Conventional, FHA, VA, and other common mortgage loan product types tested on the SAFE Act mortgage loan originator exam.
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- What is a conventional mortgage loan?
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A mortgage loan not insured or guaranteed by the federal government, typically requiring a down payment of 10-20%.- What is the primary purpose of private mortgage insurance (PMI)?
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To protect the lender against losses if a borrower defaults when the down payment is less than 20%.- What is an FHA loan?
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A mortgage insured by the Federal Housing Administration, allowing lower down payments (as low as 3.5%) and more flexible credit requirements.- What is mortgage insurance premium (MIP) on an FHA loan?
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An insurance cost paid by the borrower to the FHA to protect the lender, including an upfront MIP and annual MIP.- What is a VA loan?
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A mortgage guaranteed by the Department of Veterans Affairs, available to eligible military members and veterans with no required down payment.- What is the VA funding fee?
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A one-time fee paid by the VA loan borrower to the Department of Veterans Affairs, ranging from 1.25% to 3.6% of the loan amount depending on circumstances.- What is a USDA loan?
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A mortgage guaranteed by the U.S. Department of Agriculture for eligible rural homebuyers, requiring no down payment and featuring lower interest rates.- What are the property eligibility requirements for a USDA loan?
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The property must be located in a designated rural area as defined by the USDA, typically excluding properties in major metropolitan areas.- What is a jumbo loan?
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A conventional mortgage exceeding the conforming loan limit set by Fannie Mae or Freddie Mac, typically requiring larger down payments and stricter credit standards.- What is a conforming loan?
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A conventional mortgage that meets the loan limits set by Fannie Mae and Freddie Mac, allowing secondary market sales.- What is an adjustable-rate mortgage (ARM)?
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A mortgage with an interest rate that varies over time, typically starting lower than fixed rates and adjusting periodically based on market indices.- What is a fixed-rate mortgage?
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A mortgage with an interest rate that remains constant throughout the entire loan term, providing predictable monthly payments.- What is an interest-only mortgage?
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A mortgage where the borrower pays only interest for a specified period, with principal payments beginning later or at the end of the loan term.- What is a balloon mortgage?
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A mortgage with lower monthly payments during the loan term, but a large lump-sum payment due at the end.- What is an assumable mortgage?
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A mortgage that allows a qualified buyer to take over the seller's loan obligations and remaining balance under the same terms.
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