Mortgage Mortgage Mortgage Products and Programs Questions and Answers 3

Question 1

What is a key feature of an interest-only mortgage during the initial payment period?

Accepted Answer

Monthly payments cover only the interest, not the principal

Answer

The borrower pays no interest or principal

Answer

The interest rate is always fixed

Answer

The loan balance decreases faster than a standard mortgage

Question 2

Which mortgage product is designed by Fannie Mae to help low-to-moderate income borrowers with down payments as low as 3%?

Accepted Answer

HomeReady mortgage

Answer

FHA 203(b) loan

Answer

VA loan

Answer

HECM reverse mortgage

Question 3

What happens when a balloon mortgage reaches its maturity date?

Accepted Answer

The remaining balance becomes due in full

Answer

The loan automatically converts to a fixed-rate mortgage

Answer

The interest rate drops to zero

Answer

Monthly payments are reduced by half

Question 4

Which government agency insures FHA loans against borrower default?

Accepted Answer

Federal Housing Administration

Answer

Department of Veterans Affairs

Answer

Federal Reserve

Answer

Consumer Financial Protection Bureau

Question 5

What is the purpose of a construction-to-permanent loan?

Accepted Answer

It finances building a new home and converts to a permanent mortgage upon completion

Answer

It refinances an existing construction loan into a higher rate

Answer

It provides temporary funding only during demolition

Answer

It covers landscaping and exterior improvements exclusively

Question 6

How does a reverse mortgage (HECM) differ from a traditional mortgage?

Accepted Answer

The lender pays the borrower, and repayment is deferred until the borrower moves out or passes away

Answer

The borrower makes double payments each month

Answer

It requires a 20% down payment

Answer

It is only available to first-time homebuyers