#1
Which of the following best describes a mortgage?
A loan taken out to purchase real estate.
ExplanationA mortgage is a loan specifically for purchasing real estate.
#2
What does LTV stand for in real estate financing?
Loan to Value
ExplanationLTV stands for Loan to Value, indicating the ratio of the loan amount to the property value.
#3
What is the typical duration of a standard mortgage loan term?
30 years
ExplanationThe standard mortgage loan term commonly extends over a period of 30 years.
#4
What does DTI stand for in real estate financing?
Debt to Income
ExplanationDTI stands for Debt to Income, indicating the ratio of debt payments to income.
#5
What is a real estate appraisal?
An evaluation of a property's market value by a licensed appraiser.
ExplanationA real estate appraisal determines a property's market value conducted by a licensed appraiser.
#6
What is an amortization schedule used for in mortgage financing?
To outline the payment plan over the loan term.
ExplanationAn amortization schedule details the repayment plan of a mortgage over time.
#7
In real estate financing, what does PMI typically refer to?
Private Mortgage Insurance
ExplanationPMI, or Private Mortgage Insurance, protects the lender in case of borrower default.
#8
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM)?
A fixed-rate mortgage has a constant interest rate, while an ARM has a variable interest rate.
ExplanationA fixed-rate mortgage maintains the same interest rate, while an ARM's rate fluctuates.
#9
What is the primary purpose of underwriting in real estate financing?
To assess the borrower's creditworthiness and risk.
ExplanationUnderwriting evaluates a borrower's financial suitability and risk level.
#10
What does the term 'points' refer to in mortgage financing?
The percentage of the loan amount paid upfront as a fee to the lender.
ExplanationPoints represent a fee paid upfront as a percentage of the loan amount.
#11
What is a balloon payment in mortgage financing?
A large, final payment due at the end of a mortgage loan term.
ExplanationA balloon payment is a lump sum payment required at the end of a mortgage term.
#12
What is a deed of trust in real estate financing?
A document granting a trustee the power to foreclose on property if the borrower defaults.
ExplanationA deed of trust authorizes foreclosure if a borrower defaults on their mortgage.
#13
What is a prepayment penalty in mortgage financing?
A fee charged if the borrower pays off the mortgage before a certain period.
ExplanationA prepayment penalty is a charge incurred for early mortgage repayment.