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

PITI stands for Principal, Interest, Taxes, and Insurance, which together make up the typical total monthly housing payment a borrower must budget for.

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-approval involves a thorough review of the borrower's credit, income, and assets, while pre-qualification is generally a quick, informal estimate based on self-reported information.

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

A rate lock guarantees the borrower a specific interest rate for a set period, protecting them from market rate increases while the loan is being processed.

Question 4

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

Accepted Answer

Truth in Lending Act (TILA)

Answer

The Truth in Lending Act (TILA) requires lenders to disclose the APR and other key loan terms so borrowers can compare the true cost of credit across different offers.

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

During underwriting, the lender thoroughly reviews the borrower's financial profile and the property's appraisal to assess the risk and determine loan approval.

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Mortgage Mortgage General Mortgage Knowledge Questions and Answers 3