Mortgage loan products and programs
Mortgage loan products and programs
This domain tests whether the MLO can match a borrower to a product and explain its guidelines accurately: government-insured, conventional, portfolio, ARM, reverse, and Massachusetts housing-finance options.
Government and conventional basics
FHA generally allows 3.5% down with a 580 score, charges an upfront mortgage insurance premium plus annual MIP, and requires FHA-approved lenders and appraisers. VA offers 0% down for eligible veterans with full entitlement, a funding fee unless exempt, and residual-income underwriting; it does not charge monthly mortgage insurance. USDA offers 0% down in eligible rural areas, with income limits and a guarantee fee. Conforming loans meet FHFA limits and may carry PMI; jumbo loans exceed those limits and are often portfolio products.
Structure and special programs
Fixed-rate loans have level payments. ARMs have an initial fixed period, index, margin, and initial/periodic/lifetime caps. Reverse mortgages (HECMs) require age 62+, counseling, and no monthly principal-and-interest payment, but they are not a solution for every senior. HELOCs and construction/bridge loans have distinct disclosure and repayment rules. In Massachusetts, MassHousing offers fixed-rate loans and down-payment assistance, and the HLPA overlay can classify a product as high-cost.
Worked example
A veteran with full entitlement buys a $400,000 home with no down payment. VA is the better first comparison: 0% down and no monthly MI, though a funding fee applies unless exempt. FHA would require $14,000 down and ongoing MIP. A conventional 3% down loan might price well but adds PMI. The MLO should compare total monthly housing cost, cash to close, and residual income-not just the note rate.
Traps
Do not say VA has monthly mortgage insurance. Do not ignore USDA’s rural and income limits. Do not call a reverse mortgage available at 55. Do not treat MassHousing as a lender-of-last-resort program; it has underwriting and income rules.