#1
Which of the following is a common type of mortgage interest rate?
All of the above
ExplanationVarious types like fixed, adjustable, and hybrid are common.
#2
What is the loan-to-value ratio (LTV) in mortgage financing?
The ratio of the loan amount to the value of the property
ExplanationIt represents the percentage of the property's value financed by the loan.
#3
What is a mortgage amortization schedule?
A breakdown of each mortgage payment into principal and interest
ExplanationIt outlines how each payment contributes to loan reduction.
#4
In a mortgage context, what is the 'closing costs'?
Costs associated with transferring ownership of a property
ExplanationFees paid during property purchase or refinancing.
#5
What is a mortgage pre-approval?
A preliminary assessment of a borrower's creditworthiness
ExplanationIt signifies a lender's commitment for a loan up to a certain amount.
#6
What is the role of the appraisal in the mortgage process?
To assess the value of the property being financed
ExplanationIt determines the fair market value of the property.
#7
Which of the following is NOT a type of mortgage loan?
IRA loan
ExplanationIRAs are retirement accounts, not mortgage loans.
#8
What is Private Mortgage Insurance (PMI)?
Insurance protecting the lender in case of borrower default
ExplanationIt's a safeguard for the lender when the borrower has less than 20% equity.
#9
What is an adjustable-rate mortgage (ARM)?
A mortgage with a fluctuating interest rate that adjusts periodically
ExplanationInterest rates vary based on market conditions.
#10
Which of the following factors typically affects mortgage interest rates?
All of the above
ExplanationEconomic indicators, inflation, and lender policies influence rates.
#11
What does the term 'points' refer to in mortgage financing?
Percentage of the loan amount paid upfront to reduce the interest rate
ExplanationThey lower interest rates in exchange for upfront payment.
#12
What is the Debt-to-Income Ratio (DTI) used for in mortgage lending?
To evaluate the borrower's ability to repay the loan
ExplanationIt measures the proportion of income used for debt payments.
#13
What is a balloon mortgage?
A mortgage with a large, one-time payment due at the end of the loan term
ExplanationIt features low initial payments followed by a lump sum payment.
#14
What is the main difference between a fixed-rate mortgage and an adjustable-rate mortgage?
The way the interest rate is set and adjusted
ExplanationFixed-rate stays constant, while adjustable-rate fluctuates.
#15
What is a jumbo mortgage?
A mortgage that exceeds the conforming loan limits set by government-sponsored enterprises
ExplanationIt's for high-value properties exceeding standard loan limits.
#16
What is a cash-out refinance in mortgage financing?
A refinance where the borrower receives cash back based on the equity in their home
ExplanationIt replaces the existing mortgage with a larger one, withdrawing equity.
#17
What is the main benefit of a biweekly mortgage payment plan?
Reduced loan term
ExplanationIt accelerates loan repayment, saving on interest.
#18
What is a recourse loan in mortgage financing?
A loan where the lender can pursue other assets of the borrower if the property value drops below the loan balance
ExplanationIt provides additional recourse for lenders in case of default.