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
What is the primary purpose of a balloon mortgage product?
Answer: To offer lower payments during the loan term with the full remaining balance due at maturity
A balloon mortgage features lower monthly payments based on a long amortization schedule, but the entire remaining balance becomes due at the end of a shorter term.
An Option ARM mortgage allows borrowers to choose from multiple payment options each month. Which payment option can lead to negative amortization?
Answer: Minimum payment below the interest accruing
When the minimum payment on an Option ARM is less than the accruing interest, the unpaid interest is added to the loan balance, creating negative amortization.
In the context of a HECM (Home Equity Conversion Mortgage), what is the 'Principal Limit'?
Answer: The maximum loan amount a borrower can receive based on age, rate, and home value
The Principal Limit in a HECM is the maximum amount a borrower can receive, calculated using the borrower's age, expected interest rate, and the lesser of the appraised value or FHA lending limit.
A lender offers a 2-1 buydown on a 7% fixed-rate mortgage. What rate does the borrower pay in year one?
Answer: 5%
In a 2-1 buydown, the rate is reduced by 2% in year one and 1% in year two, so a 7% loan has a 5% rate in year one.
Which feature differentiates a conforming jumbo loan from a standard jumbo loan?
Answer: Conforming jumbos meet agency guidelines except for loan amount
Conforming jumbo loans (also called agency jumbos or high-balance loans) exceed standard conforming limits but meet all other Fannie Mae/Freddie Mac guidelines and are eligible for purchase in high-cost areas.
A shared appreciation mortgage (SAM) typically requires the borrower to give the lender a portion of future appreciation. What does the borrower receive in exchange?
Answer: A below-market interest rate
In a shared appreciation mortgage, the borrower accepts a below-market interest rate in exchange for giving the lender a share of any future appreciation in the property's value.
What is a key characteristic of a physician mortgage loan that sets it apart from conventional financing?
Answer: It excludes student loan debt from DTI calculations or uses a favorable method
Physician mortgage programs typically exclude deferred student loan debt from DTI calculations or use a more favorable income-driven repayment figure, recognizing the earning potential of medical professionals.