Mortgage Terms 2

Question 1

What is 'negative amortization' in a mortgage?

Accepted Answer

When monthly payments are less than the interest owed, causing the loan balance to grow

Answer

Paying off the loan ahead of schedule

Answer

A penalty charged for early payoff

Answer

A type of balloon payment at loan maturity

Question 2

What does 'LTV' stand for in mortgage lending?

Accepted Answer

Loan-To-Value ratio

Answer

Long-Term Value

Answer

Liability Transfer Value

Answer

Lender's Total Valuation

Question 3

What is a 'due-on-sale' clause in a mortgage?

Accepted Answer

A provision requiring the full loan balance to be paid when the property is sold or transferred

Answer

A clause requiring the lender to sell the loan on the secondary market

Answer

A fee charged when the property appreciates in value

Answer

A requirement to pay taxes when the home is sold

Question 4

What is 'title insurance' in the context of a mortgage?

Accepted Answer

Insurance that protects against losses from defects or disputes in the property's ownership history

Answer

Insurance that covers the home's physical structure

Answer

Insurance that pays the mortgage if the borrower dies

Answer

Insurance that covers the lender against interest rate changes

Question 5

In mortgage terms, what is a 'rate cap'?

Accepted Answer

A limit on how much an adjustable-rate mortgage's interest rate can change in a given period or over the loan's life

Answer

The maximum interest rate a lender is allowed to charge by law

Answer

The minimum credit score required to qualify for a loan

Answer

A fee charged when the interest rate rises above market average

Question 6

What is a 'jumbo loan'?

Accepted Answer

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac

Answer

A mortgage with a term longer than 30 years

Answer

A loan that covers multiple properties at once

Answer

A mortgage with a very large down payment requirement

Question 7

What is 'private mortgage insurance' (PMI) typically required for?

Accepted Answer

Conventional loans where the down payment is less than 20% of the home's purchase price

Answer

All conventional loans regardless of down payment

Answer

FHA loans only

Answer

VA loans for military veterans