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General Mortgage Knowledge Question Bank

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• What is the minimum down payment for an FHA loan with a 580+ credit score?
• A first-time homebuyer who is an active-duty Army sergeant with a credit score of 640 is shopping for a $250,000 home. His loan officer...
• A borrower is purchasing a home with an FHA loan. The base loan amount is $250,000. At closing, the lender adds an upfront mortgage...
• A borrower is purchasing a $400,000 home with a conventional loan and plans to make a $60,000 down payment. The loan officer informs the...
• In an ARM with 2/2/6 caps, what does the "6" represent?
• What does a lender's title insurance policy protect?
• Which of the following is NOT a characteristic of a conventional loan?
• A borrower has a 5/1 ARM with a current SOFR index of 4.25% and a margin of 2.75%. The initial teaser rate of 3.50% has just expired....
• What is the maximum loan term for a Qualified Mortgage?
• A borrower has a payment option ARM with a minimum monthly payment of $1,200. The interest due this month is $1,450. After making the...
• What is a HECM (reverse mortgage)?
• A borrower is purchasing a home for $250,000 and making a 10% down payment. What is the LTV?
• A borrower earns $6,000/month gross income and has total monthly debts of $2,400. What is their back-end DTI?
• A home appraises at $220,000 but the purchase price is $230,000. With a 90% LTV loan, what is the maximum loan amount?
• An FHA borrower is taking a $200,000 loan. What is the upfront MIP (UFMIP)?
• A borrower's PITI is $1,800/month and their gross monthly income is $7,200. What is their front-end (housing) DTI?
• A home's purchase price is $400,000. The buyer puts down 20%. What is the loan amount?
• A loan has a 6% annual interest rate. What is the monthly interest rate?
• A property is valued at $300,000 with a first mortgage of $200,000 and a HELOC of $40,000. What is the CLTV?
• A borrower has an ARM with an initial rate of 4.0%, a margin of 2.5%, and a 2/2/5 cap structure. The index is currently 3.0%. After the...
• What does the term "subordination" mean in the context of mortgage lending?
• How does a lender credit work in a mortgage transaction?
• A borrower faces a rate/cost tradeoff. At par (zero-cost), the rate is 6.5%. Option A: buy 1 discount point for a 0.25% rate reduction....
• What was a Yield Spread Premium (YSP), and why was it prohibited under Dodd-Frank?
• A borrower needs $4,000 in closing costs. The lender offers to increase the interest rate by 0.5% and provide a $4,500 lender credit. Is...
• A mortgage broker originates a loan at 7.25% when the lender's par rate is 6.75%. Before Dodd-Frank, the lender would have paid the broker...
• What is a 2-1 temporary buydown structure?
• Calculate the approximate total cost of a 2-1 buydown: $350,000 loan, 7% note rate. Monthly payments: $1,878 at 5% (Y1), $2,098 at 6% (Y2),...
• What is the key difference between a permanent buydown (discount points) and a temporary buydown (2-1)?
• A borrower has a 2-1 buydown at a 7% note rate (5% in Year 1, 6% in Year 2, 7% in Year 3+). At what rate must the borrower qualify?
• A seller agrees to pay $8,000 for a 2-1 buydown to help the buyer close. Is this a RESPA kickback violation?
• What is the minimum age requirement for a HECM reverse mortgage, and what happens if one spouse is under that age?
• When must HUD-approved counseling be completed in the HECM reverse mortgage process?
• A HECM borrower wants to receive all proceeds at once. Which interest rate type is available for this disbursement option?
• What does the non-recourse feature of a HECM reverse mortgage mean for the borrower and their heirs?
• A 68-year-old HECM borrower moves to an assisted living facility and does not return to the home for 13 consecutive months. What happens to...
• A HECM borrower dies, leaving the home to their adult daughter. The loan balance is $180,000 and the home appraises at $150,000. What does...
• What is the difference between a whole loan sale and securitization in the secondary mortgage market?
• When a lender sells a loan to Fannie Mae or Freddie Mac, the lender makes "representations and warranties" about the loan. What happens if...
• Why does repurchase risk matter to mortgage lenders?
• The 2025 conforming loan limit for most areas is $806,500. A lender originates a $900,000 conventional loan in a standard (non-high-cost)...
• How does Ginnie Mae's role in the secondary market differ from Fannie Mae and Freddie Mac?
• What is a mortgage fraud red flag that an MLO should report?
• In underwriting, "capacity" refers to:
• What is the purpose of seasoning requirements for funds?
• The maximum loan-to-value (LTV) for a conventional conforming loan is typically:
• What is an occupancy classification on a mortgage application?
• A cash-out refinance is defined as:
• RESPA requires:
• An MLO is advising a client who purchased a home six months ago with an FHA loan and now wants to use a 203(k) to renovate. The client...
• A veteran is purchasing a home using a VA-guaranteed loan for the first time and is making no down payment. The veteran does not have a...
• Prior to the 2021 General QM Final Rule, what was the maximum debt-to-income (DTI) ratio permitted for a loan to qualify as a General...
• Which market is where mortgage loans are originated directly between lenders and borrowers?
• A borrower is purchasing a $400,000 home with a conventional loan using an 80-10-10 piggyback structure. What does this structure...
• When calculating points and fees for QM compliance purposes, which of the following charges MUST be included in the points and fees...
• Which of the following loans would be classified as non-conforming?
• A borrower applies for an FHA-insured purchase loan and has a credit score of 580. What is the minimum down payment percentage the borrower...
• Which of the following renovation projects would be eligible under the FHA Standard 203(k) loan but NOT under the FHA Limited (Streamline)...
• A borrower takes out a $100,000 interest-only mortgage at an annual rate of 5% for the first 5 years of a 30-year loan. What is the...
• Under conventional lending guidelines, which of the following is a key characteristic that distinguishes a second home from an investment...
• A private-label MBS is issued without any government sponsorship. Compared to agency MBS (issued or guaranteed by Fannie Mae, Freddie Mac,...
• A 68-year-old homeowner is considering a HECM reverse mortgage. Which of the following obligations must the borrower still meet to remain...
• An MLO is working with a National Guard member who was called to active duty under Title 10 federal orders and completed 90 days of...
• A loan that includes an interest-only period during the first five years of a 30-year term would be classified as which of the following?
• A veteran has $36,000 in remaining VA entitlement. In most counties, what is the maximum loan the VA will guarantee without a down payment?
• A Home Equity Line of Credit (HELOC) is best classified as:
• A borrower is purchasing a home in a community with a population of 12,000 that borders a metropolitan statistical area (MSA). The property...
• During a title search, the examiner discovers a gap in the chain of title: a deed from 1987 was never properly recorded, meaning there is a...
• On an adjustable-rate mortgage, which component is set by the lender and remains fixed for the entire life of the loan?
• A borrower with a 565 credit score wants to purchase a home for $320,000 using an FHA loan. Assuming the lender agrees to originate the...
• Under the Homeowners Protection Act (HPA), a borrower with a good payment history on a conventional loan has the right to request...
• A first-lien QM loan is originated with an APR of 7.40%. The APOR for a comparable transaction at the time of consummation is 5.70%. The...
• A self-employed borrower with strong assets cannot document income through traditional means. A lender agrees to verify income using 12...
• On an adjustable-rate mortgage, what is the 'margin'?
• The Ability-to-Repay rule requires creditors to make a reasonable, good-faith determination that a borrower can repay a loan. Which of the...
• A title search on a property reveals a recorded easement allowing the local utility company to access a 10-foot strip along the back of the...
• A borrower brings an ATR lawsuit against a lender claiming the lender did not properly assess their ability to repay. The loan was a...
• A buyer purchases a home and later discovers that a contractor placed a mechanic's lien on the property five years ago that was never...
• The GSE QM (also called the 'GSE Patch') historically allowed loans to qualify as QMs even if they exceeded the 43% DTI threshold. This...
• A seller agrees to fund a 2-1 buydown for a buyer purchasing a home with a 7% note rate. How does this buydown structure affect the...
• A homeowner is approved for a $50,000 HELOC structured with a 10-year draw period followed by a 20-year repayment period. During the draw...
• An MLO is originating a mortgage for a borrower who has irregular income from freelance work. Under the ATR rule, which of the following...
• Which federal agency is responsible for setting the annual conforming loan limits for conventional mortgages?
• Prior to its expiration in October 2022, loans eligible for purchase by Fannie Mae or Freddie Mac could automatically qualify under which...
• On an adjustable-rate mortgage, the first rate-change notice sent to a borrower must include which of the following that subsequent notices...
• A borrower is purchasing a home for $420,000 and makes a down payment of $63,000. What is the LTV ratio, and will PMI be required on this...
• A borrower obtains a conventional mortgage and makes a down payment of less than 20% of the purchase price. Which of the following is the...
• Which document must a veteran obtain to verify eligibility for a VA-guaranteed home loan?
• A borrower wants to use an FHA Standard 203(k) loan to renovate a home. The planned repairs include structural work, a new roof, and...
• A borrower owns a beachfront condo that she purchased as a second home two years ago. She has since listed it on a short-term rental...
• When a mortgage is sold to an investor in the secondary market, what typically happens to the loan's servicing rights?
• Which statement BEST explains a key risk of an interest-only mortgage for the borrower?
• A borrower is purchasing a home with an FHA loan. The purchase price is $280,000 and the borrower's credit score is 612. What is the...
• What is the minimum credit score required for a borrower to qualify for an FHA loan with a 3.5% down payment?
• A Qualified Mortgage that is NOT a higher-priced covered transaction receives what level of legal protection for the lender under the ATR...
• A mortgage-backed security (MBS) is best described as:
• A lender originates a 5/1 ARM with an initial rate of 4.5% and a 2/2/5 cap structure on a $300,000 loan. Under the ATR rule, at which rate...
• An MLO is counseling a borrower who is considering a balloon mortgage. The borrower plans to sell the home within five years. Which...
• A borrower's mortgage servicer transfers the loan to a new servicer. The borrower sends their first payment to the old servicer by mistake....
• Private Mortgage Insurance (PMI) is typically required on a conventional loan when the borrower's down payment is less than what percentage...