Alabama Real Estate Practice Exam

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Prepare for the Alabama Real Estate Exam. Utilize flashcards and multiple-choice questions, each coupled with hints and explanations. Ace your upcoming test!

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What can cause changes in a variable-rate mortgage's interest rate?

Market interest rates
The borrower's credit score
Changes in the FHA's policies
Changes in the VA's guarantees

The correct answer is: Market interest rates

Market interest rates can cause changes in a variable-rate mortgage's interest rate because these types of mortgages are tied to an index rate, such as the prime rate or LIBOR, which is influenced by market conditions. Option B, the borrower's credit score, may affect the initial interest rate offered by the lender but it typically does not impact changes in the interest rate over the life of the loan. Options C and D, changes in the FHA's policies and changes in the VA's guarantees, are not relevant as those are generally changes in government policies that do not directly affect individual mortgage rates.