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

During the interest-only period, borrowers pay only interest, so the principal balance remains unchanged.

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

Fannie Mae's HomeReady program allows qualifying borrowers to put down as little as 3% with flexible income sources.

Question 3

What happens when a balloon mortgage reaches its maturity date?

Accepted Answer

The remaining balance becomes due in full

Answer

A balloon mortgage requires the borrower to pay off the entire remaining balance as a lump sum at maturity.

Question 4

Which government agency insures FHA loans against borrower default?

Accepted Answer

Federal Housing Administration

Answer

The FHA, part of HUD, provides mortgage insurance to lenders on FHA-approved loans.

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

A construction-to-permanent loan funds the building phase and then automatically converts to a standard mortgage.

Mortgage Practice Test