Illinois Real Estate Exam Practice Question
What type of mortgage loan is likely to be tied to a publicly available index that is mutually acceptable to the lender and the borrower?
Correct Answer: C
Rationale: An adjustable rate mortgage (ARM) is linked to a publicly available index, which allows interest rates to fluctuate based on market conditions, benefiting both lenders and borrowers.
Option A, a renegotiable rate mortgage, involves periodic adjustments but does not necessarily tie to a public index. Option B, a graduated payment mortgage, features fixed payments that increase over time, lacking any link to an index. Option D, Freddie Mac, refers to a government-sponsored enterprise that supports mortgage markets but is not a type of mortgage loan. Thus, only an ARM directly connects to a publicly available index for its rate adjustments.
Unlock All Questions
Subscribe to Premium for full access to all practice questions, detailed rationales, and performance tracking.
Subscribe Now