RES Real Estate Finance & Mortgages 2

Question 1

What is a mortgage point?

Accepted Answer

A fee equal to 1% of the loan amount paid upfront to reduce the interest rate

Answer

A unit of measurement for interest rates

Answer

A penalty for late payments

Answer

A bonus paid to the loan officer

Question 2

What is a home equity line of credit (HELOC)?

Accepted Answer

A revolving credit line secured by the borrower's home equity that can be drawn on as needed

Answer

A fixed second mortgage

Answer

A government grant for home improvements

Answer

A savings account for future home purchases

Question 3

What is a debt-to-income (DTI) ratio and why do lenders use it?

Accepted Answer

The percentage of monthly gross income that goes toward debt payments, used to assess a borrower's ability to manage mortgage payments

Answer

The total amount of debt divided by total assets

Answer

The interest rate on the mortgage

Answer

The ratio of property value to outstanding liens

Question 4

What is refinancing a mortgage?

Accepted Answer

Replacing an existing mortgage with a new one, typically to obtain a lower interest rate or different terms

Answer

Making extra payments on the current mortgage

Answer

Selling the property and buying a new one

Answer

Defaulting on the current mortgage

Question 5

What triggers a foreclosure?

Accepted Answer

The borrower's failure to make mortgage payments, leading the lender to take legal action to seize and sell the property

Answer

The property increasing in value above the loan amount

Answer

The borrower paying off the mortgage early

Answer

A change in zoning laws affecting the property

Question 6

What is an appraisal and why is it required for a mortgage?

Accepted Answer

A professional estimate of a property's market value required by lenders to ensure the property is worth the loan amount

Answer

An inspection of the property's structural condition

Answer

A survey of the property's boundaries

Answer

A review of the neighborhood's crime statistics