Mortgage Mortgage Terms Question and Answers 3

Question 1

What does 'debt-to-income ratio' (DTI) represent to a mortgage lender?

Accepted Answer

The ratio of the borrower's total monthly debt payments to gross monthly income

Answer

The percentage of the home's value that the borrower owes

Answer

The amount of savings a borrower has relative to the loan amount

Answer

The difference between the interest rate and the inflation rate

Question 2

What is a 'rate lock' in the mortgage process?

Accepted Answer

A guarantee from the lender that a specific interest rate will be held for a set period during processing

Answer

A permanent interest rate that never changes over the life of the loan

Answer

A government regulation that caps how high mortgage rates can go

Answer

An agreement that the borrower will not refinance for a certain number of years

Question 3

What does 'title insurance' protect against in a real estate transaction?

Accepted Answer

Financial loss from defects in the title or ownership disputes

Answer

Damage to the property from natural disasters

Answer

Loss of the property due to eminent domain

Answer

Increases in property taxes after the purchase

Question 4

What is a 'prepayment penalty' on a mortgage?

Accepted Answer

A charge imposed by the lender when the borrower pays off the loan ahead of schedule

Answer

A fee charged if the borrower misses a scheduled payment

Answer

An additional cost added to the loan if the appraisal comes in low

Answer

A surcharge applied to the first payment of a new mortgage

Question 5

What does 'points' or 'discount points' mean when obtaining a mortgage?

Accepted Answer

Upfront fees paid to the lender at closing to reduce the interest rate

Answer

The number of years remaining on the loan term

Answer

The credit score thresholds used to qualify for a loan

Answer

The percentage of closing costs covered by the seller

Question 6

What is an 'adjustable-rate mortgage' (ARM) introductory period?

Accepted Answer

The initial fixed-rate period before the interest rate begins to adjust periodically

Answer

The time during which the borrower is exempt from making any payments

Answer

The grace period after a missed payment before late fees apply

Answer

The waiting period required between applying for and closing on the loan