### What is a mortgage? - [ ] An unsecured personal loan - [x] A loan used to secure financing for a home - [ ] A grant given by the government - [ ] A type of insurance for home protection > **Explanation:** A mortgage is a type of secured loan specifically used to purchase a home or other real estate. The property itself serves as collateral for the loan. ### Why are mortgage interest rates generally low compared to other loans? - [x] Because mortgages are secured loans - [ ] Because they are government funded - [ ] Because they have very short repayment periods - [ ] Because lenders offer promotions frequently > **Explanation:** Mortgage interest rates are generally lower compared to other loans because they are secured loans. This means that the property itself acts as collateral, reducing the lender's risk. ### What can happen if a mortgage is not paid in a timely manner? - [ ] The borrower gets additional time to make payments - [x] The borrower's home can be taken from them - [ ] Additional loans will be provided to help repay - [ ] The interest rate will be increased significantly > **Explanation:** If a mortgage is not paid in a timely manner, the lender has the right to take possession of the home because the mortgage is a secured loan with the home serving as collateral. ### What is a fixed-rate mortgage? - [ ] A loan with interest rates that can change over time - [x] A loan with interest rates that remain the same throughout the term - [ ] A loan that only requires interest payments initially - [ ] A temporary loan to bridge the financing gap > **Explanation:** A fixed-rate mortgage is a loan where the interest rate remains unchanged throughout the entire term of the loan, providing predictable monthly payments. ### What is a variable-rate mortgage? - [ ] A loan with a fixed interest rate - [ ] A loan that never requires interest payments - [x] A loan with an interest rate that can change over time - [ ] A government grant for home buyers > **Explanation:** A variable-rate mortgage, also known as an adjustable-rate mortgage (ARM), has an interest rate that can fluctuate based on changes in an underlying index or benchmark rate. ### What is an interest-only mortgage? - [ ] A loan that doesn't require any payments at all - [x] A loan where the borrower pays only the interest for the first few years - [ ] A loan that is intended only for investors - [ ] A loan backed entirely by the government > **Explanation:** An interest-only mortgage allows the borrower to pay just the interest for the initial period of the loan, typically the first three to five years, after which they must start repaying the principal. ### For whom are FHA loans particularly useful? - [ ] High-income borrowers - [ ] Experienced real estate investors - [x] Borrowers who may otherwise have trouble qualifying for a mortgage - [ ] Commercial property developers > **Explanation:** FHA loans are government-backed loans that are particularly useful for borrowers who might find it difficult to qualify for conventional mortgages due to lower credit scores or limited funds for a down payment. ### What is a key benefit of an FHA loan? - [ ] It offers very high-interest rates - [ ] It requires a large down payment - [x] It doesn't require down payments or pre-closing costs - [ ] It is available only for commercial properties > **Explanation:** One key benefit of FHA loans is that they often do not require down payments or upfront closing costs, which are typically rolled into the loan, making it easier for borrowers to afford a home. ### How can closing costs be managed under an FHA loan? - [ ] They must be paid upfront and in full - [ ] They are eliminated entirely - [x] They can be rolled into the loan amount - [ ] They are covered by the seller > **Explanation:** Under an FHA loan, closing costs can usually be rolled into the loan amount, meaning they do not need to be paid upfront, which alleviates initial financial pressure on the borrower. ### What does 'secured loan' mean in the context of mortgages? - [ ] A loan with no collateral backing it - [ ] A loan guaranteed by a third party - [x] A loan backed by the property being purchased - [ ] A loan with extremely high interest rates > **Explanation:** In the context of mortgages, a 'secured loan' means that the loan is backed by collateral, typically the property being purchased. If the borrower defaults, the lender can take possession of the property.