The 'Dodd-Frank Act' introduced the concept of a 'Qualified Mortgage' (QM). A key feature of a QM loan is:
Why A limit on points/fees and a requirement that the lender verify the borrower's ability to repay Is Correct
Answer B: A limit on points/fees and a requirement that the lender verify the borrower's ability to repay
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
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Key Terms to Know
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Math Concepts
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