A borrower wants to compare an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. What is the MOST important disclosure the MLO must provide about the ARM?
Correct Answer
B) The maximum rate the loan can reach over its lifetime
The lifetime cap (maximum rate) is crucial information for ARM comparisons as it shows the borrower's maximum potential payment exposure. This is required disclosure under ARM regulations and essential for informed decision-making.
Why This Is the Correct Answer
The lifetime cap (maximum rate) is crucial information for ARM comparisons as it shows the borrower's maximum potential payment exposure. This is required disclosure under ARM regulations and essential for informed decision-making.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
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