Loan Officer Practice Exam 2025 – Comprehensive All-in-One Guide for Exam Success!

In the context of a Home Equity Conversion Mortgage (HECM), the factors determining how much a borrower can access typically include the current interest rate, the appraisal value, and the age of the youngest borrower or eligible non-borrowing spouse. Each of these directly influences the calculation of the loan amount available to the borrower.

The current interest rate is pivotal since lower rates generally allow for higher borrowing amounts due to lower interest costs over the life of the loan. The appraised value of the home, along with the HECM FHA mortgage limit or the sales price, determines the maximum limit set against which the loan can be taken. Lastly, the age of the youngest borrower is crucial because it affects life expectancy—a longer lifespan would generally allow for borrowing a smaller percentage of the home's equity, as the loan must be repaid over a longer period.

The loan-to-value ratio, however, is not a direct factor in determining how much can be borrowed under a HECM. Unlike traditional reverse mortgages where the loan-to-value ratio can fluctuate based on the borrower's financial profile and equity, HECM calculations are primarily based on the mentioned factors rather than an adjustable loan-to-value ratio. Thus, the loan-to-value ratio does not apply to the calculations