Mortgage Loan Originator Trivia 3

Question 1

What is the name of the index most commonly used for adjustable-rate mortgages tied to the Secured Overnight Financing Rate?

Accepted Answer

SOFR

Answer

SOFR (Secured Overnight Financing Rate) replaced LIBOR as the preferred benchmark index for adjustable-rate mortgages after LIBOR's phase-out.

Question 2

Which type of mortgage loan is backed by the U.S. Department of Agriculture and designed for rural and suburban homebuyers?

Accepted Answer

USDA loan

Answer

USDA loans are guaranteed by the U.S. Department of Agriculture and offer 100% financing to eligible buyers in designated rural areas.

Question 3

What is the term for a mortgage where the interest rate is fixed for an initial period, then adjusts periodically based on a market index?

Accepted Answer

Adjustable-Rate Mortgage (ARM)

Answer

An ARM has an initial fixed-rate period followed by periodic rate adjustments tied to a benchmark index plus a margin.

Question 4

What minimum credit score does the FHA typically require for a borrower to qualify for a 3.5% down payment?

Accepted Answer

580

Answer

FHA allows a 3.5% down payment for borrowers with a credit score of 580 or higher; scores between 500–579 require 10% down.

Question 5

What document provides a final itemized list of all closing costs and is delivered to the borrower at least three business days before closing?

Accepted Answer

Closing Disclosure

Answer

Under TRID, the Closing Disclosure replaced the HUD-1 and must be delivered at least three business days before loan consummation.

Mortgage Loan Originator Practice Test