Question

In: Finance

True or False? if False say why 1- If you want to increase your FICO socre,...

True or False? if False say why

1- If you want to increase your FICO socre, it is a good idea to max out your credit card

2- if you cannot afford to make 20 percent down payment, you can choose to buy mortgage insurance and not to pay any down payment at all

3- the ratio of borrower income to housing expense is referred to as "LTV"

4- A mortgage is said to be confornming if it meets the Fannie Mea/Freddie Mac guidelines

5- A potential loss that could occur if the borrower falied to make payment on a loan is called interest rate risk.

6- A 7/1 ARM means that the mortgage is floating rate with an initial rate of 7 percent.

Solutions

Expert Solution

a.

to improve your FICO (credit score you must minimize the utilization of credit card. An use of max out your credit card can reduce your credit score.

Statement is false.

2.

if you cannot afford to make 20 percent down payment, you can choose to buy mortgage insurance and not to pay any down payment at all.
Statement is true.

3.

the ratio of borrower income to housing expense is referred to as income to loan ratio. a LTV ratio mean total value of loan out of total mortgage value. the borrower has to some doen payment on purchase of home. So, LTV is loan after payment of down payment to total value of home.

Statement is false.

4.

A mortgage is said to be confornming or conventional if it meets and backed by the Fannie Mea/Freddie Mac

guidelines.

Statement is true.

5.

A potential loss that could occur if the borrower falied to make payment on a loan is called default risk. interest rate risk arise when market interest rate change from lending rate.

Statement is false.

6.

A 7/1 ARM means that the mortgage is floating rate with an initial rate of 7 percent.

Statement is true.


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