Mortgage Products and Programs 3

Question 1

Which government-backed loan program charges both an Upfront Mortgage Insurance Premium (UFMIP) and an annual MIP?

Accepted Answer

FHA loan

Answer

FHA loans require a UFMIP (typically 1.75% of the loan amount) plus annual MIP paid monthly for the life of most loans.

Question 2

A construction-to-permanent loan differs from a standalone construction loan because it:

Accepted Answer

Automatically converts to a permanent mortgage after construction

Answer

A construction-to-permanent loan closes once and converts to a long-term mortgage when construction is complete, saving closing costs.

Question 3

The VA funding fee for a first-time use, no-down-payment purchase by an active-duty veteran is approximately:

Accepted Answer

2.15%

Answer

As of current VA guidelines, the funding fee for a first-time use purchase with no down payment is 2.15% of the loan amount.

Question 4

An interest-only mortgage allows borrowers to pay only interest for a set period, which means:

Accepted Answer

Monthly payments are lower during the IO period but principal is not reduced

Answer

During the interest-only period, payments cover only interest, so the principal balance stays the same until amortization begins.

Question 5

The FHA 203(k) loan is specifically designed to finance:

Accepted Answer

Purchase and renovation of a home in a single loan

Answer

The FHA 203(k) program allows borrowers to finance both the acquisition and rehabilitation of a property with one loan.

Mortgage Practice Test