Mortgage Loan Originator Mortgage Products and Programs 2

Question 1

What is a 'bridge loan' and when is it typically used?

Accepted Answer

A short-term loan used to bridge the gap between buying a new home and selling the existing one

Answer

A bridge loan provides short-term financing allowing a homeowner to purchase a new property before selling their current one, using existing equity as collateral.

Question 2

What is the difference between a rate-and-term refinance and a cash-out refinance?

Accepted Answer

Rate-and-term only modifies the rate or term; cash-out provides the borrower with proceeds above the payoff amount

Answer

A rate-and-term refinance adjusts the interest rate or loan term without increasing the loan balance, while a cash-out refinance results in a new loan exceeding the existing balance with the difference paid to the borrower.

Question 3

A reverse mortgage is designed for homeowners who are at least:

Accepted Answer

62 years old

Answer

HECM (Home Equity Conversion Mortgage) reverse mortgages are available to homeowners aged 62 and older, allowing them to convert home equity into loan proceeds.

Question 4

Which type of mortgage loan allows the borrower to pay only the interest for an initial period before principal payments begin?

Accepted Answer

Interest-only mortgage

Answer

An interest-only mortgage allows the borrower to pay just the interest portion for an initial period, after which payments adjust to include both principal and interest.

Question 5

What is the purpose of mortgage discount points?

Accepted Answer

To prepay interest upfront in exchange for a lower interest rate

Answer

Discount points are prepaid interest paid at closing — typically 1% of the loan amount per point — to permanently reduce the interest rate on the mortgage.

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Practice Test

Mortgage Loan Originator Mortgage Products and Programs 2