Mortgage Terms 4

Question 1

What is a 'short sale' in real estate and mortgage terms?

Accepted Answer

Selling a property for less than the outstanding mortgage balance with lender approval

Answer

A short sale occurs when a lender agrees to accept the sale proceeds of a property even though the amount is less than the remaining mortgage balance, typically to avoid foreclosure.

Question 2

What is 'mortgage forbearance'?

Accepted Answer

A temporary pause or reduction of mortgage payments granted by the lender during financial hardship

Answer

Mortgage forbearance is an agreement between lender and borrower that temporarily suspends or reduces payments during periods of financial hardship, with repayment arranged afterward.

Question 3

What does the term 'assumable mortgage' mean?

Accepted Answer

A mortgage that can be transferred from the seller to the buyer, who takes over the existing loan terms

Answer

An assumable mortgage allows a homebuyer to take over the seller's existing mortgage, including its interest rate and remaining balance, subject to lender approval.

Question 4

What is a 'deed of trust' as opposed to a mortgage?

Accepted Answer

A three-party security instrument used in some states where a trustee holds title until the loan is repaid

Answer

A deed of trust involves three parties—borrower, lender, and a neutral trustee—who holds legal title to the property as security until the loan is paid off, used instead of a traditional mortgage in many states.

Question 5

What is a 'piggyback loan' in mortgage financing?

Accepted Answer

A second mortgage taken simultaneously with the first to avoid PMI or cover the down payment

Answer

A piggyback loan is a second mortgage taken at the same time as the first, commonly structured as 80/10/10 to avoid PMI when the borrower has only 10% down.

Mortgage Practice Test

Mortgage Practice Test

Mortgage Terms 4