Mortgage Terms Question and Answers

Question 1

Which option most accurately describes CLOSING COSTS?

Accepted Answer

The fees collected by the lender are needed to make the loan.

Answer

a cost incurred by the title insurance company for the services of the closer, management of the closing process, and distribution of funds

Answer

The phrase can be used to refer to the process of collecting the appraisal and credit report fees or as a charge to cover the expense of preparing the application for underwriting.

Question 2

What option best describes appraisal?

Accepted Answer

a document that details a property's worth as determined by a certified appraiser.

Answer

a report that a professional underwriter uses to value a property.

Answer

A licensed inspector verifies that the building is structurally sound and that everything is operating as it should.

Question 3

Which option most accurately describes CONSUMER REPORTING AGENCY?

Accepted Answer

Companies such as Equifax, Experian and TransUnion that collect data from creditors and public records.

Answer

Enacted in 1996, this act exercises control over the Credit Report Agencies.

Answer

A legal entity that is separate from its shareholders, officers and directors.

Question 4

What option most accurately describes annual percentage rate (APR)?

Accepted Answer

A ratio that illustrates how the entire financing charges (interest, origination fees, etc.) relate to the loan amount

Answer

the quantity that a lender multiplies the index by in order to calculate the interest rate for an adjustable rate mortgage.

Answer

the sum paid to the lender as compensation for using the funds they lent the owner.

Question 5

Which option most accurately describes an adjustable rate mortgage (ARM)?

Accepted Answer

a loan that permits periodic interest rate changes over the course of the loan.

Answer

a short-term loan with monthly payments that are insufficient to cover the total in the allotted time.

Answer

a loan having a fixed interest rate that stays the same throughout the loan's term.

Question 6

Which option most accurately describes CLOSING FEE?

Accepted Answer

a cost paid to the title insurance provider that covers the closer's services, the management of the closing documents' signing, and the distribution of funds.

Answer

The fees collected by the lender needed to make the loan.

Answer

The phrase can be used to refer to the collection of the appraisal and credit report fees or as a payment to cover the expense of preparing the application for underwriting.

Question 7

CREDIT GRADE is best described by which option?

Accepted Answer

a system that non-prime and private investors use to rank the risk in a file and decide the appropriate interest rate to be charged.

Answer

a one-time payment made to the lender to secure a specific loan interest rate.

Answer

a figure that quantifies a borrower's statistical likelihood of paying back future loans.