Mortgage Products and Programs Flashcards
6 cards from real Mortgage Loan Originator practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Mortgage Products and Programs flashcards as text
What is lender-paid mortgage insurance (LPMI), and what is its tradeoff?
Answer: The lender pays PMI in exchange for a higher interest rate on the loan
LPMI means the lender covers the mortgage insurance premium but charges a higher interest rate, which cannot be canceled like borrower-paid PMI.
A HELOC (Home Equity Line of Credit) is best described as:
Answer: A revolving line of credit secured by home equity with a variable rate
A HELOC is a revolving credit line secured by home equity, typically featuring a variable interest rate and a draw period followed by a repayment period.
The VA Interest Rate Reduction Refinance Loan (IRRRL) is designed to:
Answer: Streamline a refinance of an existing VA loan to a lower rate with minimal documentation
The VA IRRRL is a streamlined refinance program that allows veterans to refinance an existing VA loan to a lower interest rate with reduced documentation and no appraisal in most cases.
What is a 'balloon mortgage' and what risk does it pose to borrowers?
Answer: A mortgage with low payments followed by a large lump-sum payment due at maturity; risk of inability to pay or refinance
A balloon mortgage has smaller monthly payments (often interest-only or based on a 30-year amortization) but requires a large lump-sum payoff at the end of the balloon term, risking default if the borrower cannot pay or refinance.
A construction-to-permanent loan differs from a standalone construction loan in that:
Answer: It automatically converts to permanent financing upon construction completion without a second closing
A construction-to-permanent loan covers the construction phase and then automatically rolls into permanent mortgage financing at completion, saving borrowers from a second closing.
Which loan program is specifically designed to help borrowers finance energy-efficient improvements as part of a purchase or refinance?
Answer: Energy Efficient Mortgage (EEM)
The Energy Efficient Mortgage (EEM) program, available through FHA and VA, allows borrowers to finance the cost of energy-efficient upgrades into their mortgage.