A balloon mortgage has a 7-year term with a 30-year amortization schedule. At the end of 7 years, what is the borrower typically required to do?
Correct Answer
A) Pay off the remaining loan balance in full or refinance
With a balloon mortgage, the borrower must pay off the entire remaining loan balance when the balloon payment comes due (in this case, after 7 years). This typically requires refinancing the loan or paying cash. The borrower cannot simply continue the original payment schedule since the loan term has ended.
Why This Is the Correct Answer
With a balloon mortgage, the borrower must pay off the entire remaining loan balance when the balloon payment comes due (in this case, after 7 years). This typically requires refinancing the loan or paying cash. The borrower cannot simply continue the original payment schedule since the loan term has ended.
More Mortgage Knowledge Questions
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?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
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?
A borrower refinances their home with a cash-out refinance loan of $750,000. The original loan balance was $400,000, and they're taking $300,000 in cash. If conforming limits allow $766,550, how is this loan classified?
Under TRID regulations, discount points must be disclosed on the Loan Estimate in which section?
During the draw period of a HELOC, what type of payments are borrowers typically required to make?
A lender packages a $500,000 conventional loan that meets all current GSE standards but was originated using outdated underwriting software that didn't verify employment in the required manner. This loan would be:
An MLO receives a loan application where the borrower lists their income as 'self-employed - varies monthly.' No specific dollar amount is provided. The borrower states they will provide tax returns later. What is the status of this application under TRID?
A borrower is applying for a USDA Rural Development loan. Which of the following best describes the primary eligibility requirement for the property location?
People Also Study
Federal Mortgage-Related Laws
23% of exam
Mortgage Loan Origination Activities
25% of exam
Ethics, Fraud & Consumer Protection
17% of exam
Uniform State Test Content
12% of exam
Related Study Resources
Previous Question
A borrower has two existing mortgages totaling $200,000 and wants to refinance into a single loan of $195,000, paying off both existing mortgages. What type of transaction is this?
Next Question
A borrower makes their regular payment plus an additional $1,000 toward principal on the first payment of their 30-year mortgage. Approximately how much total interest will this save over the life of the loan at 5% interest?