Understanding Home Loans Quiz

Which of the following is a characteristic of a fixed-rate mortgage?

• The interest rate changes periodically.

• The interest rate remains the same throughout the loan term.

• The loan term is always 15 years.

• The loan is only available for first-time homebuyers.

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DOK Level 2: Skill/Concept

What is the primary purpose of a pre-approval letter in the home loan application process?

• To guarantee a loan amount.

• To show sellers that a buyer is serious and financially capable.

• To lock in an interest rate.

• To finalize the loan agreement.

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DOK Level 2: Skill/Concept

How does an adjustable-rate mortgage (ARM) differ from a fixed-rate mortgage?

• ARM has a fixed interest rate for the entire loan term.

• ARM interest rates can change after an initial fixed period.

• ARM is only available for investment properties.

• ARM requires a higher down payment than fixed-rate mortgages.

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DOK Level 2: Skill/Concept

Which factor is most likely to affect the interest rate offered on a home loan?

• The color of the house.

• The borrower's credit score.

• The number of bedrooms in the house.

• The age of the borrower.

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DOK Level 2: Skill/Concept

What is the role of private mortgage insurance (PMI) in home loans?

• To protect the borrower in case of job loss.

• To protect the lender if the borrower defaults on the loan.

• To cover home repairs.

• To reduce the interest rate on the loan.

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DOK Level 2: Skill/Concept

Which of the following best describes a home equity loan?

• A loan used to purchase a second home.

• A loan that allows homeowners to borrow against the equity in their home.

• A loan that requires no interest payments.

• A loan that can only be used for home improvements.

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DOK Level 2: Skill/Concept

How does a higher credit score generally impact the terms of a home loan?

• It leads to a higher interest rate.

• It results in a lower interest rate.

• It has no impact on the loan terms.

• It requires a larger down payment.

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DOK Level 2: Skill/Concept

What is the typical consequence of missing multiple mortgage payments?

• The interest rate is reduced.

• The loan term is extended.

• The lender may initiate foreclosure proceedings.

• The borrower receives a tax credit.

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DOK Level 2: Skill/Concept

Which type of home loan is specifically designed for veterans and active-duty military members?

• FHA loan

• VA loan

• USDA loan

• Conventional loan

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DOK Level 2: Skill/Concept

What is the main advantage of a 15-year mortgage over a 30-year mortgage?

• Lower monthly payments.

• Higher interest rates.

• Less interest paid over the life of the loan.

• More flexible payment options.

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DOK Level 2: Skill/Concept