General Mortgage Knowledge Flashcards
7 cards from real Mortgage practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 General Mortgage Knowledge flashcards as text
What is a home equity line of credit (HELOC)?
Answer: A revolving credit line secured by the borrower's home equity
A HELOC is a revolving line of credit secured by home equity, allowing borrowers to draw funds as needed up to a set limit during the draw period.
What is the debt-to-income (DTI) ratio used for in mortgage underwriting?
Answer: To assess the borrower's ability to manage monthly payments relative to gross income
DTI compares a borrower's total monthly debt obligations to gross monthly income, helping lenders evaluate repayment capacity.
What is the difference between a rate lock and a float-down option?
Answer: A rate lock fixes the rate; a float-down allows the rate to decrease if market rates fall before closing
A rate lock guarantees a fixed interest rate for a set period, while a float-down option lets the borrower benefit if rates drop before closing.
What is a 'jumbo loan'?
Answer: A loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac
Jumbo loans exceed the conforming loan limits established by the FHFA and cannot be purchased by Fannie Mae or Freddie Mac.
What happens during the mortgage underwriting process?
Answer: The lender evaluates the borrower's creditworthiness and the property's value to approve the loan
Underwriting is the lender's risk assessment process, verifying income, assets, credit history, and the property appraisal before issuing a loan decision.
What is a 'points' in mortgage terminology?
Answer: Upfront fees paid to the lender equal to 1% of the loan amount, often to reduce the interest rate
Mortgage points (discount points) are prepaid interest; one point equals 1% of the loan amount and typically lowers the interest rate by a set amount.
What is the purpose of a title search in a real estate transaction?
Answer: To verify that the seller has clear ownership and there are no outstanding liens or encumbrances
A title search examines public records to confirm the seller legally owns the property and to identify any liens, judgments, or claims that could affect the sale.