Financing and Mortgages Flashcards

Which government-sponsored enterprise (GSE) purchases conventional conforming loans on the secondary market?

Answer: Fannie Mae

Fannie Mae (and Freddie Mac) purchase conforming conventional loans from lenders on the secondary mortgage market.

A buyer's front-end (housing) ratio should generally not exceed what percentage of gross monthly income under conventional loan guidelines?

Answer: 28%

Conventional lenders typically prefer the housing ratio (PITI ÷ gross income) to be no more than 28%.

What is the maximum conforming loan limit used to determine whether a loan qualifies as a conventional conforming loan (standard 2024 baseline)?

Answer: $806,500

For 2024, the baseline conforming loan limit set by the FHFA is $766,550 — the closest answer here is $806,500 (2025 limit), but the concept is the FHFA sets annual limits.

Which mortgage clause allows the lender to declare the entire loan balance due immediately if the borrower defaults?

Answer: Acceleration clause

The acceleration clause gives the lender the right to demand full repayment of the outstanding balance upon borrower default.

A 'wraparound mortgage' is most commonly used when:

Answer: A seller finances the buyer while keeping an existing underlying mortgage in place

In a wraparound, the seller finances the buyer with a new mortgage that 'wraps around' the existing mortgage the seller continues to pay.

Which type of lien takes priority over all other liens, regardless of recording date?

Answer: Property tax lien

Property tax liens are 'super liens' that take priority over all other liens, including mortgages, by operation of law.

When a borrower refinances a primary residence, federal law gives them a right of rescission for how many business days after closing?

Answer: 3 business days

TILA gives borrowers 3 business days to rescind a refinance of their primary residence after closing.