Mortgage Banking Flashcards
7 cards from real Banking practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mortgage Banking flashcards as text
What distinguishes an FHA loan from a conventional mortgage?
Answer: FHA loans are insured by the Federal Housing Administration, allowing lower down payments and flexible qualification
FHA loans are insured by the Federal Housing Administration, enabling lenders to offer down payments as low as 3.5% and more flexible credit requirements.
What is the primary benefit of a VA mortgage loan for eligible borrowers?
Answer: It is guaranteed by the Department of Veterans Affairs and typically requires no down payment
VA loans are guaranteed by the Department of Veterans Affairs, allowing eligible veterans, active-duty service members, and surviving spouses to purchase homes with no down payment required.
What defines an adjustable-rate mortgage (ARM)?
Answer: A mortgage with an interest rate that periodically resets based on a market index after an initial fixed period
An ARM features an interest rate that adjusts periodically — typically annually after an initial fixed period — based on a benchmark index such as SOFR.
What is a 'jumbo loan' in mortgage banking?
Answer: A mortgage that exceeds the conforming loan limits set by the FHFA
A jumbo loan exceeds the conforming loan limits established annually by the Federal Housing Finance Agency (FHFA), making it ineligible for purchase by Fannie Mae or Freddie Mac.
What is a USDA Rural Development mortgage loan primarily designed for?
Answer: Low-to-moderate income borrowers purchasing homes in USDA-eligible rural and suburban areas
USDA Rural Development loans assist low-to-moderate income borrowers in purchasing homes in eligible rural and suburban areas, often with no down payment required.
In a 5/1 ARM, what do the numbers '5' and '1' represent?
Answer: A fixed interest rate for the first 5 years, then the rate adjusts once per year
In a 5/1 ARM, the first number (5) is the initial fixed-rate period in years, and the second number (1) is the adjustment frequency in years after that period ends.
What is mortgage refinancing?
Answer: Replacing an existing mortgage with a new loan to obtain better terms or access equity
Refinancing pays off an existing mortgage by taking out a new loan, commonly to secure a lower interest rate, shorten the loan term, or convert home equity to cash.