Products and Programs Flashcards

What is the maximum DTI ratio typically allowed for a USDA Guaranteed Loan without compensating factors?

Answer: 41%

USDA Guaranteed Loans generally allow a maximum DTI of 41%, though waivers may be granted with strong compensating factors.

Which mortgage product allows a borrower to draw funds, repay, and redraw during the draw period?

Answer: HELOC

A Home Equity Line of Credit (HELOC) is a revolving credit line that allows repeated borrowing and repayment during the draw period.

A 5/1 ARM means the rate is fixed for the first 5 years, then adjusts every:

Answer: 1 year

In a 5/1 ARM, the '1' indicates the rate adjusts once per year after the initial 5-year fixed period.

The Fannie Mae HomeReady program is designed primarily for:

Answer: Low-to-moderate income borrowers

HomeReady targets low-to-moderate income borrowers and allows income from non-borrower household members to qualify.

Which loan program insures mortgages for properties in rural and suburban areas and requires no down payment?

Answer: USDA Rural Development Loan

The USDA Rural Development Guaranteed Loan program offers 100% financing for eligible rural and suburban properties.

A balloon mortgage typically requires full repayment of the remaining principal:

Answer: At the end of a short term (e.g., 5 or 7 years)

Balloon mortgages have a large lump-sum payment due at the end of a relatively short loan term, often 5 to 7 years.

Which feature of an ARM caps the maximum amount the interest rate can increase at each adjustment?

Answer: Periodic cap

The periodic cap limits how much the interest rate can change at any single adjustment interval.

Which index is most commonly used as the basis for adjustable-rate mortgage adjustments in the United States?

Answer: SOFR

The Secured Overnight Financing Rate (SOFR) replaced LIBOR as the primary benchmark index for new U.S. ARM products.

A reverse mortgage allows eligible homeowners aged 62 or older to:

Answer: Convert home equity into loan proceeds without a required monthly payment

A reverse mortgage (typically a HECM) lets seniors access home equity as cash, a line of credit, or monthly advances with no required monthly repayment.

Which conventional loan program is specifically designed for manufactured housing and allows a 3% down payment?

Answer: Both A and C

Both Fannie Mae's MH Advantage and Freddie Mac's CHOICEHome allow 3% down payment for qualifying manufactured homes with site-built features.

The 'Good Neighbor Next Door' program offers a 50% discount on the list price of HUD homes for eligible buyers who are:

Answer: Teachers, law enforcement officers, firefighters, and EMTs

The HUD Good Neighbor Next Door program offers a 50% listing price discount to teachers, law enforcement officers, firefighters, and emergency medical technicians in revitalization areas.

A lender who holds originated loans in their own portfolio rather than selling them on the secondary market is called a:

Answer: Portfolio lender

Portfolio lenders retain loans on their own balance sheet, allowing more flexible underwriting outside agency guidelines.

An Energy Efficient Mortgage (EEM) allows borrowers to finance energy improvements by:

Answer: Stretching the loan amount beyond the appraised value to include efficiency upgrades

EEMs allow the cost of qualifying energy improvements to be added to the loan amount, above the home's appraised value, under FHA, VA, and conventional programs.

Which mortgage product is best suited for a borrower who needs short-term financing to purchase a new home before selling their current one?

Answer: Bridge loan

A bridge loan provides short-term financing, often secured by the current home's equity, to cover the gap between buying and selling.

Under the VA loan program, which of the following borrowers is exempt from paying the VA funding fee?

Answer: Veterans receiving VA disability compensation

Veterans receiving VA disability compensation are exempt from the VA funding fee, reducing their upfront loan costs.

The maximum loan limit for an FHA-insured single-family loan in high-cost areas is set at what percentage of the FHFA conforming loan limit?

Answer: 150%

FHA high-cost area loan limits are set at 150% of the FHFA conforming loan limit for that area.

A 'teaser rate' on an ARM is best described as:

Answer: A temporarily discounted initial rate below the fully indexed rate

A teaser rate is an artificially low introductory rate that is below the fully indexed rate (index + margin), used to attract borrowers.

Which specialized loan program is backed by the Small Business Administration and can be used to purchase commercial real estate for an owner-operated business?

Answer: SBA 504 Loan

The SBA 504 Loan provides long-term, fixed-rate financing for major fixed assets like owner-occupied commercial real estate.

Down Payment Assistance (DPA) programs are most commonly administered by:

Answer: State and local Housing Finance Agencies (HFAs)

State and local Housing Finance Agencies typically administer DPA programs funded through bond proceeds and federal grants.

A non-qualified mortgage (Non-QM) loan differs from a qualified mortgage primarily because it:

Answer: Does not meet the CFPB's Ability-to-Repay rule safe harbor requirements

Non-QM loans fall outside the CFPB's qualified mortgage safe harbor, meaning the lender assumes more legal risk related to the Ability-to-Repay rule.