Finance
The Federal Reserve's monetary policy affects Washington mortgage rates primarily by:
ASetting maximum allowable mortgage rates by state
BInfluencing short-term interest rates, which affect lending costs and long-term mortgage rates✓ Correct
CDirectly approving or denying individual mortgage applications
DSetting the conforming loan limits for Fannie Mae
Explanation
The Federal Reserve sets the federal funds rate, which influences short-term borrowing costs. While mortgage rates are not directly set by the Fed, Fed policy impacts the broader interest rate environment that affects mortgage rates.
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Key Terms to Know
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
Math Concepts
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