FinanceIntermediateCalifornia Exam

The maximum conforming loan limit set by the FHFA determines:

AThe maximum amount a borrower can receive from an FHA loan

BThe maximum loan size that Fannie Mae and Freddie Mac will purchaseCorrect

CThe maximum interest rate a lender can charge

DThe maximum amount a seller can contribute toward closing costs

Why The maximum loan size that Fannie Mae and Freddie Mac will purchase Is Correct

Answer B: The maximum loan size that Fannie Mae and Freddie Mac will purchase

The FHFA sets conforming loan limits annually. Loans at or below these limits can be sold to Fannie Mae or Freddie Mac on the secondary market.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

Closing Costs

Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.

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Key Terms to Know

Closing Costs

Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.

Discount Points

Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.

Pre-Approval

A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.

Amortization

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

Math Concepts

Interest Rate Closing Costs

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