15 Questions
What is the main purpose of Private Mortgage Insurance (PMI)?
To protect the lender against loss from a default
What is the impact on the borrower if PMI is required?
Higher monthly mortgage payments
How does a lender-paid MI program differ from traditional PMI?
The lender covers the MI costs, possibly resulting in a higher interest rate
When does PMI typically end for borrowers?
Upon reaching 80% loan-to-value ratio through payments or appreciation
Why do lenders often require PMI for borrowers with less than a 20% down payment?
To safeguard against potential losses due to default
What role does PMI play in facilitating home ownership for borrowers?
Provides a safety net for lenders, enabling them to offer loans with lower down payments
What determines the maximum loan amount for an FHA-insured loan?
The Federal Housing Finance Agency (FHFA) on an annual basis
What type of premium is required for FHA-insured loans?
Both an upfront and an annual premium
What is the primary funding source for the FHA's single-family mortgage insurance program?
Insurance premiums and proceeds from foreclosed homes
Which of the following is a loss mitigation option for FHA loans?
Forbearance agreements
How does a higher down payment affect the private mortgage insurance (PMI) rate?
Decreases the PMI rate
Which statement best describes a conforming loan limit?
It refers to a loan that meets specific criteria set by Fannie Mae and Freddie Mac
What is the purpose of a VA-Guaranteed Loan?
To help Veterans purchase homes with no down payment
What is the significance of the Loan-to-Value (LTV) ratio?
It indicates the borrower's risk level and affects PMI requirements
What is a jumbo loan?
A loan that exceeds the conforming loan limits
Test your knowledge on mortgage insurance and loan programs with this quiz. Questions cover topics such as PMI, ways to avoid PMI, and different loan programs. See how well you understand the concepts!
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