#1
What is a fixed-rate mortgage?
A mortgage with an interest rate that remains constant throughout the loan term
ExplanationInterest rate remains constant throughout the loan term.
#2
Which of the following is a type of adjustable-rate mortgage (ARM)?
Option ARM
ExplanationOption ARM is a type of ARM.
#3
What is the purpose of a mortgage pre-approval?
To secure financing before house hunting
ExplanationSecures financing before house hunting.
#4
What is the role of the down payment in a mortgage?
To reduce the loan amount and lender's risk
ExplanationReduces loan amount and lender's risk.
#5
What is a home equity loan?
A loan using the equity in a home as collateral
ExplanationLoan using home equity as collateral.
#6
What is the loan-to-value (LTV) ratio in a mortgage?
The ratio of the loan amount to the appraised value of the property
ExplanationLoan amount compared to property value ratio.
#7
What is private mortgage insurance (PMI) used for?
To protect the lender in case the borrower defaults on the loan
ExplanationProtects lender in case of borrower default.
#8
What is the difference between a conventional mortgage and an FHA loan?
Conventional mortgages require a higher down payment compared to FHA loans.
ExplanationConventional requires higher down payment than FHA.
#9
What is the main advantage of an interest-only mortgage?
Lower monthly payments during the interest-only period
ExplanationLower monthly payments in interest-only period.
#10
What is a buy-to-let mortgage?
A mortgage for buying a property to rent out
ExplanationFor buying property to rent out.
#11
What is a hybrid ARM?
An ARM with a fixed interest rate for a certain period before becoming adjustable
ExplanationFixed rate period before becoming adjustable.
#12
Which of the following factors can affect mortgage interest rates?
Economic indicators such as inflation and unemployment rates
ExplanationInflation and unemployment affect rates.
#13
What is a jumbo mortgage?
A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac
ExplanationExceeds Fannie Mae and Freddie Mac loan limits.
#14
What is a reverse mortgage primarily used for?
To provide income for retirees using the equity in their home
ExplanationProvides income for retirees using home equity.
#15
What is the main risk associated with an adjustable-rate mortgage (ARM)?
Risk of fluctuating interest rates and monthly payments
ExplanationFluctuating rates and payments risk.
#16
What is a cash-out refinance?
Refinancing to borrow more than the remaining balance on the mortgage
ExplanationBorrowing more than remaining balance.
#17
What is a deed of trust?
A legal document that conveys title to a neutral third party as security for a loan
ExplanationTitle conveyed to neutral party as loan security.
#18
What is the purpose of a mortgage escrow account?
To hold funds for property taxes and insurance
ExplanationHolds funds for taxes and insurance.
#19
What is the difference between a mortgage broker and a mortgage lender?
A mortgage broker originates loans, while a mortgage lender funds and services loans.
ExplanationBroker originates, lender funds and services loans.