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NMLS Exam > General Mortgage Knowledge > Flashcards

General Mortgage Knowledge Flashcards

1
Q

What defines a conventional loan?

A

A lender agreement that is not guaranteed by the federal govt under the VA, FHA, Rural Housing Service of the USDA.

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2
Q

What is a conforming loan?

A

Conventional loans that follow the terms and conditions set by Fannie Mae and Freddie Mac. $417K max loan for a single-family to four unit dwelling.

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3
Q

True or false, FHA insured mortgages require mortgage insurance.

A

TRUE

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4
Q

What is the amount charged for mortgage insurance?

A

.55% times the loan amount divided by 12.

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5
Q

Are no-doc loans or NINA loans a QM Mortgage?

A

NO.

not allowed

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6
Q

What is the maximum debt-to-income ratio for a QM mortgage?

A

43%

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7
Q

What is the maximum points and fees that can be charged on a QM?

A

3 % / 3 points

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8
Q

Is a loan with a term MORE than 30 years a QM?

A

No. 30 year is the maximum.

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9
Q

Can an interest only loan be a QM?

A

NO

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10
Q

Can a Negative amortized loan be a QM?

A

NO

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11
Q

Can a Negative amortized loan be a QM?

A

NO

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12
Q

A QM requires that adjustable-rate mortgages (ARMs) be underwritten to the maximum interest that can be charged during the first ____ years of the loan term.

A

First five years

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13
Q

Are prepayment penalties allowed with a QM?

A

NO

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14
Q

What are the two places we get loans?

A
  1. Conventional/ Conforming

2. Government

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15
Q

What is the most common FHA home loan program?

A

203b Basic Home Loan

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16
Q

What is the biggest restriction for FHA loans?

A

areal loan limits that change annually

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17
Q

Do FHA loans have to be owner occupied within 60 days of signing the security instrument?

A

YES

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18
Q

What is the minimum credit score for an FHA loan and minimum downpayment?

A

500-579

10% down -3.5 % down payment = 96.5% LTV

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19
Q

What kind of insurance is required with an FHA loan?

A

government insurance
-Upfront mortgage insurance 1.75 %
AND
-Annual MIP paid monthly

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20
Q

MIP stands for

A

Mortgage Insurance Premiums

21
Q

What is a conventional loan?

A

A conventional loan is a loan that is not guaranteed or insured by the government.

22
Q

Government Sponsored Enterprises (GSEs) are

A

Fannie Mae and Freddie Mac

23
Q

A conventional loan is also a _________ loam.

A

conforming loan

24
Q

What are conforming/ conventional loan types?

A

Fannie Mae and Freddie Mac

25
Q

Generally, what % downpayment do Fannie Mae and Freddie Mac prefer?

A

5% down payment

26
Q

GSE Subprime, Freddie Mac

A

A- minus program

  • lesser credit requirements
  • lower down-payments
  • 1 to 4 unit primary residences
27
Q

Does FHA require mortgage insurance?

A

Yes, but typically have lower interest rates.

28
Q

VA Loan Perks

A

Purchase= 100% financing (0 down-payment)

  • no required mortgage insurance
  • Interest Rate Reduction Refinance Loan (aka streamline refinance loan)
  • no maximum loan amounts
  • no income requirements
29
Q

What is the maximum guaranty amount for a VA Loan?

A

VA guarantees 25% of the VA county loan limit or 25% of the home purchase (whatever the lesser)

Veteran Administration Home Loan Program Example 1
Veteran has full entitlement available and is purchasing a home for $300,000 where the county loan limit is $510,400

  • $510,400 X 25% = $127,500 Maximum Guaranty and Available Entitlement
  • $300,000 X 25% = $75,000 Guaranty and Down Payment Combination Required
  • Since VA’s guaranty is limited to the lesser of 25% of the county loan limit or 25% of the loan amount, VA will guaranty $75,000 on Veteran’s $300,000 loan in this county
  • A down payment should not be required
30
Q

What is the DTI ratio for a VA loan?

A

41%

31
Q

USDA loans are on available in _____ areas.

A

Rule Areas with 21,000 people or less

32
Q

What is the required down-payment for a USDA loan?

A

10% down-payment or 90% loan note guarantee.

33
Q

USDA has a ____% upfront guarantee fee and a ____ BPS annual MIP.

A

1%

35 BPS

34
Q

What is the minimum FICO score for a USDA loan?

A

No minimum FICO score

35
Q

Mortgage Products (7)

A
  • Fixed Rate
  • Adjustable Rate
  • Balloon
  • Reverse Mortgage
  • Home Equity
  • Construction
  • Interest Only
36
Q

Fixed Rate Loans

A

Generally, the shorter the term, the lower the rate.

37
Q

Government Loan Types

A

FHA, VA, USDA

38
Q

Adjustable Rate Mortgage (ARM Loan)

A

A loan that a has an initial interest rat that is set for a short amount of time(3, 5, 7 years).
At the end of the set period the lender takes the index value + the margin (within cap range) that creates the new interest rate and new payment.

39
Q

What is a 5-1 ARM?

A

An ARM loan that has set integrate rate for the first five years, and then can be adjusted every 1 year after.

40
Q

Negative Amortization

A

When the minimum payment was not enough to pay the interest on the loan. The difference that was paid was added on to the end of the loan balance each month.

Therefore, it increased the cost of the loan constantly.

41
Q

Balloon Mortgages

A

a mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the loan period.

  • Construction Loans
  • Reverse Mortgages
  • Bridge Loans/ Swing Loans/ Relocation
  • Some home equity loans may have a balloon such as a Home Equity Line of Credit
42
Q

Reverse Mortgage

A

A homeowner who is 62 or older and has considerable home equity can borrow against the value of their home and receive funds as a lump sum, fixed monthly payment or line of credit.

Borrower Qualifications
• Be 62 years of age or older
• Own the property outright or paid-down a considerable amount
• Occupy the property as your principal residence
• Not be delinquent on any federal debt
• Have financial resources to continue to make timely payment of other ongoing
property charges such as property taxes, insurance and Homeowner
Association fees, etc.
• Participate in a consumer information session given by a HUD-approved HECM Counselor

43
Q

Second Mortgage

A

a loan you take out using your house as collateral while you still have another loan secured by your house. Home equity loans and home equity lines of credit (HELOCs) are common examples of second mortgages.

  • Second in line (subsequent) in lien status.
  • referred to as a “piggyback” loan or simultaneously second
44
Q

HELOC stands for

A

Home Equity Line of Credit

also generally, a second mortgage

45
Q

HELOCs

A

A line of credit secured against real property
• Advances made available by special checks or a credit card
• Draw period allows for advances from account approval to end of draw period
• During the draw period minimum payments are required (interest only payments)
• When the draw period ends no more advances available
• Loan may balloon or amortize at the end of the draw period

46
Q

What is a subordinate loan?

A

A lien in a lower position to another lien.

47
Q

what is a super-lien?

A

liens that can leap-frog mortgage priority

typically cause by property tax or IRS tax issues.

48
Q

Construction Loan

A
  • buy land and construct a home or they own the land and are building on it.
  • Construction loans a temporary financing.
  • Construction loan normally has the borrower and the contractor listed so that they both have access for the draw.
49
Q

Interest- Only loans

A

An interest-only mortgage is a loan with scheduled payments that require only interest payments for a specified amount of time
• The loan balance does not go down with each payment
• Once the interest-only period ends the borrower may have the following options:
– Paying off the loan balance all at once
– Refinancing the mortgage loan, if refinancing is available
– Beginning to pay off the balance in monthly payments, which are higher
than the interest-only payments
• Prohibited on QM loans

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