the context of mortgage loans, what is a prepayment penalty?
A fee charged for paying off the loan early
ExplanationCharge imposed for early loan repayment.
#10
What is a jumbo mortgage loan?
A loan exceeding the conforming loan limits set by FHFA
ExplanationLoan surpassing FHFA's conforming limits.
#11
What is the main difference between a conventional mortgage and an FHA loan?
Down payment requirement
ExplanationDiffering down payment criteria.
#12
In the context of mortgage loans, what does 'points' refer to?
Discount points paid upfront
ExplanationUpfront payments to lower interest rate.
#13
What is a reverse mortgage?
A mortgage for seniors allowing them to convert home equity into cash
ExplanationLoan enabling seniors to utilize home equity.
#14
What is a deed of trust in the context of mortgage loans?
A document recording the transfer of property title to a trustee
ExplanationDocument transferring property title to trustee.