Products and Calculations Flashcards

A borrower has a $300,000 loan at 6% annual interest. What is the monthly interest portion of the first payment using simple interest calculation?

Answer: $1,500

Monthly interest = $300,000 × (6% / 12) = $300,000 × 0.005 = $1,500.

An ARM has a 2/6 cap structure with an initial rate of 4.5%. What is the maximum rate the loan can ever reach?

Answer: 10.5%

A lifetime cap of 6% added to the initial rate of 4.5% yields a maximum possible rate of 10.5%.

Which loan product is characterized by payments that cover only interest for a set period, after which the payment increases substantially?

Answer: Interest-only mortgage

An interest-only mortgage requires only interest payments during the initial period, then fully amortized payments begin.

A home appraises at $250,000 and the borrower puts 10% down. What is the LTV ratio?

Answer: 90%

LTV = Loan Amount / Appraised Value = $225,000 / $250,000 = 90%.

What is the FHA upfront mortgage insurance premium (UFMIP) rate for most FHA purchase loans?

Answer: 1.75%

FHA charges a UFMIP of 1.75% of the base loan amount, which can be financed into the loan.

A conventional loan with an 85% LTV on a $400,000 purchase would require PMI. Approximately how much is the loan amount?

Answer: $340,000

Loan amount = $400,000 × 85% = $340,000, meaning the borrower puts $60,000 down.

A 5/1 ARM means the interest rate is fixed for the first 5 years and then adjusts every:

Answer: 1 year

In a 5/1 ARM, '5' is the fixed period in years and '1' is the adjustment frequency in years after that.