CMC Advanced Mortgage Products 2

Question 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?

Accepted Answer

Interest-only fixed-rate mortgage

Answer

Interest-only ARM

Answer

Negative amortization loan

Answer

Graduated payment mortgage

Question 2

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

Accepted Answer

HELOC is a revolving line of credit with a variable rate

Answer

HELOC has a fixed interest rate and lump-sum disbursement

Answer

HELOC always requires full repayment within 5 years

Answer

HELOC cannot be used for investment properties

Question 3

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

Accepted Answer

Borrower only pays closing costs once instead of twice

Answer

Lower construction interest rates than stand-alone construction loans

Answer

No draws are required during the construction phase

Answer

Permanent financing terms are negotiated after construction is complete

Question 4

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

Accepted Answer

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

Answer

Reverse mortgage requires higher monthly payments

Answer

Reverse mortgage payments are tax-deductible each year

Answer

Reverse mortgage balances decrease over time as equity builds

Question 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?

Accepted Answer

6%

Answer

5%

Answer

8%

Answer

9%

Question 6

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

Accepted Answer

FHA 203(k) Rehabilitation Loan

Answer

Home Equity Loan

Answer

Jumbo renovation loan

Answer

Construction-only loan

Question 7

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

Accepted Answer

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

Answer

First mortgage 80%, HELOC 10%, closing costs 10%

Answer

Down payment 80%, first mortgage 10%, second mortgage 10%

Answer

First mortgage 80%, PMI reserve 10%, taxes 10%