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Unit 16: Real Estate Financing Practice > Assessment > Flashcards

Assessment Flashcards

1
Q

The ___ maintains sound credit conditions, helps counteract inflationary and deflationary trends, and creates a favorable economic climate.

A

Federal Reserve System

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2
Q

The ___ is made up of the lenders that originate mortgage loans

A

primary mortgage market

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3
Q

The Fed divides the country into ___ Federal Reserve Districts

A

12

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4
Q

Each federal reserve district is served by a(n) ___

A

Federal Reserve Bank

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5
Q

The Fed divides the country into 12 ___

A

Federal Reserve Districts

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6
Q

Lenders that make up the primary mortgage market make money available directly to ___

A

Borrowers

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7
Q

___ mortgages are the opposite of conventional mortgages in that the homeowner’s equity diminishes as the loan amount increases

A

Reverse

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8
Q

Reverse mortgages are the opposite of ___ mortgages in that the homeowner’s equity diminishes as the loan amount increases

A

Conventional

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9
Q

Reverse mortgages are the opposite of conventional mortgages in that the homeowner’s ___ diminishes as the loan amount increases

A

equity

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10
Q

Reverse mortgages are the opposite of conventional mortgages in that the homeowner’s equity diminishes as the ___.

A

loan amount increases

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11
Q

A(n) ___ mortgage allows people 62 or older to borrow money against the equity they have built in their home

A

Reverse

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12
Q

A reverse mortgage allows people 62 or older to borrow money against the ___ they have built in their home.

A

Equity

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13
Q

___ generally originate at one rate of interest, then fluctuate up or down during the loan term based on some objective economic indicator

A

Adjustable Rate mortgages

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14
Q

Because the ___ rate on Adjustable-rate mortgages may change, the mortgagor’s loan repayments may also change.

A

interest

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15
Q

The Department of Veterans Affairs (VA) is authorized to ___ a portion of a loan to purchase or construct homes for eligible veterans and their spouses.

A

guarantee

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16
Q

An FHA loan refers to a loan made by the Federal Housing Administration (FHA). True or false?

A

False, FHA loans are INSURED by the FHA

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17
Q

An FHA loan refers to a loan that is ___ by the Federal Housing Administration (FHA)

A

Insured

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18
Q

The VA normally does NOT ___ money.

A

Lend

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19
Q

Loan rate changes up or down during the loan term

A

Adjustable rate mortgage

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20
Q

Loan that covers more than once parcel or lot

A

Blanket Loan

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21
Q

Way to temporarily lower the interest rate on a loan

A

Buydown

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22
Q

Loan where the final payment is larger than the others

A

Balloon Payment

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23
Q

Loan where the seller agrees to finance all or part of the purchase price

A

Purchase-money mortgage

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24
Q

Allows people 62 or older to borrow money against the equity in their home

A

Reverse Mortgage

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25
Q

Loan that includes real and personal property

A

Package Loan

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26
Q

Loan payments pay off both principal and interest

A

Amortized loans

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27
Q

A(n) ___ is a note and mortgage created at the time of purchase when the seller agrees to finance all or part of the purchase price

A

purchase money mortgage (PMM)

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28
Q

A(n) ___ loan usually includes furniture and appliances as part of the sales price of the home

A

Package

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29
Q

The purchase money mortgage (PMM)consists of a(n) ___ or ___ lien, depending on whether prior mortgage liens exist

A

First or Junior

30
Q

The purchase money mortgage (PMM) consists of a first or junior lien, depending on whether ___ liens exist.

A

prior mortgage liens

31
Q

___ are often called seller financing or owner financing.

A

purchase money mortgage (PMM)

32
Q

A(n) ___ is often used when the buyer does not qualify for a typical lender loan.

A

purchase money mortgage (PMM)

33
Q

A(n) ___ loan covers more than one parcel or lot and is usually used to finance subdivision developments

A

Blanket

34
Q

A borrower wants to negotiate a $113,000 loan. Which of these loan terms would he need to accept to pay the least amount of interest over the life of the loan?
a) 8% amortized over 20 years
b) 9% amortized over 15 years
c) 10% amortized over 25 years
d) 7% amortized over 30 years

A

9% amortized over 15 years

35
Q

In a loan that requires periodic payments that do not fully amortize the loan balance by the final payment, the final payment would be best described as a(n) ___ payment.

A

Balloon

36
Q

Which law requires that all advertising that references mortgage financing terms contain certain disclosures?

A

Truth in Lending Act

37
Q

A developer received a loan that covers 5 parcels of real estate and provides for the release of the mortgage lien on each parcel when certain payments are made on the loan. This type of loan arrangement is called a(n) ___.

A

Blanket loan

38
Q

A buyer purchased a home for cash 30 years ago. Today, the buyer receives monthly checks from a mortgage lender that supplement her income. If she is older than 62, the buyer most likely has obtained a(n) ___.

A

Reverse mortgage

39
Q

Funds for FHA loans are usually provided by…

A

qualified lenders

40
Q

A buyer purchased a new residence for $175,000. He made a down payment of $15,000 and obtained a $160,000 mortgage loan. The builder of the house paid the lender 3% of the loan balance for the first year and 2% of for the second year. This represented a total savings for the buyer of $8,000. What type of mortgage arrangement is this?

A

Buydown

41
Q

A buyer borrowed $85,000 to be repaid in monthly installments of $823.76 at 11.5% annual interest. How much of the buyer’s first-month payment was applied to reducing the principal amount of the loan?

A

$9.18

$85,000 x 0.115 = 9,775
9,775 divided by 12 = 814.58
823.76 - 814.58 = 9.18

42
Q

A lender agrees to make a loan based on an 80% LTV ratio, what is the amount of the loan if the property appraises for $114,500 and the sales price is $116,900?

A

$91,600

114,500 x 0.80 = 91,600

43
Q

A home is purchased using a fixed-rate, fully amortized mortgage loan. Therefore, each mortgage payment amount is…

A

the same

44
Q

A characteristic of a fixed-rate home loan that is amortized according to the original payment schedule is that the amount of ___ to be paid is predetermined.

A

Interest

45
Q

A characteristic of a fixed-rate home loan that is amortized according to the original payment schedule is that the amount of interest to be paid is ___.

A

predetermined

46
Q

Which of these is NOT a participant in the secondary mortgage market?
a) Freddie Mac
b) Fannie Mae
c) Credit Unions
d) Ginnie Mae

A

Credit unions

47
Q

In order to assist prospective buyers who lacked a down payment on their property, a married couple agreed to “take back paper” at the closing for part of the purchase price. The document used most likely would be a(n) ___.

A

Purchase money mortgage

48
Q

The ___ is a place where loans are bought and sold after they have been originated

A

Secondary market

49
Q

A borrower obtains a $100,000 mortgage loan for 30 years at 7.5% interest. If the monthly payments of $902.77 are credited first to interest and then to principal, what will the balance of the principal be after the borrower makes the first payment?

A

$99,722.23

100,000 x 0.75 - 7,500
7,500 divided by 12 = $625 interest
902.77 - 625 = 277.77
100,000 - 277.77 = 99,722.23

50
Q

The primary activity of ___ is to buy and pool blocks of conventional mortgages

A

Freddie Mac

51
Q

Because of the ___, finance charges that must be disclosed include loan fees, service charges, and discount points.

A

Truth in Lending Act

52
Q

When the Fed raises its discount rate, interest rates will most likely ___.

A

rise

53
Q

___ is the difference between the market value and any mortgages the borrower has on the property.

A

Equity

54
Q

A buyer purchased a residence for $195,000. She made a down payment of $25,000 and agreed to assume the seller’s existing mortgage, which had a current balance of $123,000. The buyer financed the remaining $47,000 of the purchase price by executing a mortgage and note to the seller. This type of loan by which the seller becomes the mortgagee is called a(n) ___.

A

Purchase money mortgage

55
Q

When the periodic payments are not enough to fully amortize the loan by the time final payment is due, the final payment is ___ and called a(n) ___

A

Larger
Balloon payment

56
Q

The ___ provides strict regulation of real estate advertisements in all media that refer to mortgage financing terms

A

Truth in Lending Act

57
Q

A blanket loan usually includes a(n) ___, which permits the borrower to obtain the release of any one lot or parcel from the lien by repaying a certain amount of the loan.

A

Partial release clause

58
Q

A(n) ___ allows people 62 or older to borrow money against the equity built in their home.

A

Reverse mortgage

59
Q

Money from a reverse mortgage may be used for ___.

A

any purpose

60
Q

A way to temporarily or permanently lower the initial interest rate on a mortgage or deed of trust loan

A

Buydown

61
Q

Under a(n) ___ loan, the mortgagor pays a constant amount, usually monthly. The lender credits each payment first to the interest due and then to the principal amount of the loan. As a result, while each payment remains the same, the portion applied to repayment of the principal grows, and the interest due declines as the unpaid balance of the loan is reduced.

A

fully amortized

62
Q

Under a fully amortized loan, the mortgagor pays a constant amount, usually monthly. The lender credits each payment first to the interest due and then to the principal amount of the loan. As a result, while each payment remains the same, the portion applied to repayment of the ___ grows, and the ___ declines as the unpaid balance of the loan is reduced.

A

Principal grows
Interest declines

63
Q

The payment in a(n) ___ loan partially pays off both principal and interest.

A

Amortized

64
Q

The most frequently used plan for amortized loans

A

Fully amortized loan

65
Q

Under a fully amortized loan, the mortgagor pays a constant amount usually monthly. The amount of the constant payment is determined from a(n) ___.

A

Mortgage factor chart

66
Q

In the ___, various agencies purchase existing mortgages from banks and savings associations and assemble those mortgages into packages.

A

Secondary market

67
Q

In the secondary market, various agencies purchase existing mortgages from banks and savings associations and assemble those mortgages into ___. Securities that represent shares in these pooled mortgages are then sold to investors or other agencies.

A

Packages

68
Q

In the secondary market, various agencies purchase existing mortgages from banks and savings associations and assemble those mortgages into packages. ___ that represent shares in these pooled mortgages are then sold to investors or other agencies.

A

Securities

69
Q

The Federal Home Loan Mortgage Corporation is usually called…

A

Freddie Mac

70
Q

Freddie Mac provides a secondary market primarily for ___.

A

Conventional loans

71
Q

The interest or value that an owner has in property over and above any indebtedness

A

Equity

Unit 16: Real Estate Financing Practice (3 decks)

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