Terms 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 Terms flashcards as text
What is 'negative amortization' in a mortgage?
Answer: When monthly payments are less than the interest owed, causing the loan balance to grow
Negative amortization occurs when minimum payments don't cover accruing interest, so the unpaid interest is added to the principal balance.
What does 'LTV' stand for in mortgage lending?
Answer: Loan-To-Value ratio
LTV (Loan-To-Value) is the ratio of the loan amount to the appraised property value, expressed as a percentage.
What is a 'due-on-sale' clause in a mortgage?
Answer: A provision requiring the full loan balance to be paid when the property is sold or transferred
A due-on-sale clause (also called an acceleration clause) requires the borrower to pay off the remaining mortgage balance when the property is sold or ownership is transferred.
What is 'title insurance' in the context of a mortgage?
Answer: Insurance that protects against losses from defects or disputes in the property's ownership history
Title insurance protects the buyer and/or lender from financial loss due to defects in a property's title, such as liens or ownership disputes from before the purchase.
In mortgage terms, what is a 'rate cap'?
Answer: A limit on how much an adjustable-rate mortgage's interest rate can change in a given period or over the loan's life
A rate cap limits how much an ARM's interest rate can increase per adjustment period and/or over the life of the loan, protecting borrowers from unlimited rate increases.
What is a 'jumbo loan'?
Answer: A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac
A jumbo loan is a mortgage that exceeds the conforming loan limits established by the FHFA, making it ineligible for purchase by Fannie Mae or Freddie Mac.
What is 'private mortgage insurance' (PMI) typically required for?
Answer: Conventional loans where the down payment is less than 20% of the home's purchase price
PMI is required on conventional loans when the borrower puts less than 20% down, protecting the lender if the borrower defaults.