General Mortgage Knowledge Flashcards

What is 'points' in the context of mortgage lending?

Answer: Prepaid interest equal to 1% of the loan amount

Each point equals 1% of the loan amount and represents prepaid interest paid upfront to reduce the interest rate.

A borrower wants to refinance to lower their monthly payment without resetting the loan term significantly. Which option is most appropriate?

Answer: Rate-and-term refinance

A rate-and-term refinance changes only the interest rate and/or loan term without taking out additional cash.

What is the 'annual percentage rate' (APR) designed to reflect?

Answer: The total cost of credit, including fees, expressed as a yearly rate

APR includes the interest rate plus fees and other costs, giving borrowers a broader measure of the loan's true annual cost.

Which of the following best describes 'amortization'?

Answer: Gradually paying off a loan through scheduled principal and interest payments

Amortization is the process of paying down a loan over time through regular payments that cover both principal and interest.

A homebuyer is purchasing a $400,000 property with a $60,000 down payment. What is the LTV ratio?

Answer: 85%

LTV = loan amount / property value = $340,000 / $400,000 = 85%.

What type of loan allows a buyer to assume the existing mortgage from the seller?

Answer: Assumable mortgage

An assumable mortgage lets a qualified buyer take over the seller's existing mortgage terms, rate, and remaining balance.

Which document provides a borrower with an itemized list of all estimated loan costs and must be delivered within 3 business days of application under TRID?

Answer: Loan Estimate (LE)

The Loan Estimate replaced the GFE under TRID and must be provided within 3 business days of receiving a completed loan application.