#1
Which of the following is a common type of mortgage?
All of the above
ExplanationVarious mortgage types include fixed-rate, adjustable-rate, and interest-only.
#2
What does LTV stand for in the context of mortgages?
Loan to Value
ExplanationLTV represents the ratio of the loan amount to the property's appraised value.
#3
Which of the following factors typically affects mortgage interest rates?
All of the above
ExplanationInterest rates are influenced by credit score, economic conditions, and market forces.
#4
What is private mortgage insurance (PMI) used for?
To protect the lender in case the borrower defaults
ExplanationPMI safeguards the lender against financial loss if the borrower fails to repay.
#5
What is the difference between a mortgage broker and a mortgage lender?
A mortgage broker is a middleman who connects borrowers with lenders, while a mortgage lender directly provides the loan.
ExplanationBrokers facilitate loan connections, while lenders fund the mortgage directly.
#6
What is the purpose of a home appraisal in the mortgage process?
To determine the market value of the property
ExplanationAppraisal assesses the property's value, ensuring it aligns with the loan amount.
#7
Which of the following is a disadvantage of an adjustable-rate mortgage (ARM)?
It can lead to higher monthly payments if interest rates rise.
ExplanationARMs pose the risk of increased payments when interest rates climb.
#8
What is the purpose of a pre-approval letter in the mortgage process?
To estimate the maximum loan amount a borrower can qualify for
ExplanationPre-approval provides an estimate of the borrower's qualifying loan amount.
#9
In a mortgage, what does 'amortization' refer to?
The process of paying off a loan over time through regular payments
ExplanationAmortization involves gradual repayment of the loan principal and interest.
#10
What is the role of escrow in a mortgage transaction?
To ensure that property taxes and insurance are paid on time
ExplanationEscrow manages payments for taxes and insurance, ensuring timely coverage.
#11
What is a jumbo mortgage?
A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac
ExplanationJumbo mortgages surpass standard loan limits set by housing agencies.
#12
What is a reverse mortgage primarily designed for?
Providing income for retirees using their home equity
ExplanationReverse mortgages offer retirees income by leveraging home equity.
#13
What is a mortgage refinance?
Obtaining a new mortgage with different terms to replace an existing one
ExplanationRefinancing involves replacing an existing mortgage with a new one, often for better terms.
#14
What is the purpose of a home inspection in the mortgage process?
To assess the condition of the property
ExplanationInspections evaluate the property's condition, ensuring it meets standards.