Mortgage Loan Originator Trivia 3 — Questions and Answers
Question 1: What is the name of the index most commonly used for adjustable-rate mortgages tied to the Secured Overnight Financing Rate?
- LIBOR
- SOFR (Correct answer)
- Prime Rate
- COFI
Correct answer: SOFR
SOFR (Secured Overnight Financing Rate) replaced LIBOR as the preferred benchmark index for adjustable-rate mortgages after LIBOR's phase-out.
Question 2: Which type of mortgage loan is backed by the U.S. Department of Agriculture and designed for rural and suburban homebuyers?
- FHA loan
- VA loan
- USDA loan (Correct answer)
- Conventional loan
Correct answer: USDA loan
USDA loans are guaranteed by the U.S. Department of Agriculture and offer 100% financing to eligible buyers in designated rural areas.
Question 3: What is the term for a mortgage where the interest rate is fixed for an initial period, then adjusts periodically based on a market index?
- Graduated Payment Mortgage
- Adjustable-Rate Mortgage (ARM) (Correct answer)
- Balloon Mortgage
- Interest-Only Mortgage
Correct answer: Adjustable-Rate Mortgage (ARM)
An ARM has an initial fixed-rate period followed by periodic rate adjustments tied to a benchmark index plus a margin.
Question 4: What minimum credit score does the FHA typically require for a borrower to qualify for a 3.5% down payment?
- 500
- 580 (Correct answer)
- 620
- 640
Correct answer: 580
FHA allows a 3.5% down payment for borrowers with a credit score of 580 or higher; scores between 500–579 require 10% down.
Question 5: What document provides a final itemized list of all closing costs and is delivered to the borrower at least three business days before closing?
- Good Faith Estimate
- HUD-1 Settlement Statement
- Closing Disclosure (Correct answer)
- Truth-in-Lending Disclosure
Correct answer: Closing Disclosure
Under TRID, the Closing Disclosure replaced the HUD-1 and must be delivered at least three business days before loan consummation.
Question 6: What is the name of the VA funding fee exemption category that applies to veterans receiving VA compensation for service-connected disabilities?
- Purple Heart recipients only
- All active-duty service members
- Veterans with service-connected disability ratings (Correct answer)
- First-time VA loan users only
Correct answer: Veterans with service-connected disability ratings
Veterans who receive VA disability compensation for service-connected disabilities are exempt from paying the VA funding fee.
Question 7: What term describes the difference between a home's appraised value and the outstanding mortgage balance?
- Loan-to-Value ratio
- Home Equity (Correct answer)
- Net Worth
- Amortization
Correct answer: Home Equity
Home equity is the portion of the property's value that the homeowner actually owns, calculated as appraised value minus outstanding mortgage balance.
Mortgage Loan Originator Trivia 3
What is the name of the index most commonly used for adjustable-rate mortgages tied to the Secured Overnight Financing Rate?