Mortgage Questions and Answers

Principal is the loan balance on which interest is charged.

1. Amount borrowed before interest
2. Monthly property tax only
3. Home insurance premium
4. Broker commission

Fixed-rate loans reduce interest-rate uncertainty.

1. Interest rate stays the same under loan terms
2. Payment always includes utilities
3. Taxes cannot change
4. Home value is guaranteed

ARMs adjust according to contract rules after initial periods.

1. Index and margin terms
2. House paint color
3. Neighborhood weather
4. Insurance logo

A larger down payment can reduce borrowing and some costs.

1. Loan amount and sometimes mortgage insurance
2. Utility usage
3. Credit report age
4. Stock dividends

Escrow helps pay property-related bills through the lender.

1. Property taxes and insurance
2. Vacation spending
3. Car maintenance
4. Stock purchases

Discount points are upfront costs that may reduce rate.

1. A lower interest rate
2. A larger house automatically
3. No closing costs
4. Free repairs

LTV measures how much of the property is financed.

1. Loan balance to property value
2. Income to credit score
3. Taxes to insurance
4. Rent to utilities

Preapproval gives a lender-based estimate subject to final underwriting.

1. Estimated borrowing capacity
2. Guaranteed home value
3. Future interest rates exactly
4. Repairs required

Loan amount is 240000, and 240000 divided by 300000 is 80 percent.

1. 80 percent
2. 20 percent
3. 60 percent
4. 120 percent

Private mortgage insurance protects the lender, not the borrower.

1. The lender if borrower defaults
2. The borrower from job loss
3. The home from fire only
4. The seller from repairs

Total housing affordability includes more than loan repayment.

1. Principal, interest, taxes, insurance, and possible HOA
2. Only principal
3. Only paint cost
4. Only moving boxes

Points require breakeven analysis.

1. Upfront cost is recovered through lower payments over time
2. The buyer sells immediately
3. The rate is unchanged
4. Closing cash is unavailable

Adjustable-rate mortgages can reset under contract terms.

1. Payment can rise after the fixed introductory period
2. Principal vanishes
3. Taxes are frozen
4. Insurance is free

A lower monthly payment can still cost more if term and fees change.

1. Closing costs, new rate, term, and breakeven time
2. Only monthly payment
3. Only lender logo
4. Only app design

DTI equals monthly debt payments divided by gross monthly income.

1. 30 percent
2. 18 percent
3. 60 percent
4. 3 percent

Escrow accounts estimate future bills and may need adjustment.

1. Taxes or insurance rise above collected amounts
2. Principal falls
3. Credit score increases
4. The loan is paid early

Borrowing more can raise payment and insurance requirements.

1. Loan amount and possible mortgage insurance cost
2. Home equity immediately
3. Savings automatically
4. Property value guarantee

Preapproval generally involves more lender review.

1. It may rely on less verified information
2. It is a final loan contract
3. It includes completed appraisal always
4. It removes underwriting

Amortization tracks loan balance decline over time.

1. How each payment splits between interest and principal
2. Only future home value
3. Insurance claim status
4. Tax bracket only

Amortizing loans often pay more interest at the beginning.

1. Interest
2. Principal only
3. Property taxes only
4. Insurance only

High housing cost can crowd out other goals.

1. Budget flexibility and emergency savings ability
2. Property taxes by law
3. Maintenance needs
4. Insurance cost always

Rate locks can preserve quoted rates for a period.

1. Rate changes during a defined lock period
2. Home repair costs
3. Property tax increases forever
4. Job loss

Closing costs are transaction costs beyond down payment.

1. Lender, title, appraisal, and prepaid items
2. Monthly groceries
3. Future vacations
4. Credit card rewards

Appraisals help lenders assess collateral value.

1. Property value for lender and transaction purposes
2. Buyer income
3. Credit card APR
4. Moving cost

LTV measures the financed share of the property.

1. Loan-to-value
2. Expense ratio
3. Dividend yield
4. Inventory turnover