Mortgage Loan Originator (MLO) Licensing Practice Test

Question: 1 / 605

What percentage is generally the minimum payment required on revolving debt according to Freddie Mac?

3%

5%

The minimum payment required on revolving debt, according to Freddie Mac, is typically set at 5%. This percentage is often used to ensure that borrowers are making progress on their debt while also considering their ability to manage ongoing expenses. A minimum payment of 5% helps lenders assess the borrower's creditworthiness and the likelihood of repayment, as this amount allows for gradual liquidation of the debt.

In contrast, the other percentages listed—3%, 10%, and 15%—are considered either too low, potentially insufficient for managing debt obligations effectively, or too high, potentially making it challenging for borrowers to keep up with payments. This context is crucial for understanding responsible borrowing practices and how lenders like Freddie Mac set standards to mitigate risk while supporting borrowers in maintaining financial stability.

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10%

15%

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