Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

What are the primary types of mortgage loans available?

1. Interest-only loans, Reverse mortgages, Balloon loans, and Fixed-rate loans

2. Fixed-rate loans, Variable-rate loans, Balloon loans, and Bullet loans

3. Installment loans, Bridging loans, Conventional loans, and Microloans

4. Credit loans, Home equity loans, Personal loans, and Construction loans

The correct answer is: Fixed-rate loans, Variable-rate loans, Balloon loans, and Bullet loans

The primary types of mortgage loans include Fixed-rate loans, Variable-rate loans, Balloon loans, and Bullet loans. Fixed-rate loans are characterized by having a stable interest rate throughout the loan term, which provides predictability in monthly payments. This predictability makes them a popular choice for borrowers who prefer consistency in budgeting. Variable-rate loans, also known as adjustable-rate mortgages (ARMs), have interest rates that can fluctuate over time based on market conditions. This type of loan can sometimes start with lower initial payments, making it attractive to certain borrowers, though it does carry the risk of higher payments in the future as rates adjust. Balloon loans typically have a short term with lower initial payments that can lead to a large final payment at the end of the loan term. These might be utilized in situations where the borrower plans to sell the property or refinance before the balloon payment comes due. Bullet loans are structured so that the entire principal amount is paid off at once, usually at the end of the term, with interest payments made in the interim. This arrangement can appeal to borrowers who expect to have the liquidity to pay off the loan in a lump sum. In contrast, the other options present types of loans that do not primarily focus on traditional mortgage structures or are