Real Estate Finance & Mortgages

Question 1

Loan-to-value (LTV) ratio is calculated as:

Accepted Answer

Loan amount divided by the appraised property value

Answer

Loan amount divided by the borrower's income

Answer

Monthly payment divided by gross income

Answer

Down payment divided by purchase price

Question 2

Private Mortgage Insurance (PMI) is typically required when the borrower's down payment is:

Accepted Answer

Less than 20% of the purchase price

Answer

More than 20% of the purchase price

Answer

Equal to the loan amount

Answer

Less than 10% on FHA loans only

Question 3

In an adjustable-rate mortgage (ARM), the interest rate is tied to:

Accepted Answer

A market index plus a margin

Answer

The prime rate set by the Federal Reserve directly

Answer

The borrower's credit score

Answer

The original purchase price

Question 4

Amortization in a mortgage refers to:

Accepted Answer

The gradual payoff of the loan through scheduled principal and interest payments

Answer

The process of increasing the loan balance over time

Answer

Refinancing to a lower rate

Answer

Converting an ARM to a fixed rate

Question 5

Mortgage pre-approval differs from pre-qualification because pre-approval involves:

Accepted Answer

A formal review of verified financial documents by the lender

Answer

Only a verbal income estimate

Answer

A home inspection

Answer

A title search

Question 6

FHA loans are attractive to first-time buyers primarily because they allow:

Accepted Answer

Down payments as low as 3.5% with lower credit score requirements

Answer

No down payment required

Answer

No mortgage insurance

Answer

Unlimited loan amounts