Mortgage Loan Originator General Mortgage Knowledge

Question 1

Nora Chen applied for an $820,000 first mortgage on a one-unit house. Her county's stated one-unit conforming limit is $766,550. Credit and down payment already meet the usual agency guides. What does the loan amount make this mortgage?

Accepted Answer

Jumbo, because $820,000 is above the stated $766,550 limit.

Question 2

Marcus Hale needs $766,550 to buy a one-unit home. The conforming limit stated for that county and unit count is also $766,550. He asks whether landing exactly on the limit makes the loan jumbo. What is the size classification?

Accepted Answer

Conforming as to size, because the loan equals the stated limit and is not over it.

Question 3

Priya Shah plans a $548,250 loan on a one-unit primary home. The conforming limit stated for her county is $766,550. A coworker calls every loan over $500,000 a jumbo. Is that the right size label?

Accepted Answer

No. $548,250 is under $766,550, so the size is conforming.

Question 4

Owen Blake is buying a two-unit property and wants a $980,000 loan. The file states a one-unit conforming limit of $766,550 and a two-unit conforming limit of $981,500. Which limit decides the size label?

Accepted Answer

The two-unit limit. $980,000 is $1,500 under $981,500, so the size is conforming.

Question 5

Elena Voss is in a high-cost county. The file states a baseline one-unit limit of $766,550 and a high-cost one-unit limit of $1,149,825. She wants $1,050,000, and the rest of the file fits agency guides. What is the loan?

Accepted Answer

High-balance conforming, because it is over the baseline and not over the stated high-cost limit.

Question 6

Derek Cole wants $1,200,000 on a one-unit home in a high-cost county. The stated high-cost conforming limit is $1,149,825. He will make a large down payment and pay discount points. What does the amount do?

Accepted Answer

It makes the loan jumbo, because $1,200,000 exceeds the stated high-cost limit.

Question 7

Amina Farouk wants a $400,000 loan on a one-unit investment condo she will not live in. The stated one-unit conforming limit is $766,550. A colleague says an investment loan is jumbo even under that limit. What is right?

Accepted Answer

It is not jumbo. $400,000 is under the stated $766,550 size limit.

Question 8

Luis Ortega was quoted $850,000, which is above the stated one-unit conforming limit of $766,550. He wants the smallest cut that puts the loan on that limit so the size is no longer jumbo. How much must the loan shrink?

Accepted Answer

$83,450, which lands the loan exactly on the $766,550 limit.

Question 9

Helen Cho is buying a two-unit home with a $900,000 loan. The file states a one-unit conforming limit of $766,550 and a two-unit conforming limit of $981,500. She worries that $900,000 is over the one-unit figure. Which statement applies?

Accepted Answer

The two-unit limit applies, and $900,000 is under $981,500, so the size is conforming.

Question 10

Jamal Wright is buying a $300,000 house with an FHA loan. The credit facts in his file qualify for the 3.5 percent minimum down payment. How much cash is that minimum down payment?

Accepted Answer

$10,500, which is 3.5 percent of the price.

Question 11

Camille Ortiz is buying a $240,000 home with FHA financing. Her credit facts qualify for the 3.5 percent minimum down payment, and she will pay that amount. What is the base loan before any mortgage insurance premium?

Accepted Answer

$231,600, after a down payment of $8,400.

Question 12

Sofia Alvarez received an FHA quote on a $275,000 purchase. The quote lists an upfront mortgage insurance premium and a separate annual mortgage insurance premium. She asks whether FHA insurance is only one of those charges. What is she paying?

Accepted Answer

Both. The upfront premium and the annual premium are two separate FHA charges.

Question 13

After Benito Cruz pays the FHA minimum down payment that his credit facts allow, the base loan is $200,000. The quote charges an upfront mortgage insurance premium of 1.75 percent of that base loan. How much is the upfront premium?

Accepted Answer

$3,500.

Question 14

Yara Hassan's FHA base loan is $240,000. Her quote states an annual mortgage insurance premium of 0.50 percent of that base loan, collected in monthly installments. What is the annual premium for the year?

Accepted Answer

$1,200 for the year.

Question 15

Grace Nguyen's FHA base loan is $150,000. The quote states an upfront mortgage insurance premium of 1.75 percent, and she chooses to finance that premium. What is the loan amount after the premium is added?

Accepted Answer

$152,625, after adding the 1.75 percent premium.

Question 16

Rita Feldman is buying a $180,000 home. Her credit facts qualify for the FHA 3.5 percent minimum. A friend told her an FHA loan is zero down, the way some VA loans are. What cash down payment is the FHA minimum here?

Accepted Answer

$6,300.

Question 17

Andre Wilson wants an FHA loan on a $250,000 purchase. His credit facts do not qualify for the 3.5 percent minimum, and the quote requires 10 percent down. How much cash is that down payment?

Accepted Answer

$25,000, from the 10 percent the quote requires.

Question 18

Naomi Brooks financed the upfront mortgage insurance premium on her FHA loan of $210,000. She asks whether paying that upfront premium removes the annual premium from the rest of the loan. What is the answer?

Accepted Answer

No. The upfront premium does not remove the annual premium. FHA uses both.

Question 19

Patrick Flynn wants a $265,000 VA loan. The worksheet says his entitlement covers the loan. After taxes, housing, and other debts, his residual income is $2,450, and the floor on the file is $1,100. What cash down payment does this loan require?

Accepted Answer

$0. Entitlement covers the loan, and residual income clears the floor.

Question 20

Denise Walker's VA quote is a $320,000 loan with zero down because entitlement covers it. The quote lists a funding fee of 2.15 percent of the loan. She asks what that fee is in dollars. What is the funding fee?

Accepted Answer

$6,880.

Question 21

Howard Kim has $5,200 left after taxes each month. The proposed VA housing payment is $1,750, and his other monthly debts are $350. The residual-income floor on his file is $1,395. What is his residual income?

Accepted Answer

$3,100, which clears the $1,395 floor.

Question 22

Keisha Grant wants a new $350,000 VA loan with nothing down. The worksheet says her remaining entitlement does not cover this loan and is not enough for zero down. She still asks for no down payment. What is available?

Accepted Answer

Zero down is not available. Entitlement does not cover this loan.

Question 23

Samuel Iqbal's entitlement covers a $300,000 VA loan, so the down payment is zero. The quote charges a funding fee of 2.3 percent and he will finance it. What loan amount is recorded, and what cash does he bring for the down payment?

Accepted Answer

The loan becomes $306,900, and the cash down payment is $0.

Question 24

Lila Petrov wants a $420,000 VA loan. The worksheet says entitlement covers $380,000 of it, and the uncovered $40,000 is the down payment required to complete the loan. She hoped for zero down. What down payment does the file require?

Accepted Answer

$40,000. Entitlement does not cover the full loan.

Question 25

Imani Douglas has $3,200 after taxes. Her proposed VA housing payment is $1,900 and her other monthly debts are $450. Entitlement would cover the loan, but the residual-income floor on the file is $1,200. What is the residual-income result?

Accepted Answer

Residual income is $850, which is $350 short of the $1,200 floor.

Question 26

Victor Ramos has entitlement that covers his $280,000 VA loan. The funding fee is 1.25 percent, and he will pay that fee in cash at closing rather than finance it. What is his down payment, and what is the fee he is paying in cash?

Accepted Answer

The down payment is $0. The $3,500 cash is the funding fee, not a down payment.

Question 27

Carla Diaz already used her VA entitlement on a loan that is still outstanding. The file says that entitlement is not restored and does not cover a new $360,000 VA loan. She asks for zero down on the new loan because she is a veteran. What follows?

Accepted Answer

Zero down is not available from entitlement, because it is not restored and does not cover the new loan.

Question 28

Peter Novak wants a USDA loan. The file says the house is in an eligible rural area, his household income of $62,000 is under the stated limit of $84,000, and he will occupy the home as his primary residence. Do these facts pass?

Accepted Answer

Yes. The property is an eligible rural home, income is under the stated limit, and he will occupy it.

Question 29

Sandra McKay earns $61,000, under the $88,000 income limit stated on her USDA worksheet, and she will live in the house. The same worksheet shows the address is outside the eligible rural area. Can she use USDA for this house?

Accepted Answer

No. The house is not an eligible rural property, so income and occupancy do not make it a USDA loan.

Question 30

Trevor Walsh's household income is $96,000. The USDA income limit stated for his household and area is $91,000. The house is in an eligible rural area and he would occupy it. How does the income test come out?

Accepted Answer

He does not pass. He is $5,000 over the $91,000 limit.

Question 31

Claire Dubois found a cottage in an eligible rural area. Her income is under the USDA limit stated in the file. She will keep her city apartment and use the cottage on weekends. Does this occupancy work for USDA?

Accepted Answer

No. She must occupy the USDA property as her primary residence.

Question 32

Omar Haddad earns $54,000 and his spouse Lena earns $28,000. Both amounts count as household income. The USDA income limit stated for their household is $90,000, the house is in an eligible rural area, and they will occupy it. Does income pass?

Accepted Answer

Yes. Combined income is $82,000, which is under the $90,000 limit.

Question 33

Emily Sato's base pay is $78,000, and the USDA file says her $12,001 of overtime must be counted. The income limit stated for her household is $90,000. The house is rural-eligible and she will occupy it. What is the income result?

Accepted Answer

She does not pass. $78,000 plus $12,001 is $90,001, which is $1 over the limit.

Question 34

George Patel will stay in his current house. He wants a USDA loan on an eligible rural home that his daughter will live in. His income is under the limit stated in the file. Whose occupancy matters?

Accepted Answer

George must occupy the home. Buying it for a daughter while he lives elsewhere fails.

Question 35

Ruthie Stein wants a $200,000 loan. Her household income is $110,000. The USDA worksheet states an income limit of $86,500 and also shows the house is rural-eligible. She says $200,000 is fine because it is under some loan cap. What fails?

Accepted Answer

Income. $110,000 is $23,500 over the $86,500 income limit.

Question 36

Felix Romero's income is under the USDA limit stated in the file, and he will occupy the house. The eligibility map shows his lot is one parcel outside the rural boundary line drawn on the worksheet. A neighbor inside the line would qualify. Does Felix's lot qualify?

Accepted Answer

No. A lot outside the stated boundary is not an eligible rural property.

Question 37

Hannah Price has an adjustable-rate mortgage. The index is 3.25 percent and the margin is 2.50 percent. No cap is binding. What is her fully indexed rate?

Accepted Answer

5.75 percent, the index plus the margin.

Question 38

Colin Briggs took an ARM with a start rate of 4.00 percent. The index is now 3.50 percent and the margin is 2.50 percent. He thinks the start rate is the fully indexed rate. What is the fully indexed rate?

Accepted Answer

6.00 percent, the index plus the margin.

Question 39

Wendy Zhou's ARM is at 5.00 percent. The periodic cap is 2 percentage points. Index plus margin would put the fully indexed rate at 8.00 percent at the next change. What rate can the next adjustment reach?

Accepted Answer

7.00 percent, because the rate can rise by only 2 points from 5.00.

Question 40

Frank Miller's ARM started at 4.50 percent with a lifetime cap of 5 percentage points over that start rate. The index is 7.25 percent and the margin is 2.75 percent. What is the highest rate the note allows?

Accepted Answer

9.50 percent, the start rate plus the lifetime cap.

Question 41

Paula Grant's note rate is fixed at 6.25 percent. A worksheet beside her file shows an index of 4.10 percent and a margin of 2.75 percent. Does that index-plus-margin math reset her rate?

Accepted Answer

No. Her fixed rate stays 6.25 percent. Index and margin do not reset a fixed note.

Question 42

Neil Kapoor's ARM margin stays at 2.25 percent. The index moved from 3.00 percent to 4.50 percent. What is the new fully indexed rate?

Accepted Answer

6.75 percent, the new index plus the same margin.

Question 43

Iris Dalton's ARM is at 5.00 percent. The lifetime ceiling is 10.00 percent. Index plus margin is 8.00 percent, from an index of 5.25 and a margin of 2.75. The periodic cap is 1 percentage point. Which cap sets the next rate?

Accepted Answer

The periodic cap. The next rate is 6.00 percent, a 1-point move.

Question 44

Jorge Medina's ARM starts at 4.00 percent. The first change is capped at 2 percentage points, and the lifetime cap is 5 points over the start rate. At the first change, index plus margin equals 7.25 percent. What rate is allowed?

Accepted Answer

6.00 percent, because the first change cannot exceed 2 points.

Question 45

Bethany Shaw's ARM is at 6.50 percent. The index is 1.75 percent and the margin is 2.25 percent. The periodic cap is 2 percentage points, and it limits decreases as well as increases. What can the next rate be?

Accepted Answer

4.50 percent, because the rate can fall by only 2 points from 6.50.

Question 46

Aaron Pell has a $240,000 interest-only loan at 6 percent. This month's payment is interest only, with no principal. What is the monthly interest payment?

Accepted Answer

$1,200.

Question 47

Megan Doyle paid only the interest due on her $275,000 loan for five years. The payment never included principal. What is the principal balance after those five years?

Accepted Answer

$275,000, the same balance she started with.

Question 48

Chris Lang owes $186,000. His payment of $1,115 is calculated as if the loan ran 30 years, but the note makes the remaining unpaid principal due at the end of year 7. The payment includes some principal. What is due on that balloon date?

Accepted Answer

The unpaid principal still left at the end of year 7, as a lump sum.

Question 49

Patricia Molina's loan balance is $200,000. This month the interest due is $1,050 and her payment is $900. The unpaid interest is added to the principal. What is the balance after this month?

Accepted Answer

$200,150, after adding the $150 of unpaid interest.

Question 50

Robert Ellis owes $150,000. Interest this month is $860 and he pays $700. The $160 difference is added to principal. Who is hurt by a payment that does not cover the interest?

Accepted Answer

Robert. The unpaid $160 is added to what he owes, so the balance becomes $150,160.

Question 51

Diane Frost's fully amortizing payment is $1,450. Of that, $1,100 is interest and $350 is principal. Her balance was $310,000. How much does the principal balance fall this month?

Accepted Answer

$350, the principal portion.

Question 52

Kyle Brennan borrowed $220,000. The payment of $1,340 is calculated on a 30-year schedule, and the note is a 5-year balloon. He thinks the long calculation means there is no early payoff. When is the large remaining balance due?

Accepted Answer

At the end of year 5, when the remaining unpaid principal is due.

Question 53

Angela Moss owes $100,000. Monthly interest is 0.50 percent of the balance, so this month's interest is $500. She pays $400, and the $100 shortfall is added to principal. If the payment stays $400, what is next month's interest?

Accepted Answer

$500.50, interest on the new balance of $100,100.

Question 54

Gavin Reid's payment is short of the interest due, and the shortage is added to principal. His balance is higher at the end of the month than at the start. What is that result called?

Accepted Answer

Negative amortization, which means the balance rises.

Question 55

Jordan Peck, age 44, wants to borrow against his house, pay the balance down, and borrow again without a new closing. He needs a second lien that reopens as he repays it. Which product matches?

Accepted Answer

A HELOC, because the line can be drawn, repaid, and drawn again.

Question 56

Erica Nunez wants one $40,000 lump sum for a kitchen, then fixed payments until that second loan is gone. She does not want the ability to borrow the paid-down principal again. Which second mortgage fits?

Accepted Answer

A closed-end second, with one disbursement and no redraw.

Question 57

Nathan Crowe has a HELOC with an $80,000 limit. He has drawn $30,000 and has not repaid any of it. How much credit is still available to draw?

Accepted Answer

$50,000.

Question 58

Beverly Adams is 61 and wants a reverse mortgage on the house she occupies. She turns 62 in 11 months. Does she meet the age test today?

Accepted Answer

No. A reverse mortgage borrower must be at least 62, and she is 61.

Question 59

Harold Jenkins is 74 and occupies the home on his reverse mortgage. The loan does not require a monthly principal and interest payment. What happens to the balance while he stays and makes no payment?

Accepted Answer

It rises, because interest and advances are added and he is not paying the balance down.

Question 60

Cynthia Park is 62 and lives in the home she wants to use for a reverse mortgage. A relative told her the minimum age is higher. Does she meet the age test?

Accepted Answer

Yes. Age 62 meets the minimum age of 62.

Question 61

Darius Webb has a closed-end second that started at $45,000. He has since paid the principal down by $5,000. He asks how much of that paid principal he can draw again. What credit reopens?

Accepted Answer

$0. Paying a closed-end second down does not reopen credit.

Question 62

Tina Flores is in the draw period of a HELOC. She has $20,000 drawn at 6 percent, and the minimum payment this period is interest only on the drawn balance. What is that monthly payment?

Accepted Answer

$100.

Question 63

Walter Green's reverse mortgage balance is $120,000. This month $610 of interest and fees is added, and he makes no payment. What is the balance after that addition?

Accepted Answer

$120,610.

Question 64

Sarah Bolton wants a $280,000 loan. The value used for the ratio is $350,000. What is the loan-to-value ratio?

Accepted Answer

80 percent.