Loan Interest Rates & Pricing Quiz

The interest rate on a loan with no lender credit or discount points for the borrower.

A sudden, large increase in monthly payments that could lead to a borrower defaulting on their loan.

A lender credit is paid to the borrower in exchange for a higher interest rate.

Upfront payments at closing for mortgage and property expenses, like homeowners insurance and property taxes.

A fee charged when a borrower pays off a mortgage early.

The institutions that directly lend money to borrowers for home purchases or refinances.

Insurance that protects lenders from borrower default, typically required with low down payments.

'Par Rate' is the standard rate with no extras. 'Premium Pricing' offers a lender credit to the borrower in exchange for paying a higher interest rate.

A temporary plan to reduce the first two years' mortgage payments. The first year's interest rate is 2% lower than the note rate, and the second year's is 1% lower. The difference between reduced and full payments is collected at closing and held in escrow.

The process used by a lender to evaluate loan applications, assess risk, and decide if a loan should be offered. It involves automated checks and human review.

Zero-down-payment mortgage loan guaranteed by the U.S. Department of Agriculture for rural homeowners buying properties in qualifying rural areas.

The amount the Department of Veterans Affairs guarantees on a veteran's VA loan, covering the lender's losses if the veteran defaults. Veterans with full entitlement can borrow up to 25% of the loan without a down payment.

Compensation paid to a mortgage broker by a lender for selling a higher interest rate loan than the borrower could have qualified for based on their credit.

A type of mortgage that meets specific, lower risk criteria set by the ATR/QM rule to ensure borrowers have the ability to repay. These loans typically have no balloon or interest-only features, meet certain APR and fee thresholds, and require income and asset verification.

A commitment from a mortgage lender to a borrower, guaranteeing a specific interest rate at a specific cost for a set period, protecting borrowers from unexpected rate changes.

A type of Qualified Mortgage where the loan exceeds the average prime rate by a small margin (1.5% to 2.25%), but the borrower is still presumed to have the ability to repay, which they can challenge.

When a lender needs to buy back a mortgage loan from a secondary market buyer due to issues like fraud, underwriting errors, or early payment default.

A term for a Qualified Mortgage that completely meets the Ability-to-Repay standards of the Truth-in-Lending Act (TILA), providing strong lender protection.

A market where existing mortgage loans are bought and sold by institutions like Fannie Mae, Ginnie Mae, and Freddie Mac, packaging them into securities for investors.

When the responsibility for collecting mortgage payments is transferred from one company to another, requiring borrowers to make payments to the new servicer.

The final stage of a home purchase where ownership is transferred from seller to buyer, and all necessary funds and paperwork are exchanged.

A loan that is not in the first lien position, meaning it's paid back after other loans in case of default.

A loan offered to borrowers with less-than-ideal credit, potentially including features like short-term introductory rates, high interest rate increases, and limited income documentation.

An agreement where a lender holding a subordinate (second) mortgage allows a new first mortgage to take priority, preventing potential conflicts during refinancing.

A method used by lenders to purchase and fund loans originated by mortgage brokers, enabling brokers to close loans in their own name without funding capabilities.

An estimate of the total interest cost for a reverse mortgage, accounting for the loan's duration and potential home appreciation, due to the uncertainty of future loan amounts and borrowers' lifespans.

Companies that provide settlement services other than the lender, such as title companies, home inspectors, or escrow companies.

The legal ownership rights to a property, including the right to sell or transfer ownership to others.