Finance
A jumbo loan is best defined as a mortgage that:
AHas a term longer than 30 years
BExceeds the conforming loan limits set by Fannie Mae/Freddie Mac✓ Correct
CIs available only to first-time homebuyers
DRequires no down payment
Explanation
A jumbo loan exceeds the conforming loan size limits established by Fannie Mae and Freddie Mac; it cannot be purchased by those GSEs and typically has stricter underwriting requirements.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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