A creditor offers the following loans to a qualified borrower: 30-year fixed at 6.5% with $2,500 points, 30-year fixed at 7.0% with $500 points, and 5/1 ARM at 6.0% with $1,000 points. If the borrower wants to avoid adjustable rate features, which loan should be presented as the lowest rate without risky features?
Correct Answer
A) 30-year fixed at 6.5% with $2,500 points
Among loans without risky features (excluding the ARM), the 30-year fixed at 6.5% has the lowest interest rate. While adjustable rates are not specifically defined as risky features under the regulation, if we're looking for loans without variable rate features, the 6.5% fixed rate loan is the lowest rate option.
Why This Is the Correct Answer
Among loans without risky features (excluding the ARM), the 30-year fixed at 6.5% has the lowest interest rate. While adjustable rates are not specifically defined as risky features under the regulation, if we're looking for loans without variable rate features, the 6.5% fixed rate loan is the lowest rate option.
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?
During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?
An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer:
An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
People Also Study
Federal Mortgage-Related Laws
23% of exam
General Mortgage Knowledge
23% of exam
Ethics, Fraud & Consumer Protection
17% of exam
Uniform State Test Content
12% of exam
Previous Question
When reviewing a credit report, an MLO notices a borrower has a charge-off from 18 months ago. How should this derogatory item be addressed in the loan application process?
Next Question
A borrower's Loan Estimate shows total closing costs of $8,000. At closing, the actual total closing costs are $8,650. Assuming no changed circumstances occurred, what is the maximum tolerance violation?