12
9 exam questionsHigh Priority
Mortgage types, terms, qualification, and the lending process.
Quick Explanation
5 min readMortgages are loans secured by real property. Key concepts: LTV (Loan-to-Value), amortization, discount points, and PMI. When LTV exceeds 80%, PMI is required. Discount points reduce the interest rate — 1 point = 1% of loan amount.
Key Points — What Matters for the Exam
1
LTV = Loan Amount ÷ Appraised Value2
PMI required when LTV exceeds 80% (conventional loans)3
Discount Points = prepaid interest; 1 point = 1% of loan amount4
Amortization = gradual payoff through regular P&I payments5
Due-on-Sale clause = loan must be paid when property is sold6
Assumable mortgage = buyer takes over seller's existing loan7
ARM = Adjustable Rate Mortgage, rate changes with indexMemory Trick
LTV over 80% = PMI. Think: 'Less Than 20% down? Pay More Insurance.' Discount points: each point costs 1% of loan but lowers your rate.
Common Trap Answers — Don't Fall For These
PMI protects the LENDER (not the borrower)
Discount points are paid at CLOSING (not monthly)
Due-on-sale clause prevents unauthorized loan assumptions
Key Terms for This Unit (4)
Amortization
Gradual payoff of a loan through regular payments of principal and interest.
LTV (Loan-to-Value)
Loan amount ÷ Appraised Value. PMI required when LTV exceeds 80%.
Due-on-Sale Clause
Requires full loan balance when property is sold. Prevents unauthorized assumptions.
Discount Points
Prepaid interest paid at closing to reduce the interest rate. 1 point = 1% of loan amount.