CMA - Certified Mortgage Advisor Mortgage Products and Programs Questions and Answers 1 — Questions and Answers
Question 1: A client is considering a USDA Guaranteed Rural Housing loan. Which of the following is a key eligibility requirement they must meet for this specific program?
- The property must be a working farm or ranch.
- The borrower's household income cannot exceed 115% of the area median income. (Correct answer)
- A minimum down payment of 3.5% is required.
- The borrower must be a first-time homebuyer.
Correct answer: The borrower's household income cannot exceed 115% of the area median income.
The USDA Guaranteed Loan Program is designed for low- to moderate-income households in rural areas. A primary qualifying factor is that the applicant's total household income must not be more than 115% of the Area Median Income (AMI).
Question 2: A 65-year-old homeowner with significant equity in their primary residence wants to access funds without taking on a monthly mortgage payment. Which mortgage product is specifically designed for this purpose?
- A jumbo loan
- A VA Interest Rate Reduction Refinance Loan (IRRRL)
- A Home Equity Conversion Mortgage (HECM) (Correct answer)
- A conforming conventional loan
Correct answer: A Home Equity Conversion Mortgage (HECM)
A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is an FHA-insured loan that allows homeowners aged 62 or older to convert a portion of their home equity into cash. The loan generally does not require monthly payments and becomes due when the borrower sells the home, moves out, or passes away.
Question 3: What is the primary purpose of the VA funding fee associated with a VA-guaranteed home loan?
- To cover the cost of the property appraisal.
- To pay the mortgage originator's commission.
- To reduce the financial burden on taxpayers by helping to fund the VA loan program. (Correct answer)
- To act as the first year's homeowners insurance premium.
Correct answer: To reduce the financial burden on taxpayers by helping to fund the VA loan program.
The VA funding fee is a one-time fee paid to the Department of Veterans Affairs. Its main purpose is to help offset the costs of the VA loan program, reducing the burden on taxpayers and ensuring the program remains available for future veterans.
Question 4: A prospective homebuyer is applying for an FHA-insured loan. Their credit score is 560. What is the minimum down payment requirement they must meet, according to FHA guidelines?
- 3.5%
- 5%
- 20%
- 10% (Correct answer)
Correct answer: 10%
According to FHA guidelines, borrowers with a FICO score between 500 and 579 are required to make a minimum down payment of 10%. Borrowers with a score of 580 or higher can qualify for the minimum 3.5% down payment.
Question 5: Which of the following best distinguishes a 'jumbo' loan from a 'conforming' loan?
- Jumbo loans are exclusively for investment properties, while conforming loans are for primary residences.
- Jumbo loans always have a fixed interest rate, whereas conforming loans can be fixed or adjustable.
- The loan amount of a jumbo loan is above the limits set by the Federal Housing Finance Agency (FHFA). (Correct answer)
- Jumbo loans do not require mortgage insurance, but conforming loans always do.
Correct answer: The loan amount of a jumbo loan is above the limits set by the Federal Housing Finance Agency (FHFA).
The primary difference between a conforming loan and a jumbo loan is the loan amount. Conforming loans meet the loan limit guidelines set by the Federal Housing Finance Agency (FHFA) and can be purchased by Fannie Mae and Freddie Mac. Jumbo loans exceed these limits.
Question 6: A client is looking to purchase a multi-family home where they will live in one unit and rent out the others. Which of the following loan programs explicitly allows for the purchase of a 2-4 unit property, provided the borrower occupies one of the units as their primary residence?
- USDA Direct Loan
- FHA Standard 203(b) Loan (Correct answer)
- VA Interest Rate Reduction Refinance Loan (IRRRL)
- Home Equity Conversion Mortgage (HECM)
Correct answer: FHA Standard 203(b) Loan
The standard FHA 203(b) loan program can be used to finance properties with one to four units, as long as the borrower occupies one of the units as their primary residence. This makes it a popular choice for owner-occupant landlords. The other options are for different purposes (refinancing, reverse mortgages) or have different property type restrictions.
CMA - Certified Mortgage Advisor Mortgage Products and Programs Questions and Answers 1
A client is considering a USDA Guaranteed Rural Housing loan.
Which of the following is a key eligibility requirement they must meet for this specific program?