Mortgage Products and Programs 5 — Questions and Answers
Question 1: Under the VA loan program, which of the following borrowers is exempt from paying the VA funding fee?
- First-time homebuyers using VA benefits
- Veterans receiving VA disability compensation (Correct answer)
- Active-duty service members on their second VA loan
- National Guard members who served fewer than 6 years
Correct answer: Veterans receiving VA disability compensation
Veterans receiving VA disability compensation are exempt from the VA funding fee, reducing their upfront loan costs.
Question 2: The maximum loan limit for an FHA-insured single-family loan in high-cost areas is set at what percentage of the FHFA conforming loan limit?
- 100%
- 115%
- 150% (Correct answer)
- 175%
Correct answer: 150%
FHA high-cost area loan limits are set at 150% of the FHFA conforming loan limit for that area.
Question 3: A 'teaser rate' on an ARM is best described as:
- The rate applied after the first adjustment period
- A temporarily discounted initial rate below the fully indexed rate (Correct answer)
- The index rate plus the margin
- The lifetime cap applied at origination
Correct answer: A temporarily discounted initial rate below the fully indexed rate
A teaser rate is an artificially low introductory rate that is below the fully indexed rate (index + margin), used to attract borrowers.
Question 4: Which specialized loan program is backed by the Small Business Administration and can be used to purchase commercial real estate for an owner-operated business?
- FHA 221(d)(4)
- SBA 504 Loan (Correct answer)
- USDA Business Program
- HUD Section 8 Financing
Correct answer: SBA 504 Loan
The SBA 504 Loan provides long-term, fixed-rate financing for major fixed assets like owner-occupied commercial real estate.
Question 5: Down Payment Assistance (DPA) programs are most commonly administered by:
- Private mortgage insurance companies
- The Federal Reserve
- State and local Housing Finance Agencies (HFAs) (Correct answer)
- The CFPB
Correct answer: State and local Housing Finance Agencies (HFAs)
State and local Housing Finance Agencies typically administer DPA programs funded through bond proceeds and federal grants.
Question 6: A non-qualified mortgage (Non-QM) loan differs from a qualified mortgage primarily because it:
- Does not conform to FHFA loan limits
- Does not meet the CFPB's Ability-to-Repay rule safe harbor requirements (Correct answer)
- Requires no appraisal at origination
- Is only available to borrowers with credit scores above 740
Correct answer: Does not meet the CFPB's Ability-to-Repay rule safe harbor requirements
Non-QM loans fall outside the CFPB's qualified mortgage safe harbor, meaning the lender assumes more legal risk related to the Ability-to-Repay rule.
Question 7: Which HECM (Home Equity Conversion Mortgage) disbursement option provides the borrower with a guaranteed monthly payment for as long as they live in the home?
- Term payment plan
- Tenure payment plan (Correct answer)
- Line of credit
- Modified term
Correct answer: Tenure payment plan
The tenure payment plan provides equal monthly payments for as long as at least one borrower lives and occupies the home as the principal residence.
Mortgage Products and Programs 5
Under the VA loan program, which of the following borrowers is exempt from paying the VA funding fee?