General Mortgage Knowledge
What this domain tests
General mortgage knowledge tests loan programs, property and title concepts, mortgage math, amortization, escrow, insurance, and underwriting standards. Questions often ask which program or product fits a borrower and how a payment is built.
Core concepts
- Agency and government programs: Conventional loans are not government-insured; FHA insures with MIP; VA guarantees with a funding fee; USDA guarantees rural loans with a guarantee fee.
- Fixed vs. ARM: an ARM has an initial fixed period, then adjusts by index plus margin, subject to initial, periodic, and lifetime caps.
- LTV: loan amount divided by the lesser of sales price or appraised value.
- PMI: conventional PMI is generally required above 80% LTV; borrower-requested cancellation at 80% of original value and automatic termination at 78% apply to many loans.
- Escrow: PITI includes principal, interest, taxes, and insurance; escrow analysis projects disbursements and cushions.
Worked example
Purchase price $300,000, 10% down, loan $270,000, 30-year fixed at 6%. P&I is about $1,619. Annual taxes $3,600 = $300/month; homeowner insurance $1,200 = $100/month; PMI at 0.50% of the loan = $112.50/month. PITI is about $2,131.50. LTV is 90%, so PMI is expected unless an exception applies.
Traps
Use the lesser of price or appraisal for LTV, not the higher. Do not add the down payment to the loan amount. PMI cancellation is not the same as automatic termination. A lower initial ARM payment is not the fully indexed payment. Escrow cushion rules are not the same as the monthly escrow payment.