Mortgage Products & Financial Strategies Flashcards
7 cards from real CMPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mortgage Products & Financial Strategies flashcards as text
A homeowner with a VA loan wants to lower their interest rate with minimal documentation and no appraisal. Which option is available?
Answer: VA Interest Rate Reduction Refinance Loan (IRRRL)
The VA IRRRL (also called a streamline refinance) allows eligible VA borrowers to lower their rate with reduced documentation and typically no appraisal or credit underwriting.
What is the maximum seller concession allowed on a conventional loan with an LTV between 75.01% and 90%?
Answer: 3%
Fannie Mae/Freddie Mac guidelines limit seller concessions to 3% of the purchase price for conventional loans with LTV between 75.01% and 90%.
Which of the following describes a 'buy-down' mortgage strategy where the seller or builder pays to reduce the borrower's interest rate for the first two years?
Answer: 2-1 buydown
A 2-1 buydown reduces the borrower's rate by 2% in year one and 1% in year two, with the cost paid upfront by the seller, builder, or lender.
In mortgage planning, what does the term 'debt-service coverage ratio' (DSCR) primarily measure for investment property loans?
Answer: The ratio of net operating income to total debt service
DSCR measures whether a property's net operating income is sufficient to cover its debt obligations, typically required to be 1.0 or higher for investment property DSCR loans.
A borrower is considering a home equity line of credit (HELOC) versus a home equity loan. Which statement is accurate?
Answer: A HELOC provides a revolving line of credit while a home equity loan disburses a lump sum
A HELOC functions as a revolving credit line with a draw period, while a home equity loan provides a fixed lump-sum disbursement at closing.
Which loan type is specifically designed to finance both the purchase price and renovation costs of a property in a single mortgage?
Answer: Both A and B
Both the FHA 203(k) and Fannie Mae HomeStyle renovation loans allow borrowers to finance purchase and renovation costs in one mortgage.
When evaluating the financial benefit of paying discount points to lower a mortgage rate, the 'break-even point' is calculated as:
Answer: Total points paid divided by the monthly payment savings
The break-even point equals the upfront cost of points divided by the monthly savings, indicating how many months until the borrower recoups the cost.