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1. Principles and Practices of Real Estate > 1. Financing & Mortgages > Flashcards

1. Financing & Mortgages Flashcards

1
Q

The market when the local bank that originates the loan is known as.

A

The primary (mortgage) market.

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2
Q

An attractive group/portfolio of loans to a larger financial institution.

A

A secured investment

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3
Q

The market portfolio of loans enters when sold to a larger financial institution.

A

The secondary (mortgage) market.

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4
Q

An arrangement by which a property owner sells the property to an investor with the understanding that the seller may lease the property from the buyer immediately. It frees up capital for use by the former owner.

A

Sale and leaseback, sale/leaseback, leaseback

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5
Q

A source of funding for a buyer and property-secured income for the seller.

A

Seller financing

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6
Q

Loans that are generally paid to the borrower in instalments during the course of a construction project. They typically require the borrower to make interest-only payments and arrange for the permanent financing of some sort at the end of the construction period.

A

Construction loans, interim loans, drawdown loans

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7
Q

A loan that covers more than one lot, parcel, or property; common in subdivision developments, and typically include a partial release clause which allows the borrower to pay off and release separate parcels as they get sold.

A

Blanket loans

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8
Q

Loans that include funding to purchase real as well as real property, e.g. the sale of a furnished condo.

A

Package loan

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9
Q

Loans that allow a borrower to take out a second loan, make a payment large enough to cover both loans to the new lender and have the new lender make the payments on the original loan.

A

Wrap around loan

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10
Q

Loans that offer a line of credit secured by a property, and are usually created for improvements that will be done in stages, so the borrower’s monthly indebtedness keeps pace with actual outlays.

A

Open-end-loans

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11
Q

Loans that are typically made on an agreed amount of a homeowner’s equity in the property, either in a lump sum or a line of credit. Often referred to as second mortgages or junior mortgages.

A

Home equity

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12
Q

Loans that provide payments from a bank to the homeowner, who generally has already paid off any original loans. Popular form of financing among retirement-aged homeowners who want to have access to their equity and leave repayment to their estate or heirs.

A

Reverse-annuity mortgages

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13
Q

Short-term loans made to cover a temporary shortfall or period prior to the funding of the permanent loan.

A

Bridge loan, swing loan, gap financing

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14
Q

Secured loans that allow the lender to attach only the collateral leaving all other borrower assets judgment-proof in the event of borrower default.

A

Nonrecourse loans

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15
Q

Loans that are paid off over time, usually through equal monthly payments for a set number of years.

A

Amortized loans

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16
Q

Loans that are structured to pay down the loan amount, plus interest, in equal payments, generally paid monthly until the balance is zero. These loans begin with a higher portion of each instalment going toward the interest, and end with most of the loan payment being applied directly to the remaining principal.

A

Fully amortized loans, level-payment loans

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17
Q

Loans where the loan amount is paid down according to an agreed-upon schedule, with a final payment that is larger than the others.

A

Partially amortized loan

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18
Q

A large final payment.

A

Ballon payment

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19
Q

A loan that have payments that increase over time with the additional amount applied directly to principal which brings down the interest payments and overall repayment period of the loan.

A

Growing equity mortgages

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20
Q

Fixed-rate scheduled payment loans that allow the borrower to make lower payments initially, and crease them to make up for the difference.

Structured in anticipation of the borrower’s income rising along with the payments due.

A

Graduated payment loans

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21
Q

They have single level payments for the life of the loan with a much larger final payment BUT the payments are interest-only, and the entire principal amount is due at the end of the loan’s term.

A

Term loans, straight loans, straight note

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22
Q

Loans that have an interest rate that remains the same for the life of the loan.

A

Fixed-rate loans

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23
Q

Loans with fluctuating interest rates that get adjusted at periodic intervals.

A

Adjustable-rate mortgages

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24
Q

The seller provides a supplementary loan to the buyer that makes up the difference between the purchase price and the total of the buyer’s other loans and cash.

A

Purchase-money mortgage, seller carryback

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25
Q

A loan provision/clause which allows the lender to call the entire remaining debt due on default, or after a certain number of consecutive late payments.

A

Acceleration clause

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26
Q

A loan provision/clause allows the lender to call the entire balance of the loan due-and-payable upon the transfer of the property.

A

Alienation clause, due on sale clause

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27
Q

A loan provision/clause which requires the lender to provide a release of mortgage, or satisfaction of mortgage, document when the loan has been repaid.

A

Defeasence clause

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28
Q

A document stating the loan has been repaid in the event of financing by a deed of trust.

A

Release deed, deed of conveyance

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29
Q

A loan provision/clause which serves to clarify that a loan will accept a subordinate, or junior, position and remain behind another loan in the priority of liens.

A

Subordination clause

Not to be confused with subrogation = distractor

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30
Q

A loan provision/clause that helps lenders increase their return when a borrower pays off a loan ahead of schedule by charging a fee for early payoffs.

Are prohibited in some loans.

A

Prepayment (penalty) clause

31
Q

The amount of principal a property owner has in the property.

A

Equity

32
Q

A ration obtained by dividing the loan amount by the property value.

A

Loan-to-value ratio (LTV, L/V)

33
Q

The amount of money borrowed in relation to the property’s value.

A

Leverage

34
Q

An up-front sum paid by a borrower specifically to reduce the interest rate and thereby bring down the monthly payment.

A

Buy-downs

35
Q

The effective annual percentage rate, or true annual cost of borrowing.

A

Annual percentage rate

36
Q

When a lender charges an illegally high rate of interst.

A

Usury

37
Q

The return or profit a lender makes on a transaction, generally expressed as a percentage of the amount invested.

A

Yeild

38
Q

A measurement unit for loans.

A

Points

39
Q

A lender or even a licensee determining the probable maximum loan amount the borrower can support by collecting preliminary information about the borrower’s financial circumstances, generally during a brief interview. A non-binding preliminary assessment.

A

Prequalification

40
Q

The process a lender goes through of more closely reviewing a buyer’s credit and financial status to determine the actual maximum loan amount the lender would fund.

A

Qualification

41
Q

Someone approved for funding buy a lender.

A

Qualified buyer, approved buyer

42
Q
  1. Property appraisal
  2. Title search/attorney’s opinion of title
  3. Property survey
  4. Zoning codes and ordinances
A

Process of reviewing a property for a loan

43
Q

A lender’s up front charge for making a loan. Charged to increase a lender’s yield when funding a loan at below-market interest rates.

A

Discount points

44
Q

A lender’s charge for preparing and processing a loan.

A

Bank finder’s fee

45
Q

A lender’s charge for preparing and copying loan-related documents.

A

Document preparation.

46
Q

A type of lender’s processing fee.

A

Funding fee

47
Q

A written legal document or contract defining rights, duties, and other obligations.

A

An instrument

48
Q

A written legal document or contract defining rights, duties, and other obligations that has some form of collateral identified as alternative compensation in the event a borrower defaults.

A

Secured instrument (mortgage)

49
Q

The financing instrument that serves as evidence of the debt and details the terms of repayment, and the mortgage which is the security instrument that creates a lien on the property as security for the loan.

(A borrower secures the note by signing the mortgage)

A

Promissory note, note

50
Q

To pledge property as security for a debt while retaining possession, title, and use of the property.

A

Hypothecate

51
Q

To provide something as security for a debt, generally by surrendering possession but not full title.

A

Pledge

52
Q

A two-party instrument between a borrower and lender. The borrower pledges the property as security against default and retains the title, and the lender gives the agreed-upon financing for the borrower to acquire the property in exchange for the legal right to force the sale of the property in the event of default.

A

Ordinary mortgage

53
Q

A three-party instrument under which a borrower and an institutional lender have a third party hold the property’s legal title “in trust” until the debt is repaid.

A

Deed of trust/trust deed

54
Q

A written instrument by which land is conveyed.

A

A deed

55
Q

Provides constructive notice that the title has been transferred to the new owner.

A

Recording the deed

56
Q

Deeds which include all of the five common covenants and offer the greatest protection for the grantee of all deeds.

A

General warranty deeds

57
Q

Deeds which warrant the title against title defects that arose only during the grantor’s ownership.

A

Special warranty deeds

58
Q

Deeds which contain no guarantee from the grantor about the validity of title, but imply that the grantor has an interest that it is being sold to the grantee.

A

Bargain and sale deeds

59
Q

Deeds which have no covenants or warranties. They simply relinquish any and all interest the grantor may have in a property. They are commonly used to ensure that a particular party will not decide to interfere later. They provide the least amount of protection for the grantee against other potential problems with the title.

A

Quitclaim deeds

60
Q

A covenant (guarantee/warranty)where the grantor claims to be the owner of the property and is therefore legally entitled to convey it.

A

Covenant of seisin

61
Q

A covenant (guarantee/warranty) where the grantor promises that no one will disturb the new owner with claims against the property, e.g. a long-lost heir.

A

Covenant of quiet enjoyment

deeds

62
Q

A covenant (guarantee/warranty)where the grantor assumes responsibility for any additional documentation necessary to ensure the grantee’s title, e.g. releases from family members who should have signed the original transfer deed.

A

Covenant of further assurance

63
Q

A guaranty/warranty/covenant where the grantor promises to bear the cost of defending the title against undiscovered or undisclosed flaws existing at the time of transfer.

A

Covenant of warranty forever, warranty of title

similar to covenant of quiet enjoyment

64
Q

A conflicting claim that prevent the absolute legal conveyance of clear title.

A

Cloud on the title

May be resolved via quiet title action or getting a quitclaim deed from the new discovered party

65
Q

The settlement agent authorised to process the settelment details.

A

Conveyance/purchaser attorney

66
Q

An account, or the “signed-contract to delivered-deed” period of a real estate transaction.

A

Escrow

67
Q

Acting in a highly trusted capacity.

A

Fiduciary

68
Q

Combining transaction funds with other funds that are required to be maintained separately.

Could result from putting the funds in the wrong account, either personal or business.

A

Commingling

69
Q

Converting funds to another use than intended, or misappropriating them, as in using earnest money to pay office expenses.

A

Conversion

70
Q

Closing costs for ***

  • Refunds to seller (e.g. tax prorations)
  • Deed and new mortgage fees
  • Appraisal fees for loan funding
  • Building survey/home inspection fees
  • New loan fees
A

Buyer closing costs

71
Q

Closing costs for ***

  • Cost of clearing title
  • Loan payoff
  • Agent commission
A

Seller’s closing costs

72
Q

A loan document that shows the remaining principal balance, interest rate, and date of maturity.

Used to verify the terms and amount of an existing loan that a buyer will be assuming as well as by a seller who needs to know the exact payoff amount on the day of closing.

A

Reduction certificate

73
Q

The certificate a mortgagee provides to a mortgagor that states the debt has been paid.

Typically it is recorded to confirm the title is free of the lien of encumbrance.

A

Satisfaction piece, or satisfaction of mortgage.

74
Q

A covenant (guarantee/warranty) by which the grantor promises that any and all easements or liens have been properly disclosed and is liable for damages if others are discovered after the transfer.

A

Covenant against encumbrances

1. Principles and Practices of Real Estate (4 decks)

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