Mortgage Loan Originator Mortgage Products and Programs 3

Question 1

What is lender-paid mortgage insurance (LPMI), and what is its tradeoff?

Accepted Answer

The lender pays PMI in exchange for a higher interest rate on the loan

Answer

The government pays PMI on FHA loans; no tradeoff

Answer

PMI is paid by the seller at closing; buyer gets lower rate

Answer

PMI is financed into the loan balance; monthly payments stay the same

Question 2

A HELOC (Home Equity Line of Credit) is best described as:

Accepted Answer

A revolving line of credit secured by home equity with a variable rate

Answer

A fixed-rate second mortgage with a lump-sum disbursement

Answer

A government program for home improvements

Answer

A short-term construction loan

Question 3

The VA Interest Rate Reduction Refinance Loan (IRRRL) is designed to:

Accepted Answer

Streamline a refinance of an existing VA loan to a lower rate with minimal documentation

Answer

Allow veterans to take cash out of their home equity

Answer

Convert a conventional loan to a VA loan

Answer

Purchase a new primary residence for veterans

Question 4

What is a 'balloon mortgage' and what risk does it pose to borrowers?

Accepted Answer

A mortgage with low payments followed by a large lump-sum payment due at maturity; risk of inability to pay or refinance

Answer

A mortgage with a variable rate; risk of rising payments

Answer

A mortgage with no amortization schedule; risk of increasing loan balance

Answer

A mortgage for high-value properties; risk of lower LTV

Question 5

A construction-to-permanent loan differs from a standalone construction loan in that:

Accepted Answer

It automatically converts to permanent financing upon construction completion without a second closing

Answer

It only covers the construction phase and must be refinanced

Answer

It requires a higher credit score than conventional loans

Answer

It is only available through the FHA

Question 6

Which loan program is specifically designed to help borrowers finance energy-efficient improvements as part of a purchase or refinance?

Accepted Answer

Energy Efficient Mortgage (EEM)

Answer

FHA 203(k)

Answer

USDA Rural Energy for America

Answer

VA Adaptive Housing Grant