Mortgage Products and Programs Flashcards

A borrower is purchasing a manufactured home on a permanent foundation. Which loan type is MOST appropriate?

Answer: FHA Title II loan

FHA Title II loans can finance manufactured homes on permanent foundations that meet HUD standards, treating them as real property.

What is the primary purpose of the HomeReady mortgage program offered by Fannie Mae?

Answer: To expand homeownership for low-to-moderate income borrowers with flexible underwriting

HomeReady is designed to help low-to-moderate income buyers with features like reduced MI, low down payment, and flexible income sources.

Which index is most commonly used as the benchmark for 5/1 ARM loans in the U.S. today?

Answer: Secured Overnight Financing Rate (SOFR)

SOFR has replaced LIBOR as the primary benchmark index for most adjustable-rate mortgages in the U.S. since 2023.

A balloon mortgage with a 7/23 structure means the loan:

Answer: Amortizes over 30 years with a full payment due at year 7

A 7/23 balloon mortgage is amortized over 30 years but requires the full remaining balance to be paid at the end of year 7.

Under Freddie Mac's Home Possible program, what is the maximum loan-to-value ratio allowed for a one-unit primary residence?

Answer: 97%

Freddie Mac's Home Possible allows up to 97% LTV for one-unit primary residences, requiring only a 3% down payment.

Which type of mortgage allows the borrower to receive monthly payments from the lender rather than making payments to the lender?

Answer: Reverse mortgage (HECM)

A reverse mortgage (HECM) allows homeowners 62+ to receive loan proceeds as monthly payments, a lump sum, or line of credit.

A 2-1 buydown on a 7% mortgage means the borrower pays:

Answer: 5% in year 1, 6% in year 2, 7% thereafter

A 2-1 buydown reduces the rate by 2% in year 1 and 1% in year 2, then reverts to the note rate of 7% in year 3.