CMPS Mortgage Products & Financial Strategies 2

Question 1

A borrower wants to minimize monthly payments for the first 10 years while planning to sell before the adjustment period. Which product best fits this strategy?

Accepted Answer

10/1 ARM

Answer

A 10/1 ARM offers a fixed rate for 10 years before adjusting, matching the borrower's timeline and providing lower initial payments than a fixed-rate loan.

Question 2

Which of the following best describes negative amortization in a mortgage?

Accepted Answer

The loan balance increases because monthly payments do not cover accrued interest

Answer

Negative amortization occurs when a borrower's payment is insufficient to cover accrued interest, causing the unpaid interest to be added to the loan principal.

Question 3

A FHA loan requires mortgage insurance for the life of the loan if the original LTV exceeds which threshold?

Accepted Answer

90%

Answer

FHA loans with an original LTV above 90% require MIP for the full loan term; those at 90% or below require MIP for 11 years.

Question 4

What is the primary purpose of a piggyback loan structure such as an 80-10-10?

Accepted Answer

To avoid paying private mortgage insurance while financing more than 80% LTV

Answer

An 80-10-10 piggyback combines an 80% first mortgage with a 10% second mortgage and 10% down payment to eliminate the need for PMI.

Question 5

A HECM reverse mortgage requires the borrower to do all of the following EXCEPT:

Accepted Answer

Have no existing mortgage on the property

Answer

A HECM does not require the home to be free and clear; existing mortgages must simply be paid off from the reverse mortgage proceeds at closing.

(CMPS) Certified Mortgage Planning Specialist Practice Test

(CMPS) Certified Mortgage Planning Specialist Practice Test

CMPS Mortgage Products & Financial Strategies 2