What is the term for a closed-end loan secured by a first mortgage on real property for a one to four family dwelling?

• A. Home Equity Line of Credit
• B. Mortgage Loan
• C. Construction Loan
• D. Subprime Loan

Answer: (B)

The term that accurately describes a closed-end loan secured by a first mortgage on real property for a one to four-family dwelling is a mortgage loan. This type of loan is typically used to finance the purchase of a home, where the borrower receives a lump sum upfront, which is paid back over a set period with interest.

Mortgage loans are characterized by their structure, which involves fixed or adjustable interest rates, predetermined payment schedules, and the requirement of collateral (the property itself). When the loan is closed, the funds are disbursed in full to the borrower, who then begins making regular payments until the loan is paid off.

In contrast, the other options represent different types of financing. A home equity line of credit is a revolving credit line that allows homeowners to borrow against the equity in their home, while a construction loan is specifically for funding the construction of new homes. Subprime loans cater to borrowers with lower credit scores, often with different terms and higher interest rates than conventional mortgage loans. Thus, the identifying characteristics of a closed-end loan in this context lead us to recognize it clearly as a mortgage loan.