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Advanced Mortgage Products Flashcards

7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Advanced Mortgage Products flashcards as text

  1. A borrower wants a mortgage that allows interest-only payments for the first 10 years, then fully amortizes over the remaining 20 years. Which product best describes this structure?

    Answer: Interest-only fixed-rate mortgage

    An interest-only fixed-rate mortgage allows payments covering only interest for an initial period, after which the loan fully amortizes over the remaining term.

  2. Which of the following best characterizes a HELOC compared to a traditional home equity loan?

    Answer: HELOC is a revolving line of credit with a variable rate

    A HELOC (Home Equity Line of Credit) functions as a revolving credit line, typically with a variable interest rate tied to the prime rate.

  3. A construction-to-permanent loan converts to a permanent mortgage upon completion. What is the primary advantage of this single-close structure?

    Answer: Borrower only pays closing costs once instead of twice

    A single-close construction-to-permanent loan saves the borrower from paying two sets of closing costs by combining both phases into one transaction.

  4. What distinguishes a reverse mortgage from a traditional mortgage regarding monthly payments?

    Answer: Reverse mortgage requires no monthly principal and interest payments from the borrower

    With a reverse mortgage, the borrower makes no monthly principal and interest payments; instead, the loan balance grows over time until the home is sold or the borrower leaves.

  5. A 5/1 ARM has an initial cap of 2%, periodic cap of 2%, and lifetime cap of 5%. If the start rate is 4%, what is the maximum rate at first adjustment?

    Answer: 6%

    The initial cap of 2% limits the rate increase at the first adjustment, so the maximum rate is 4% + 2% = 6%.

  6. Which mortgage product is specifically designed for borrowers who want to purchase and renovate a property in a single loan?

    Answer: FHA 203(k) Rehabilitation Loan

    The FHA 203(k) loan allows borrowers to finance both the purchase and rehabilitation of a property under a single mortgage.

  7. A borrower obtains a piggyback loan structure (80-10-10). What does each number represent?

    Answer: First mortgage 80%, second mortgage 10%, down payment 10%

    In an 80-10-10 piggyback structure, 80% is the first mortgage LTV, 10% is a second mortgage, and 10% is the borrower's down payment.

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