A borrower is considering a 5/1 ARM versus a 30-year fixed-rate mortgage. During the initial fixed period of the ARM, which statement is most accurate?
Correct Answer
B) The borrower's interest rate and payment remain constant
During the initial fixed period (5 years in a 5/1 ARM), both the interest rate and payment remain constant, just like a fixed-rate mortgage. Adjustments only begin after the initial period expires.
Why This Is the Correct Answer
During the initial fixed period (5 years in a 5/1 ARM), both the interest rate and payment remain constant, just like a fixed-rate mortgage. Adjustments only begin after the initial period expires.
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?
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?
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