Pennsylvania Finance
Practice Questions & Answers (2026)

Explanation

TRID replaced the HUD-1 Settlement Statement with the Closing Disclosure for most closed-end mortgage transactions. The Closing Disclosure provides a final accounting of all loan terms and closing costs and must be provided 3 business days before closing.

Explanation

A hybrid ARM has a fixed interest rate for an initial period (e.g., 5, 7, or 10 years) and then converts to an adjustable rate that resets periodically based on a market index plus the lender's margin. Common examples are 5/1 ARMs and 7/1 ARMs.

Explanation

Pennsylvania imposes a realty transfer tax of 1% at the state level and an additional 1% at the local level, for a total of 2%. By custom, this is typically split equally between buyer and seller (1% each), though it can be negotiated.

Explanation

An amortization schedule shows the breakdown of each mortgage payment into principal and interest over the loan term. Early payments are mostly interest; over time, a larger portion of each payment reduces principal. The loan is fully paid at the end of the term.

Explanation

A balloon mortgage features regular monthly payments (often interest-only or partially amortizing) for a set period, followed by a single large 'balloon' payment of the remaining balance. This type of loan carries refinancing risk at the end of the balloon period.

Explanation

For conventional loans with LTV above 90%, Fannie Mae and Freddie Mac guidelines limit seller concessions to 3% of the sales price. This limit is important for Pennsylvania buyers using conventional financing.

Explanation

A fixed-rate fully amortizing mortgage has a constant interest rate and equal monthly payments over the loan term, with the loan fully paid at the end. It is the most common mortgage type for home purchases.

Explanation

TILA requires lenders to disclose the APR and total cost of credit, allowing consumers to compare loan terms from different lenders. The APR includes the interest rate plus fees, giving a more complete cost picture than the interest rate alone.

Explanation

Discount points are prepaid interest. Each point equals 1% of the loan amount. Paying points typically lowers the interest rate, which reduces monthly payments over the life of the loan. They are deductible as mortgage interest for tax purposes.

Explanation

Conventional lenders require PMI when the borrower's down payment is less than 20% (LTV exceeds 80%). PMI protects the lender if the borrower defaults. Under the Homeowners Protection Act, PMI must be cancelled when LTV reaches 80%.