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
If a borrower has a 30-year fixed mortgage at 7% interest, what remains constant throughout the loan?
Answer: The monthly payment amount and interest rate
With a 30-year fixed-rate mortgage, both the interest rate and the principal-and-interest portion of the monthly payment remain unchanged for the life of the loan.
What is 'loan-to-value' (LTV) ratio?
Answer: The percentage of the property's value that the loan represents
LTV is calculated by dividing the loan amount by the property's appraised value; a lower LTV indicates more equity and less risk for the lender.
Under the Real Estate Settlement Procedures Act (RESPA), what is prohibited?
Answer: Paying kickbacks or referral fees between settlement service providers
RESPA prohibits kickbacks and unearned fees between settlement service providers (e.g., realtors, lenders, and title companies) that inflate consumer costs.
What is a 'short sale' in real estate?
Answer: Selling a home for less than the outstanding mortgage balance with lender approval
A short sale occurs when a homeowner sells the property for less than what is owed on the mortgage, requiring the lender's approval to accept the reduced payoff.
What is an 'assumption' of a mortgage?
Answer: A buyer taking over the seller's existing mortgage terms and balance
An assumable mortgage allows a buyer to take over the seller's existing loan, including its interest rate and remaining balance, subject to lender approval.
Which federal law requires lenders to disclose the Annual Percentage Rate (APR) to borrowers?
Answer: The Truth in Lending Act (TILA)
TILA requires lenders to clearly disclose the APR and other loan terms to help borrowers understand the true cost of borrowing.
What is a 'prepayment penalty' on a mortgage?
Answer: A fee charged for making payments early or paying off the loan before its term ends
A prepayment penalty is a fee some lenders charge if the borrower pays off all or a substantial portion of the mortgage before the scheduled maturity date.