Mortgage Mortgage General Mortgage Knowledge Questions and Answers 3

Question 1

What does PITI stand for in the context of monthly mortgage payments?

Accepted Answer

Principal, Interest, Taxes, Insurance

Answer

Principal, Interest, Title, Insurance

Answer

Payment, Interest, Term, Index

Answer

Principal, Inflation, Taxes, Insurance

Question 2

What is the main difference between a mortgage pre-qualification and a pre-approval?

Accepted Answer

Pre-approval involves a credit check and document verification while pre-qualification is typically an informal assessment

Answer

Pre-qualification is based on verified financial documents while pre-approval is an informal estimate

Answer

Pre-qualification guarantees a loan amount while pre-approval does not

Answer

There is no difference between the two terms

Question 3

What is the purpose of a mortgage rate lock?

Accepted Answer

To guarantee the borrower's interest rate for a specified period during the application process

Answer

To prevent the lender from changing any loan terms after closing

Answer

To lock the borrower into a minimum loan term of 30 years

Answer

To freeze the property's appraised value until closing

Question 4

Which federal law requires lenders to disclose the Annual Percentage Rate (APR) to borrowers?

Accepted Answer

Truth in Lending Act (TILA)

Answer

Fair Housing Act

Answer

Real Estate Settlement Procedures Act (RESPA)

Answer

Home Mortgage Disclosure Act (HMDA)

Question 5

What happens during a mortgage loan's underwriting process?

Accepted Answer

The lender evaluates the borrower's creditworthiness, income, assets, and the property's value to decide whether to approve the loan

Answer

The real estate agent negotiates the purchase price with the seller

Answer

The borrower selects their preferred interest rate and loan term

Answer

The title company transfers ownership of the property to the buyer

Question 6

What is an escrow account in relation to a mortgage?

Accepted Answer

An account held by the lender to collect and pay property taxes and insurance on behalf of the borrower

Answer

A savings account the borrower uses to save for a down payment

Answer

A checking account required to make monthly mortgage payments

Answer

A trust account that holds the seller's proceeds until the loan is paid off