Learning outcomes: Describe the various types of residential mortgage products. Calculate a fixed rate mortgage payment, and its principal and interest components.
Questions:
500.1. Sally is meeting with her real estate agent in order to prepare her application for a mortgage loan. The real estate agent makes the following four statements. Each of these statements is true, or at plausible, EXCEPT which is clearly false?
a. The initial interest rate on a 3/1 hybrid adjustable rate mortgage (ARM) is less than the rate on a 30-year fixed rate mortgage (FRM)
b. A conforming loan meets guidelines set by agencies such as Fannie Mae and Freddie Mac and include limits on the loan size
c. A "jumbo" is a mortgage loan with an amount above the conforming (aka, agency) loan limit; interest rates on a jumbo loan may be higher or even lower than (otherwise-equivalent) conforming loans
d. In a low interest environment, an adjustable rate mortgage (ARM) is generally advised because the borrower can always decide to refinance at a later date
500.2. Which is nearest to the principal component of the first monthly payment on a 30-year fixed rate mortgage (FRM) with an original balance of $160,000 when the interest rate is 3.60%?
a. $39.00
b. $216.50
c. $420.00
d. $636.50
500.3. After five years (60 months), which is nearest to the outstanding scheduled principal balance on a 30-year fixed rate mortgage (FRM) with an original balance of $140,000 and a mortgage interest rate of 3.60%?
a. $152,300
b. $165,800
c. $179,700
d. $182,500
Answers:
Questions:
500.1. Sally is meeting with her real estate agent in order to prepare her application for a mortgage loan. The real estate agent makes the following four statements. Each of these statements is true, or at plausible, EXCEPT which is clearly false?
a. The initial interest rate on a 3/1 hybrid adjustable rate mortgage (ARM) is less than the rate on a 30-year fixed rate mortgage (FRM)
b. A conforming loan meets guidelines set by agencies such as Fannie Mae and Freddie Mac and include limits on the loan size
c. A "jumbo" is a mortgage loan with an amount above the conforming (aka, agency) loan limit; interest rates on a jumbo loan may be higher or even lower than (otherwise-equivalent) conforming loans
d. In a low interest environment, an adjustable rate mortgage (ARM) is generally advised because the borrower can always decide to refinance at a later date
500.2. Which is nearest to the principal component of the first monthly payment on a 30-year fixed rate mortgage (FRM) with an original balance of $160,000 when the interest rate is 3.60%?
a. $39.00
b. $216.50
c. $420.00
d. $636.50
500.3. After five years (60 months), which is nearest to the outstanding scheduled principal balance on a 30-year fixed rate mortgage (FRM) with an original balance of $140,000 and a mortgage interest rate of 3.60%?
a. $152,300
b. $165,800
c. $179,700
d. $182,500
Answers:
