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Mort 202 Grande MOD 1 Questions and Answers 100% Pass Question: What is the primary function of a mortgage in real estate transactions? Answer: The primary function of a mortgage is to provide a loan to a borrower for purchasing real estate, with the property itself serving as collateral f...

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  • August 13, 2024
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Mort 202 Grande MOD 1 Questions and
Answers 100% Pass
Question: What is the primary function of a mortgage in real estate transactions?


Answer: ✔✔ The primary function of a mortgage is to provide a loan to a borrower for

purchasing real estate, with the property itself serving as collateral for the loan.




Question: How does the interest rate affect the total cost of a mortgage over its term?


Answer: ✔✔ The interest rate directly impacts the total cost of a mortgage; a higher interest rate

increases the overall amount paid over the term of the loan, while a lower interest rate reduces

the total cost.




Question: What is the significance of the loan-to-value (LTV) ratio in mortgage lending?


Answer: ✔✔ The loan-to-value (LTV) ratio measures the amount of the mortgage loan

compared to the appraised value of the property. It is significant because it helps lenders assess

the risk of the loan; a lower LTV ratio indicates less risk.




Question: What are the main differences between a fixed-rate mortgage and an adjustable-rate

mortgage (ARM)?




1

,Answer: ✔✔ A fixed-rate mortgage has a constant interest rate and monthly payments

throughout the loan term, while an adjustable-rate mortgage (ARM) has an interest rate that may

change periodically based on market conditions, leading to varying monthly payments.




Question: How does a mortgage amortization schedule work?


Answer: ✔✔ A mortgage amortization schedule outlines the repayment plan for the loan,

showing how each payment is split between interest and principal, and how the balance of the

loan decreases over time until it is fully paid off.




Question: What is the purpose of mortgage insurance, and when is it typically required?


Answer: ✔✔ Mortgage insurance protects the lender in case the borrower defaults on the loan. It

is typically required when the borrower's down payment is less than 20% of the property's value,

as the loan is considered higher risk.




Question: What is the impact of prepaying a mortgage on the loan term and interest paid?


Answer: ✔✔ Prepaying a mortgage can shorten the loan term and reduce the total interest paid

over the life of the loan, leading to significant savings for the borrower.




Question: How does a borrower’s credit score affect their mortgage application and terms?



2

, Answer: ✔✔ A borrower’s credit score affects their eligibility for a mortgage and the interest

rate they receive; higher credit scores typically qualify for better rates and terms, while lower

scores may result in higher interest rates or denial of the loan.




Small Business Administration (SBA) ✔✔- the principal government agency concerned with the

financing, operation, and management of small

businesses




Corporate refugee ✔✔- those individuals who flee the bureaucratic environment of big business

by going into

business for themselves




Small Business ✔✔a business which is independently owned


and operated and is not dominant in its field of operations




Business - ✔✔an organization that combines inputs of raw


materials, capital, labor, and management skills to produce useful outputs of goods and services

so as to earn a profit




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