Mortgage Practice

What is a mortgage?

• A type of insurance for homeowners.

• A loan specifically used to purchase real estate, where the property serves as collateral for the loan.

• A government grant for buying a house.

• A personal loan for home renovations.

What is equity in a home?

• The total amount paid for the home over time.

• The difference between the market value of a home and the amount owed on the mortgage.

• The initial purchase price of the home.

• The amount of money saved for future home improvements.

What is the difference between fixed-rate and adjustable-rate mortgages?

• Fixed-rate mortgages have a constant interest rate throughout the loan term, while adjustable-rate mortgages have rates that can change periodically.

• Fixed-rate mortgages have variable interest rates, while adjustable-rate mortgages have fixed rates.

• Fixed-rate mortgages are only available for short terms, while adjustable-rate mortgages are long-term loans.

• Fixed-rate mortgages require a larger down payment than adjustable-rate mortgages.

What is the purpose of a mortgage rate lock?

• To secure a specific interest rate for a set period, protecting against rate fluctuations during the loan process.

• To allow borrowers to change their loan amount at any time without penalties.

• To provide a guarantee that the loan will be approved regardless of credit score.

• To enable lenders to charge higher fees if interest rates increase.

How does an escrow account work in a mortgage?

• An escrow account is used by lenders to collect and hold funds for property taxes and insurance premiums, ensuring they are paid on time.

• An escrow account is a savings account that homeowners use to save for future home improvements.

• An escrow account is a type of loan that allows homeowners to borrow against their home equity.

• An escrow account is a legal agreement between buyers and sellers to finalize a property sale.

What is the role of a mortgage broker?

• A mortgage broker acts as an intermediary between borrowers and lenders, helping borrowers find the best mortgage options.

• A mortgage broker is responsible for underwriting loans and approving applications.

• A mortgage broker only provides financial advice without any involvement in loan processing.

• A mortgage broker manages the real estate properties for clients.

What is a mortgage pre-approval?

• A process where a lender evaluates a borrower's financial situation to determine the maximum loan amount they can qualify for, providing a conditional commitment.

• A type of insurance that protects the lender in case of borrower default.

• A legal document that outlines the terms of a loan agreement between a borrower and a lender.

• A financial product that allows homeowners to refinance their existing mortgage at a lower interest rate.

What is private mortgage insurance (PMI)?

• Insurance that protects the lender if the borrower defaults on the loan, typically required when the down payment is less than 20%.

• A type of insurance that covers the borrower's property in case of damage.

• Insurance that protects the borrower from losing their home due to foreclosure.

• A policy that reduces the interest rate on a mortgage loan.

How do you determine the total interest paid over the life of a mortgage?

• Total interest paid = Total amount paid - Original loan amount.

• Total interest paid = Original loan amount - Total amount paid.

• Total interest paid = Monthly payment x Number of payments.

• Total interest paid = Total amount paid + Original loan amount.

What is a mortgage refinance?

• The process of obtaining a new mortgage to replace the original one, often to secure a lower interest rate or change the loan term.

• A method of paying off a mortgage early without penalties.

• A type of loan specifically for purchasing a new home.

• A financial strategy to increase the amount of debt on a property.