A 68-year-old borrower is considering a reverse mortgage on their $400,000 home with no existing mortgage. Which factor will have the GREATEST impact on determining the loan amount they can receive?
Correct Answer
C) Current interest rates
For reverse mortgages, the loan amount is primarily determined by the borrower's age, home value, and current interest rates. Unlike traditional mortgages, income and credit are not primary factors in determining loan amount. Interest rates have the greatest impact because they affect the present value calculation of future loan proceeds.
Why This Is the Correct Answer
For reverse mortgages, the loan amount is primarily determined by the borrower's age, home value, and current interest rates. Unlike traditional mortgages, income and credit are not primary factors in determining loan amount. Interest rates have the greatest impact because they affect the present value calculation of future loan proceeds.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
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A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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