Exam MLO Topic 1 Question 43 Discussion

Actual exam question for NMLS's MLO exam
Question #: 43
Topic #: 1
A mortgage loan in which a large portion of the borrowed principal is repaid at the end of the loan period is known as a:

Suggested Answer: B Vote an answer

A balloon mortgage is a type of loan where a large portion of the principal is repaid in a lump sum at the end of the loan term. This structure often features smaller, periodic payments during the life of the loan, with the remaining balance (the balloon payment) due at the end of the loan period. Balloon mortgages are typically shorter-term loans, such as 5 or 7 years.
* This differs from other loan types:
* FHA mortgages (A) are fully amortized loans backed by the government.
* Qualified mortgages (C) meet specific ability-to-repay standards and are fully amortized.
* Deferred-payment mortgages (D) often refer to reverse mortgages or loans with delayed payment schedules, which are not the same as balloon loans.
References:
* Fannie Mae and Freddie Mac Mortgage Guidelines on balloon loans
* Truth in Lending Act (TILA) definitions of mortgage types

by Mona at Mar 13, 2025, 12:50 AM

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