Finance
The 'index' in an adjustable-rate mortgage (ARM) is:
AThe lender's profit margin
BAn external interest rate benchmark (such as SOFR or Treasury yields) to which the ARM rate is tied✓ Correct
CThe initial interest rate offered to the borrower
DThe borrower's credit score index
Explanation
The index is the external benchmark (SOFR, 1-year Treasury, LIBOR successor, CMT, etc.) used to calculate the ARM's interest rate at each adjustment period. The rate = Index + Margin, subject to rate caps.
Related Colorado Finance Questions
- A Colorado 'second mortgage' or 'junior lien' is typically characterized by:
- A Colorado lender must provide a Closing Disclosure to the borrower at least how many business days before consummation of a mortgage loan?
- The 'Dodd-Frank Wall Street Reform and Consumer Protection Act' (2010) created which consumer protection agency relevant to mortgage lending?
- A Colorado homeowner with a home worth $450,000 and a mortgage balance of $250,000 wants a HELOC. If the lender allows 85% CLTV, what is the maximum HELOC credit line?
- The annual percentage rate (APR) differs from the stated interest rate because APR:
- A Colorado buyer is financing a home with an 80% first mortgage, 10% second mortgage, and 10% down payment (piggyback). One advantage of this structure over a single 90% LTV loan is:
- A Colorado buyer using an FHA loan must pay which type of mortgage insurance?
- A Colorado buyer asks what 'discount points' are. Each discount point equals:
Practice More Colorado Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Colorado Quiz →