Florida Types of Mortgages and Sources of Financing — Printable Practice Pack

Answer key & explanations

1. 1. D — Fannie Mae is a secondary mortgage market institution that purchases and securitizes mortgages from lenders.
2. 2. B — The new interest rate will be the index (3%) + margin (2%) = 5%, which is within the cap of 2% above the current rate.
3. 3. A — A mortgage banker is a lender that originates loans, while a mortgage broker acts as an intermediary, arranging loans between borrowers and lenders.
4. 4. C — Conforming loans meet the funding criteria of Fannie Mae and Freddie Mac, while non-conforming loans do not.
5. 5. D — Fannie Mae's primary role is to purchase and securitize mortgage loans from lenders, providing liquidity to the mortgage market.
6. 6. D — One of the key benefits of a VA loan is that the borrower is not required to pay PMI, which can save them hundreds or thousands of dollars per year.
7. 7. D — An Adjustable-rate mortgage (ARM) has an interest rate that can change over the life of the loan, based on an index and margin.
8. 8. A — A mortgage banker originates loans, while a mortgage broker arranges loans for others.
9. 9. C — Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase and securitize mortgages, making it easier for lenders to originate new loans.
10. 10. A — When evaluating a loan, buyers should consider the loan's APR and the total cost of the loan over its life, including points and other fees, to determine whether it is a good choice.
11. 11. D — A blanket mortgage finances multiple properties, while a package mortgage finances a single property and may include personal property, such as appliances.
12. 12. C — A reverse mortgage allows homeowners to borrow against the equity in their home without making monthly payments, with the loan being repaid when the home is sold or the borrower passes away.
13. 13. C — The secondary mortgage market is where existing mortgages are bought and sold. This market allows lenders to free up capital and originate new loans, and provides investors with a way to invest in mortgage-backed securities.
14. 14. D — Conforming loans meet the standards of Fannie Mae and Freddie Mac, which are government-sponsored entities that purchase and securitize mortgages.
15. 15. C — A VA-guaranteed mortgage is a type of mortgage that allows a buyer to purchase a home with a low down payment and has a guarantee from the Department of Veterans Affairs. This type of mortgage is available to eligible veterans and active-duty military personnel.
16. 16. C — FHA loans are insured by the Federal Housing Administration, which provides protection to lenders in case of borrower default.
17. 17. B — FHA loans are guaranteed by the federal government and typically have more lenient credit score requirements.
18. 18. C — PMI is typically required on conventional loans with a down payment of less than 20% and will be required until the loan balance reaches 80% of the original purchase price.
19. 19. C — A purchase-money mortgage is a type of mortgage where the seller finances a portion of the purchase price, often in exchange for a higher sale price or other benefits.
20. 20. C — VA loans often require no down payment, making them an attractive option for eligible borrowers.