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ARMs questions and answers verified 2024
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ARMs questions and answers verified 2024
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ARMsARM - correct answer ✔Adjustable Rate Mortgage
Other names for ARMs - correct answer ✔adjustable-rate loan, variable rate
loan
Components of ARMs - correct answer ✔- index
- margin
- rate adjustment period
- interest rate cap/floor (if any)
- conversion option (if any)
what is an index - correct answer ✔an economic measurement used to make
periodic interest adjustments for an adjustable-rate mortgage
in ARMs, the ____ chooses the index that will be used - correct answer
✔lender
index is often referred to as the: - correct answer ✔cost of fund
a fully indexed rate is the combination of the: - correct answer ✔index and
margin
the specific index used to determine the rate adjustments must be disclosed
to a potential borrower on the: - correct answer ✔Loan Estimate
, the index appears on the loan estimate and the ________________ when the
loan goes to closing - correct answer ✔promissory note
index is _____ under control of lender, determined by index - correct answer
✔not
what is the plural of index? - correct answer ✔indices
what are some common indices? - correct answer ✔- the Constant Maturity
Treasury (CMT)
- The 11th District Cost of Fund Index (COFI)
- The London Inter Bank Offering Rates (LIBOR)
- Certificate of Deposit Index (CODI)
- The Bank Prime Loan Rate (Prime Rate)
Margin - correct answer ✔the margin is the number that a lender adds to an
index to determine the interest rate of an ARM
margin can also be referred to as a: - correct answer ✔spread
the margin is a _____ number that is not subject to change during the term of
a loan - correct answer ✔fixed
the margin represents the: - correct answer ✔lender's operating costs and
profit margin
the margin is disclosed on the - correct answer ✔loan estimate
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