SAFE Products and Calculations 2

Question 1

A borrower has a $300,000 loan at 6% annual interest. What is the monthly interest portion of the first payment using simple interest calculation?

Accepted Answer

$1,500

Answer

Monthly interest = $300,000 × (6% / 12) = $300,000 × 0.005 = $1,500.

Question 2

An ARM has a 2/6 cap structure with an initial rate of 4.5%. What is the maximum rate the loan can ever reach?

Accepted Answer

10.5%

Answer

A lifetime cap of 6% added to the initial rate of 4.5% yields a maximum possible rate of 10.5%.

Question 3

Which loan product is characterized by payments that cover only interest for a set period, after which the payment increases substantially?

Accepted Answer

Interest-only mortgage

Answer

An interest-only mortgage requires only interest payments during the initial period, then fully amortized payments begin.

Question 4

A home appraises at $250,000 and the borrower puts 10% down. What is the LTV ratio?

Accepted Answer

90%

Answer

LTV = Loan Amount / Appraised Value = $225,000 / $250,000 = 90%.

Question 5

What is the FHA upfront mortgage insurance premium (UFMIP) rate for most FHA purchase loans?

Accepted Answer

1.75%

Answer

FHA charges a UFMIP of 1.75% of the base loan amount, which can be financed into the loan.

(SAFE) Certified Secure and Fair Enforcement Mortgage Loan Originator Practice Test