Finance
A 'variable rate' or 'adjustable rate mortgage' (ARM) poses what risk to the borrower?
AA. The interest rate can never change after the initial period
BB. Monthly payments can increase if the index rate rises, potentially making the loan unaffordable✓ Correct
CC. The lender can call the loan at any time
DD. The loan balance can never decrease
Explanation
With an ARM, the interest rate adjusts periodically based on an index (e.g., SOFR). If the index rises, the borrower's rate and monthly payment increase. Caps limit per-adjustment and lifetime increases, but payments can still rise significantly.
Related Georgia Finance Questions
- A wraparound mortgage is one where:
- A Georgia buyer makes a 10% down payment on a $300,000 home. What is the loan amount?
- A USDA Rural Development loan is best suited for buyers who:
- A mortgage broker differs from a mortgage banker in that a mortgage broker:
- A buyer in Georgia obtains a conventional loan requiring PMI. PMI is typically required when the down payment is less than:
- Which federal law requires lenders to provide a Loan Estimate to borrowers within three business days of receiving a loan application?
- A lender who charges an interest rate of 6.5% on a mortgage and the APR is 6.9% means:
- The secondary mortgage market allows lenders to:
Practice More Georgia Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Georgia Quiz →