A borrower who qualifies for an fha or va loan enjoys

18. A borrower who qualifies for an FHA or VA loan enjoys the advantage that
(a) the mortgage payment is much lower.
(b) only a very low or zero down payment is required.
(c) the cost of private mortgage insurance is lower.
(d) the government holds the lien on the property.
Answer: B
19. (I) Conventional mortgages are originated by private lending institutions, and FHA or
VA loans are originated by the government. (II) Conventional mortgages are insured by
private companies, and FHA or VA loans are insured by the government.
(a) (I) is true, (II) is false.
(b) (I) is false, (II) is true.
(c) Both are true.
(d) Both are false.

Answer: B
20. Borrowers tend to prefer _________ to _________, whereas lenders prefer _________
(a) fixed-rate loans; ARMs; fixed-rate loans.
(b) ARMs; fixed-rate loans; fixed-rate loans.
(c) fixed-rate loans; ARMs; ARMs.
(d) ARMs; fixed-rate loans; ARMs.
Answer: C
21. (I) ARMs offer lower initial rates and the rate may fall during the life of the loan. (II)
Conventional mortgages do not allow a borrower to take advantage of falling interest
rates.
(a) (I) is true, (II) is false.
(b) (I) is false, (II) is true.
(c) Both are true.
(d) Both are false.
Answer: A
22. Growing-equity mortgages (GEMs)
(a) help the borrower pay off the loan in a shorter time.
(b) have such low payments in the first few years that the principal balance increases.
(c) offer borrowers payments that are initially lower than the payments on a
conventional mortgage.
(d) do all of the above.
(e) do only (a) and (b) of the above.
Answer: A
23. A borrower with a 30-year loan can create a GEM by
(a) simply increasing the monthly payments beyond what is required and designating
that the excess be applied entirely to the principal.
(b) converting his ARM into a conventional mortgage.
(c) converting his conventional mortgage into an ARM.
(d) converting his conventional mortgage into a GPM.
Answer: A
24. Which of the following are useful for home buyers who expect their income to rise in
the future?
(a) GPMs
(b) RAMs
(c) GEMs
(d) (a) and (b)

(e) (a) and (c)
Answer: E
25. Which of the following are useful for home buyers who expect their income to fall in
the future?
(a) GPMs
(b) RAMs
(c) GEMs
(d) (a) and (b)
(e) (a) and (c)
Answer: B
26. Retired people can live on the equity they have in their homes by using a
(a) GEM.
(b) GPM.
(c) SAM.
(d) RAM.
Answer: D
27. Second mortgages serve the following purposes:
(a) they give borrowers a way to use the equity they have in their homes as security for
another loan.
(b) they allow borrowers to get a tax deduction on loans secured by their primary
residence or vacation home.
(c) they allow borrowers to convert their conventional mortgages into GEMs.
(d) all of the above.
(e) only (a) and (b) of the above.
Answer: E