CMA Mortgage Products and Programs 2 — Questions and Answers
Question 1: Which loan program allows a borrower to finance both the purchase price and renovation costs into a single mortgage?
- FHA 203(k) loan (Correct answer)
- USDA Rural Development loan
- VA IRRRL
- Conventional 97 loan
Correct answer: FHA 203(k) loan
The FHA 203(k) loan combines home purchase and renovation financing into one mortgage, making it ideal for fixer-uppers.
Question 2: A borrower wants to refinance their existing VA loan with minimal documentation and no appraisal. Which program applies?
- FHA Streamline Refinance
- VA Interest Rate Reduction Refinance Loan (IRRRL) (Correct answer)
- USDA Streamlined Assist Refinance
- Conventional rate-and-term refinance
Correct answer: VA Interest Rate Reduction Refinance Loan (IRRRL)
The VA IRRRL (also called VA Streamline) allows veterans to refinance with reduced documentation and typically no appraisal.
Question 3: What distinguishes a 'super conforming' loan from a standard conforming loan?
- It has a lower interest rate than standard conforming loans
- It exceeds the standard loan limit but stays within higher limits for designated high-cost areas (Correct answer)
- It requires a minimum 20% down payment
- It is guaranteed by the federal government
Correct answer: It exceeds the standard loan limit but stays within higher limits for designated high-cost areas
Super conforming loans exceed the baseline conforming loan limit but fall within the higher limits set by FHFA for high-cost housing markets.
Question 4: Under the USDA Guaranteed Loan Program, what is the maximum debt-to-income ratio typically allowed without a compensating factor?
- 28% front-end / 36% back-end
- 29% front-end / 41% back-end (Correct answer)
- 31% front-end / 43% back-end
- 33% front-end / 45% back-end
Correct answer: 29% front-end / 41% back-end
USDA Guaranteed Loans typically allow a maximum of 29% front-end and 41% back-end DTI ratios without compensating factors.
Question 5: A borrower has a FICO score of 580 and wants the minimum possible down payment on an FHA loan. What is the minimum down payment required?
- 3.0%
- 3.5% (Correct answer)
- 5.0%
- 10.0%
Correct answer: 3.5%
Borrowers with credit scores of 580 or higher qualify for FHA's minimum 3.5% down payment; scores below 580 require 10%.
Question 6: Which feature of an adjustable-rate mortgage limits how much the interest rate can increase over the life of the loan?
- Periodic cap
- Payment cap
- Lifetime cap (Correct answer)
- Margin cap
Correct answer: Lifetime cap
The lifetime cap restricts the maximum interest rate increase over the entire loan term, regardless of index movements.
Question 7: Which mortgage product is specifically designed for energy-efficient home improvements and allows the cost to be rolled into a conventional mortgage?
- FHA EEM (Energy Efficient Mortgage)
- Fannie Mae HomeStyle Energy (Correct answer)
- VA Energy Improvement Loan
- PACE loan
Correct answer: Fannie Mae HomeStyle Energy
Fannie Mae's HomeStyle Energy mortgage allows borrowers to finance energy efficiency improvements within a conventional loan.
CMA Mortgage Products and Programs 2
Which loan program allows a borrower to finance both the purchase price and renovation costs into a single mortgage?