20 Real Estate Exam Questions On Basic Categories of Mortgages -

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1. What is a conventional mortgage?
a) A loan that is guaranteed by the government
b) A loan that meets the standards of Fannie Mae and Freddie Mac
c) A loan only available to first-time homebuyers
d) A loan with no down payment requirement

Answer: b) A loan that meets the standards of Fannie Mae and Freddie Mac
Explanation: A conventional mortgage is not insured or guaranteed by the government and typically follows Fannie Mae and Freddie Mac guidelines.

2. Which of the following is a characteristic of an FHA loan?
a) It requires a 20% down payment
b) It is insured by the Federal Housing Administration
c) It is only available to military veterans
d) It has no mortgage insurance requirement

Answer: b) It is insured by the Federal Housing Administration
Explanation: FHA loans are backed by the government, making them accessible to borrowers with lower credit scores and smaller down payments.

3. What is a VA loan?
a) A loan for veterans and active military members, backed by the Department of Veterans Affairs
b) A loan with a high interest rate
c) A loan only available in Virginia
d) A type of commercial loan

Answer: a) A loan for veterans and active military members, backed by the Department of Veterans Affairs
Explanation: VA loans help eligible service members and veterans buy homes with no down payment and no private mortgage insurance (PMI).

4. What is the primary benefit of a USDA loan?
a) It is available to anyone regardless of income
b) It allows home purchases in rural areas with no down payment
c) It offers the lowest interest rates on the market
d) It is not backed by any government agency

Answer: b) It allows home purchases in rural areas with no down payment
Explanation: USDA loans are backed by the U.S. Department of Agriculture and are designed to promote homeownership in rural areas.

5. Which mortgage type has a fixed interest rate for the life of the loan?
a) Adjustable-rate mortgage (ARM)
b) Fixed-rate mortgage
c) Interest-only mortgage
d) Balloon mortgage

Answer: b) Fixed-rate mortgage
Explanation: A fixed-rate mortgage has a stable interest rate throughout the term, providing predictable monthly payments.

6. Which mortgage type has an interest rate that can change over time?
a) Fixed-rate mortgage
b) Adjustable-rate mortgage (ARM)
c) Reverse mortgage
d) Balloon mortgage

Answer: b) Adjustable-rate mortgage (ARM)
Explanation: ARMs have interest rates that adjust periodically based on market conditions, typically after an initial fixed period.

7. What is a jumbo loan?
a) A loan that exceeds conforming loan limits set by Fannie Mae and Freddie Mac
b) A loan with a 0% interest rate
c) A loan backed by the VA
d) A loan with a balloon payment

Answer: a) A loan that exceeds conforming loan limits set by Fannie Mae and Freddie Mac
Explanation: Jumbo loans are for high-value properties and typically have stricter credit and income requirements.