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

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.

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

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

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

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

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

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.

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

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

(CMC) Certified Mortgage Consultant Practice Test

(CMC) Certified Mortgage Consultant Practice Test

CMC Advanced Mortgage Products 2