Mortgage Mortgage General Mortgage Knowledge Questions and Answers 2

Question 1

What is the primary purpose of a loan estimate (LE) that lenders must provide to borrowers?

Accepted Answer

To disclose estimated loan terms, projected payments, and closing costs

Answer

To guarantee the final interest rate on the mortgage

Answer

To serve as the binding loan agreement between borrower and lender

Answer

To provide the borrower's credit score and history

Question 2

Which of the following best describes negative amortization?

Accepted Answer

When the loan balance increases because payments do not cover the interest owed

Answer

When monthly payments are large enough to pay off the loan early

Answer

When the interest rate decreases over the life of the loan

Answer

When the borrower makes extra principal payments each month

Question 3

What does the debt-to-income (DTI) ratio measure in mortgage qualification?

Accepted Answer

The borrower's monthly debt payments divided by gross monthly income

Answer

The borrower's total assets divided by total liabilities

Answer

The property's appraised value divided by the loan amount

Answer

The borrower's net worth divided by the requested loan amount

Question 4

What is the purpose of a title search during the mortgage process?

Accepted Answer

To examine public records for liens, encumbrances, or ownership disputes on the property

Answer

To determine the fair market value of the property

Answer

To verify the property meets local building codes

Answer

To confirm the borrower's employment history

Question 5

Which type of mortgage allows the borrower to convert from an adjustable rate to a fixed rate during the loan term?

Accepted Answer

Convertible ARM

Answer

Balloon mortgage

Answer

Interest-only mortgage

Answer

Reverse mortgage

Question 6

What is the typical minimum credit score required for a conventional mortgage loan?

Accepted Answer

620

Answer

500

Answer

580

Answer

700