Mortgage General Mortgage Knowledge 2

Question 1

What is the purpose of an escrow account in a mortgage?

Accepted Answer

To collect and pay property taxes and insurance on the borrower's behalf

Answer

To hold the deed until the loan is paid off

Answer

To store the down payment during closing

Answer

To fund home repairs required by the lender

Question 2

What does PMI stand for in the context of a mortgage?

Accepted Answer

Private Mortgage Insurance

Answer

Primary Mortgage Index

Answer

Property Management Insurance

Answer

Pre-approval Mortgage Indicator

Question 3

Which loan type is insured by the Federal Housing Administration and typically requires a lower down payment?

Accepted Answer

FHA loan

Answer

Conventional loan

Answer

VA loan

Answer

USDA loan

Question 4

What is a balloon mortgage?

Accepted Answer

A loan with low or interest-only payments followed by a large lump-sum payment at the end

Answer

A mortgage with increasing payments over time

Answer

A mortgage that adjusts annually based on inflation

Answer

A short-term bridge loan for moving expenses

Question 5

What is the 'principal' of a mortgage loan?

Accepted Answer

The original amount borrowed, excluding interest

Answer

The total interest paid over the loan's life

Answer

The monthly payment amount

Answer

The lender's fee for originating the loan

Question 6

What does 'amortization' mean in mortgage terms?

Accepted Answer

Paying off a loan through regular scheduled payments over time

Answer

The process of increasing a mortgage's interest rate annually

Answer

Refinancing a loan at a lower rate

Answer

Transferring a mortgage to another borrower

Question 7

Which document gives the borrower a detailed breakdown of all closing costs at least three business days before closing?

Accepted Answer

Closing Disclosure

Answer

Good Faith Estimate

Answer

HUD-1 Settlement Statement

Answer

Mortgage Commitment Letter