10 questions, graded as you go, with the reason for every answer. No sign-up.
What this covers
Conventional loans
Fixed-rate loans
FHA loans
VA loans
USDA loans
Adjustable-rate mortgages
Negative amortization
Reverse mortgages
Balloon loans
HELOCs
Secondary market
Buydowns
Sample questions
What is a conforming loan?
A loan that is insured by the Federal Housing Administration
A loan that meets Fannie Mae and Freddie Mac purchase guidelines
A loan that meets the lender's own portfolio guidelines only
A loan that is guaranteed by the Department of Veterans Affairs
Show the answer
B. A loan that meets Fannie Mae and Freddie Mac purchase guidelines
A conforming loan fits the underwriting standards and loan limits set for purchase by Fannie Mae and Freddie Mac. A conventional loan above the conforming limit is a jumbo, or nonconforming, loan.
Reference: General mortgage knowledge: conforming and nonconforming loans
Under FHA guidelines, what minimum credit score does a borrower need to qualify for the 3.5% down payment?
580
500
620
640
Show the answer
A. 580
A borrower with a score of 580 or higher is eligible for maximum financing. Scores from 500 to 579 are limited to 90% loan-to-value, which is why 500 is the tempting wrong answer; below 500 the borrower is not eligible.
Reference: HUD Handbook 4000.1
What is the Federal Housing Administration's role in an FHA loan?
It lends the money directly to the borrower at closing
It buys the loan from the lender after the closing
It guarantees the borrower a rate below the market
It insures the lender against loss if the borrower defaults
Show the answer
D. It insures the lender against loss if the borrower defaults
FHA does not make loans. Approved lenders make them, and FHA insures those lenders against default losses, paid for by the borrower's mortgage insurance premiums. Buying loans is the job of secondary market investors.
Reference: National Housing Act; HUD Handbook 4000.1
