Question 1

____________________ mortgage insurance (PMI) protects the lender against loan default.

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Question 2

The refusal of banks to lend to residents of certain neighborhoods is called ____________________.

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Question 3

The highest bond rating a security can receive is a(n) ____________________ rating.

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Question 4

What is the loan-to-value relationship?

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Question 5

The Federal Home Loan Mortgage Corporation is better known as ____________________.

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Question 6

Calculate the monthly cost of private mortgage insurance (PMI), using the typical PMI rate of 1/2 of 1 percent, for a principal balance of $165,000.

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Question 7

When Sylvia bought her house two years ago, it was worth $75,000. The value of the house has appreciated 4 percent in each of the past two years. What is Sylvia's house worth now?

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Question 8

What are the four components of PITI?

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Question 9

What is the value of 3 points on a mortgage loan of $150,000?

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Question 10

The ____________________ cap is the specified overall maximum or minimum rate of an ARM, regardless of index.

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Question 11

The difference between what an item is worth and what is owed on it is called ____________________.

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Question 12

_________________________ occurs when the amount owed on a home is more than the current value of the home.

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Question 13

In a(n) ____________________ mortgage, the borrower prepays part of the interest in order to get a lower rate.

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Question 14

What is the adjustment interval on an ARM?

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Question 15

Four years ago, Mavis and Lester purchased a $200,000 home with $25,000 down. The remaining principal on the home is $165,000. Suppose the home has appreciated in value during that time to $250,000. Find Mavis and Lester's equity in the home.

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Question 16

A type of fixed rate mortgage in which the entire remaining balance of the loan is due in one single large payment is called a(n) ____________________ mortgage.

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Question 17

A fixed rate mortgage is also known as a(n) ____________________ mortgage.

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Question 18

Most lenders require an amount called ____________________ to be paid to them in advance; the lenders pay real estate taxes from this fund.

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Question 19

What is a foreclosure?

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Question 20

Guardian Bank will lend no more than 95 percent of the appraised value of a house to a prospective buyer. The house Yoko and Akira wish to purchase has been appraised at $110,000. What is the maximum amount that Guardian Bank would be willing to lend them?

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Quiz 8: Mortgages