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CH 11 - Real Estate Contracts > CH 13 - Types of Mortgages & Sources of Financing > Flashcards

CH 13 - Types of Mortgages & Sources of Financing Flashcards

1
Q

FHA insured
VA guaranteed
Conventional

A

3 types of mortgages

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2
Q

FHA

A

Federal Housing Authority, created in 1934

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3
Q

What does the FHA do/NOT do?

A

DOES NOT make loans
DOES insure loans
Protects lender in foreclosure

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4
Q

Basic mortgage insurance for purchase/refinance of owner-occupied 1-4 family properties

A

203(b) mortgage insurance

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5
Q

Financing of the purchase of a 1-4 family dwelling and the cost of its rehab w/ a single mortgage

A

203(k) Rehabilitation Mortgage Insurance

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6
Q

Insurance for 30-yr loans to purchase a single-unit condo

A

234(c) condominiums

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7
Q

Mortgage insurance on adjustable rate financing

A

251 Adjustable rate mortgage

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8
Q

PMI

A

Private Mortgage Insurance

Fee charged by lender, that borrower pays to offset the increased risk of conventional mortgage loan

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9
Q

PMI is usually required when

A

loan exceeds 80% of property value

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10
Q

Automatic cancellation of PMI when

A

LTV is 78% or less of property’s original value

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11
Q

Borrower can request PMI cancellation when

A

Loan paid down to 80%

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12
Q

what does FS 687 do?

A

limits the interest rate that can be charged for a loan

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13
Q

loan amounts up to 500k = __% interest rate

loan amounts of 500k or more = __% interest rate

A

18%

25%

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14
Q

UFMIP

A

Upfront Mortgage Insurance Premium

paid at time of closing of loan

can be paid annually

1.75% of mortgage amount

can be paid by borrower, seller, or third party

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15
Q

.85% of annual outstanding FHA loan balance divided into 12 monthly payments

A

AMIP (Annual Mortgage Insurance Premium)

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16
Q

What does PMI do?

A

Protects the lender

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17
Q

charging an excessive rate of interest is called ____

A

usury

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18
Q

VA guaranteed mortgage loan DOES NOT _____

A

set a max loan amount

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19
Q

_____ mortgage loans are harder for borrower to get than the other kinds

require a ____ down payment and carry a ____ interest rate

these loans are ___ ______ or _____

A

Conventional

higher; higher

not insured or guaranteed

20
Q

Amortized mortgage (scheduled periodic payments that include portion to interest and principal)

A

Interest portion + Principal portion =

Monthly mortgage payment

21
Q

I
P
R
T

A

I - Interest portion of monthly payment
P - Principal amount of loan (loan balance)
R - Rate of ann. interest charged on loan (%)
T - Time expressed in fractions of a year

22
Q

Formula for calculating interest portion of loan payment

A

I = PxRxT

23
Q

Characteristics of an Amortized Loan

A
  • interest paid each month is LESS than amount paid the previous month
  • principal portion paid each month is MORE than the amount paid previous month
  • principal balance of loan decreases each month, resulting in zero balance at end of loan term
24
Q

mortgage that includes real and personal property as security for loan (includes fridge, dishwasher etc)

A

package mortgage

25
Q

mortgage that uses ONLY personal property for security of loan

A

chattel mortgage

26
Q

Payments on a fixed rate amortized loan consist of what two components?

A

Principal and interest

27
Q

Which type of loan has payments that are sufficient to repay the loan amount and the interest owed over the life of the loan?

A

fully amortizing

28
Q

What is NOT TRUE about a fixed rate or level payment mortgage loan?

A

the amount of each payment that is applied to paying interest increases over the life of the loan

29
Q

the rate of a specific, published index as of a specified date, plus a fixed margin, DETERMINES _____

A

interest rate that a borrower must pay on an adjustable rate

30
Q

What are the advantages of a shorter-term mortgage loan over a 30 year loan?

A

the borrower pays less interest of the life of the loan and the interest rate is likely to be lower

31
Q

a mortgage that pledges multiple properties as security for a loan

A

Blanket mortgage

32
Q

flow of deposits into lending institutions, creating mortgage money supply

A

Intermediation

33
Q

when depositors bypass traditional depository institutions and withdraw from accounts w/ low fixed interest rates, then transfer those funds into alt investments w/ higher interest rates (yields) like the stock market, mutual funds, artwork, etc

A

Disintermediation

34
Q

Large scale Disintermediation, can ______

A

Reduce the mortgage money supply and cause interest rates to rise

35
Q

5 parts of Federal Reserve System

A
  • Board of Governors
  • 12 Federal Reserve banks and branches
  • Federal Open Market Committee
  • Federal Advisory Council
  • Member banks
36
Q

Board of Governors

A

7 members appointed by president and confirmed by congress

- 14 year term

37
Q

actions of board of governors that regulates cost and availability of credit in the US

A

monetary policy

38
Q

% of money on deposit in a bank that cannot be used for lending, must be transferred to district federal reserve bank

A

reserve requirement

39
Q

if reserve requirement is increased the amount of money available for lending is _____, causing interest rates to ______

A

decreased

increase

40
Q

rate of interest the Federal Reserve charges a member bank for funds loaned

A

discount rate

41
Q

where loans are originated

A

primary mortgage market

42
Q

provides constant source of funds to make real estate loans.

loans originated in primary market are SOLD HERE

A

secondary mortgage market

43
Q

benefits of a secondary mortgage market

A
  • provides liquidity to primary market so primary lender doesnt run out of funds
44
Q

final payment on an interest only loan, that includes the full amount borrowed is called a “____” payment

A

Balloon payment

45
Q

required by the Real Estate Settlement Procedures (RESPA) Act

A

That borrowers be informed of all settlement costs involved in the purchase of a home when funds are obtained from a federally regulated lender.

CH 11 - Real Estate Contracts (5 decks)

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