United States
Hong KongGeneral Mortgage Knowledge
Twenty percent of the exam, covering loan programs and products: conventional and conforming, government programs, fixed and adjustable rates, reverse mortgages and HELOCs, qualified mortgages, and mortgage terminology.
Twenty percent, which we estimate at 24 questions. This is the products area: what the loans are rather than what the rules say about them.
What it covers
- Conventional, conforming and non-conforming programs
- Government programs - FHA, VA and USDA
- Fixed-rate, adjustable-rate and hybrid products
- Reverse mortgages, HELOCs and construction lending
- Qualified and non-qualified mortgages
- Mortgage terminology and financial concepts
The government programs
These carry a lot of questions because each has distinctive numbers, and distinctive numbers make good exam items. Learn the differences.
| Program | Distinguishing features |
|---|---|
| FHA | 3.5% down at a credit score of 580 or above, 10% between 500 and 579, upfront and annual mortgage insurance |
| VA | No down payment within entitlement, no monthly mortgage insurance, a funding fee unless exempt |
| USDA | Eligible rural areas only, and an income limit |
Learn what makes each one different from the others. That is the shape the questions take.
Adjustable rates
The rate is the index plus the margin, subject to caps. A structure written as 2/2/5 means an initial cap, a periodic cap and a lifetime cap.
Questions here are usually arithmetic wearing a product costume: given an index, a margin and a set of caps, what is the new rate at first adjustment. Practice a few.
It is set annually by the Federal Housing Finance Agency and changes every year. Know that it exists, know who sets it, and never quote a fixed figure as permanent.
Mortgage insurance
Cover paid for by the borrower terminates automatically at 78% loan-to-value under the Homeowners Protection Act, and may be canceled on request at 80%.
Two numbers, two different mechanisms, and the distinction between automatic and on request is the point of the question.
Common questions
What is General Mortgage Knowledge on the NMLS exam?
The products area, at 20%: conventional and government programs, fixed and adjustable rates, reverse mortgages, HELOCs and terminology.
What is the FHA minimum down payment?
3.5% with a credit score of 580 or above, and 10% with a score between 500 and 579.
When does private mortgage insurance cancel?
Automatically at 78% loan-to-value, and a borrower may request cancellation at 80%.
What do ARM caps mean?
A structure like 2/2/5 gives an initial cap, a periodic cap and a lifetime cap on rate changes.
Do I need to know the conforming loan limit?
Know that the Federal Housing Finance Agency sets it annually. Do not memorize a figure, because it changes every year.