6. Pre-Test M/C
10 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What does exercising the conversion option in an ARM usually lead to?

  • the market rate at the time the loan was originated
  • 2% above the loan’s original adjustable rate
  • the index rate at the time of conversion
  • the market rate at the time of conversion (correct)

In the given scenario, what type of loan do the Willards have?

  • package mortgage
  • hybrid ARM (correct)
  • wraparound mortgage
  • blanket loan

What is NOT an advantage of a 15-year loan?

  • borrower equity builds up quickly
  • a lower interest rate
  • a lower amount of total interest paid
  • lower monthly payments (correct)

What is the purpose of a negative amortization cap?

<p>total amount the borrower can owe above the original loan amount (A)</p> Signup and view all the answers

What type of ARM is described for the Mitchells, with an initial 7-year rate adjustment period and subsequent annual adjustments?

<p>7/1 ARM (B)</p> Signup and view all the answers

What is the purpose of a discount rate in the Federal Reserve System?

<p>To charge interest when borrowing from a Federal Reserve Bank (C)</p> Signup and view all the answers

What does a mortgage insurance primarily protect the lender from?

<p>Foreclosure loss in case of default (D)</p> Signup and view all the answers

In a 3/1 hybrid ARM, when can the lender adjust the interest rate after the initial fixed-rate period?

<p>Annually (A)</p> Signup and view all the answers

What does a negative amortization cap limit for a borrower?

<p>The loan amount above the original sum (C)</p> Signup and view all the answers

What does a 7/1 ARM represent in terms of rate adjustment periods?

<p>Annual rate adjustments for 7 years (A)</p> Signup and view all the answers

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser