WorksheetsWhat is a Mortgage? & The Basic Structure of a Mortgage
Total questions: 50
Worksheet time: 25mins
Which statement best defines a mortgage?
A short-term loan for everyday expenses
A type of loan used to buy a home
Money you earn from selling a property
A fee paid to the real estate agent
Which part of a mortgage is the initial amount you pay upfront toward the home's price?
Closing costs
Down payment
Interest rate
Home value
A home costs $150,000 and you pay 20% down. What is the loan amount?
$140,000
$120,000
$110,000
$130,000
Which option correctly matches each term with its role in a mortgage?
Home value: total cost; Down payment: upfront part
Loan amount: remaining borrowed; Home value: total cost
Home value: amount borrowed; Down payment: total price
Loan amount: total cost; Interest: upfront part
Why is a mortgage considered a long-term financial commitment?
It does not require regular payments
It must be repaid within one month
It is paid back over many years with interest
It only covers furniture and appliances
Which statement best explains a key purpose of a down payment on a home loan?
It shows financial responsibility to the lender
It replaces the need to check credit history
It guarantees the interest rate will never change
It eliminates all closing costs for the borrower
A lender prefers borrowers who make down payments because the payment primarily does what?
Reduces the lender's risk of loss
Extends the loan repayment period
Increases the home's appraised value
Transfers risk to the real estate agent
A home is priced at $200,000. Using a typical percentage, what is a commonly expected down payment amount?
$10,000, based on five percent
$20,000, based on ten percent
$40,000, based on twenty percent
$60,000, based on thirty percent
Which factor directly reflects how much money you earn and affects how much you can borrow for a mortgage?
Income level
Credit score
Down payment
Property value
A borrower has a strong credit score but high existing debt from student loans and car payments. What is the most likely impact on the mortgage amount they qualify for?
No change at all
Higher approved amount
Lower approved amount
Unlimited approved amount
Which set best represents a lender’s debt-to-income ratio focus when deciding a mortgage amount?
Monthly debts compared to monthly income
Down payment compared to closing costs
Total assets compared to home price
Credit score compared to property taxes
Two homes are identical, but one has a higher appraised property value. If all borrower factors are the same, which outcome is most likely?
The higher-value home guarantees zero interest
The higher-value home may allow a larger loan
Property value has no effect on loan size
The lower-value home allows unlimited borrowing
What is the most common mortgage length offered by lenders?
20 years
30 years
15 years
10 years
A borrower wants the smallest monthly payment, even if it means paying more interest over time. Which loan term best fits this goal?
20-year term with balanced payment
30-year term with lower payment
10-year term with higher payment
15-year term with moderate payment
Two friends take identical loans. Alex chooses 15 years and Sam chooses 30 years. Which outcome is most accurate?
Neither pays interest overall
Both pay the same total interest overall
Sam pays less total interest overall
Alex pays less total interest overall
Which items are typically included in a standard monthly mortgage payment?
Only private mortgage insurance premiums
Only property taxes and home insurance
Principal, interest, taxes, and insurance
Principal and interest only, no other items
A borrower’s monthly mortgage payment most commonly includes principal and interest. Which additional charge may be added when the down payment is small?
Homeowners association dues
Private Mortgage Insurance (PMI)
Loan origination points
Flood zone assessment fee
Which cost is most likely escrowed with a monthly mortgage payment to protect the lender and homeowner from losses due to damage?
Home insurance premium
Property tax penalty
Late payment fee
Mortgage payoff charge
A lender wants all major housing-related costs paid through one monthly payment. Which combination best fits that setup?
Principal and interest with groceries and transportation
Principal and interest with property taxes and insurance
Principal and interest with rent and parking fees
Principal and interest with utilities and internet
Which option lists entities that commonly offer home loans to buyers?
Neighborhood associations
Pawn shops and car lots
Landlords and tenants
Banks and credit unions
A borrower wants a lender with a fully digital application and approval process. Which provider best matches this preference?
Online lenders
Local banks
Credit unions
Mortgage brokers
A borrower has limited savings for a down payment but steady income. Which program best fits this need?
USDA loans only for rural areas
FHA loans with lower down payments
VA loans requiring military service
Conventional loans with larger down payments
Which statement best describes a fixed-rate mortgage?
The interest rate stays the same throughout
The interest rate changes every few months
The payment amount never changes over time
The interest rate is always lower than average
A homeowner chooses an adjustable-rate mortgage. Which outcome is most likely over time?
Monthly payments may go up or down
Monthly payments will stay exactly the same
The interest rate is guaranteed to decrease
The loan term becomes automatically shorter
What is a typical grace period for a missed mortgage payment before a late fee is charged?
About 2 days
About 90 days
About 15 days
About 45 days
Which outcome is most likely after a single late mortgage payment beyond the grace period?
The interest rate doubles
A late fee is added
The bank sells the home
The loan balance is forgiven
Missing several mortgage payments can lead to which serious risk?
Foreclosure risk increases
Tax refund is withheld
Insurance policy is canceled
Escrow account earns bonuses
Which statement best describes foreclosure?
Bank’s last resort process
Routine monthly procedure
Voluntary refinance option
Temporary payment holiday
During foreclosure, what typically happens to the property?
Lender forgives the entire loan
Bank takes possession and sells it
Tenant buys it at a discount
Owner keeps it and pays a fine
A friend fears foreclosure after missing payments. What is the most effective first step to reduce harm?
Contact the lender immediately
Ignore notices until court
Apply for a new credit card
Stop all payments permanently
How do missed payments and foreclosure typically affect your credit?
They have minor temporary benefits
They improve long-term credit scores
They are not reported to credit bureaus
They cause negative credit impacts
When a homeowner fully pays off a mortgage, which outcome happens immediately?
The lender continues holding the deed
The home’s market value automatically doubles
Property taxes are permanently eliminated
The home becomes 100 percent theirs
Which action most directly helps you secure a lower mortgage interest rate?
Choose the lender with the flashiest ads
Ignore lender fees and points
Sign quickly to lock any first offer
Shop around to compare rate offers
Which term best describes the original amount of money borrowed on a home loan?
Collateral
Equity
Principal
Escrow
What is the cost you pay to borrow money from a lender called?
Amortization
Interest
Down payment
Appraisal fees
Which term refers to an account used to hold funds for taxes and insurance on a home?
Escrow
Equity
PMI
APR
The schedule that shows how loan payments reduce principal and interest over time is called what?
Fixed-rate
Amortization
Deed of trust
Equity plan
Which term means the value you own in your home after debts are considered?
Origination fees
Equity
Principal
PMI
A loan specifically for buying property, secured by the property itself, is called what?
Mortgage
Title insurance
Adjustable-rate
Promissory note
Something of value pledged so the lender can claim it if the loan is not repaid is called what?
Closing costs
APR
Escrow
Collateral
Who is the person or organization that provides the loan funds?
Lender
Borrower
Appraiser
Trustee
Which term is a numerical expression used by lenders to judge how likely you are to repay debt?
Amortization
PMI
APR
Credit score
What is the initial payment made when purchasing a home with a loan?
Closing costs
Origination fee
Appraisal fee
Down payment
An interest rate that stays the same for the entire loan term is called what?
Fixed-rate
Adjustable-rate
Prime rate
APR rate
What is the written promise that outlines the terms of repayment for a loan?
Mortgage
Deed of trust
Title certificate
Promissory note
Which fees are charged by the lender for processing a loan and may include several items?
Escrow deposits
Property taxes
Closing costs
PMI premiums
A fee for assessing the market value of a property is known as what?
Inspection fee
Underwriting fee
Origination fee
Appraisal fee
Which insurance protects against losses from problems with the property’s ownership record?
Title insurance
Homeowners insurance
PMI insurance
Gap insurance
Which insurance protects the lender if the borrower defaults and the down payment is under 20%?
Life insurance
Title insurance
Disability insurance
Private mortgage insurance (PMI)
Which term represents the annual cost of a loan including interest and fees, expressed as a rate?
APR
Prime
Fixed-rate
Credit score
