Ch. 15 - Real Estate Finance

Question 1

This clause states that if the
borrower repays the debt when
due, the words of grant are void,
the mortgage is canceled and the
title is given back to the borrower.

Answer 1

Defeasance clause

Question 2

The \_\_\_\_\_\_ clause outlines what will
happen if the borrower fails to pay the
mortgage, maintain the property, or
perform any other agreement, stipulation
or condition contained in the mortgage.

Answer 2

acceleration clause

Question 3

This is a form of acceleration clause
that requires the borrower to pay off
the entire mortgage debt when the
property is sold.

Answer 3

Due-On-Sale Clause

Question 4

The capital amount
borrowed, on which interest
payments are calculated

Answer 4

Principle of the Original loan

Question 5

Typically 1 percent of the loan
amount, although it could be
higher. It covers the lender’s
cost for generating the loan.

Answer 5

Loan origination fee

Question 6

_____ represent prepaid interest, and the
lender charges them to get additional
income on the loan. _______ are paid at
closing and are equal to 1 p

Answer 6

points

Question 7

A document that describes the amount of money
borrowed, the terms under which it will be repaid,
and any conditions that relate to either the
borrowing of the money or the consequences in
event of default. This document establishes legal
evidence of the debt incurred.

Answer 7

Promissory Note

Question 8

When a person is not liable for
payment of the mortgage and the
seller is still responsible for making
the mortgage payments, it is known
as \_\_\_\_\_\_

Answer 8

Taking title to a property

“subject to” the mortgage

Question 9

With a \_\_\_\_\_\_\_, the monthly payments
are allocated only to interest. No principal
is paid off. At the end of the term, the
borrower must be able to pay off the
entire principal amount.

Answer 9

straight or term mortgage

Straight Loan

Question 10

In an \_\_\_\_\_\_ plan, a borrower
makes a periodic (usually monthly)
payment of principal plus interest.
These payments result in the loan
being paid off gradually over time.

Answer 10

amortization plan

Question 11

In a ______ loan, the
borrower has the same
payment amount every
month.

Answer 11

fully amortized

Question 12

A _______ mortgage is a loan that has one large
final payment due when the loan matures.
Payment loans are partially amortized
loans. This means that the monthly payments
are not large enough to fully amortize the loan by
the end of the term, leaving

Answer 12

Balloon

Question 13

The following are examples of...
The Federal Housing Administration (FHA)
The Department of Veterans Affairs (DVA) -
sometimes simply referred to as VA
Rural Housing Service (RHS)
State of New York Mortgage Association
(SONYMA)

Answer 13

Government-backed loans

mortgages

Question 14

The _______ ________ is the most common
type of loan and is generally viewed as the most
secure. Most ________ ________ require the
borrower to make a down payment of 20% or
more, making the loan 80% or less of the
property’s sale price.**Typically uninsured

Answer 14

conventional mortgage

Question 15

This is a popular way to
avoid having to pay private
mortgage insurance

Answer 15

80-10-10 financing

Question 16

The interest owed and not
paid in the initial months is
added back to the principal

Answer 16

negative amortization

Question 17

A \_\_\_\_\_ \_\_\_\_\_\_ mortgage (PAM) is a
type of graduated payment mortgage
under which the owner/borrower
contributes a sum of money into an
account that is pledged to the lender.

Answer 17

pledged account

Question 18

A \_\_\_\_\_\_ is a variation of a Pledge
Account Mortgage (PAM). In a \_\_\_\_\_\_\_,
the lump sum payment that is made to
the lender at closing usually comes from
a builder as an incentive to the buyer or
from a family member trying to help out.

Answer 18

buydown

Question 19

An ______ loan is an
expandable loan which gives a
borrower a limit up to which he
or she may borrow.

Answer 19

open-end

Question 20

A \_\_\_\_\_ \_\_\_\_\_\_ loan covers more than
one piece of property. Land developers
commonly use this type of loan when
they buy a plot of land and divide it into
many separate lots.

Answer 20

Blanket mortgage

Question 21

A blanket loan usually includes a \_\_\_\_\_
\_\_\_\_\_ clause. This clause allows the
borrower to obtain a release of any
individual lot from the lien by repaying a
certain part of the loan.

Answer 21

partial release

Question 22

A \_\_\_\_\_\_ mortgage allows a
borrower who has an existing loan
to get another loan from a second
lender without paying off the first
loan.

Answer 22

wraparound

Question 23

Interest rates on
construction loans are
usually _______ than on
other loans

Answer 23

“higher” than on other loans

because the risk is greater.

Question 24

The following are examples of ways a \_\_\_\_\_ \_\_\_\_\_\_ loan
may be used:
Purchasing high dollar items.
Taking a vacation.
Consolidating other loans or credit card debt.
Paying medical expenses.
Paying college tuition.
Making home improvements

Answer 24

home equity loan

Question 25

The \_\_\_ provides low-down-payments
mortgage loans to qualified buyers.
***The \_\_\_ does not build homes or loan
money directly. They insure loans made
by approved lending institutions

Answer 25

FHA

Question 26

The following items are
important to know about
FHA loans.

Answer 26

FHA loans can be either fixed-rate 10-to-30-year loans or
one-year-adjustable loans. The maximum loan term is 30 years or 75 percent
of the remaining economic life of the property, whichever is less.
Down payments are low. However, the borrower must have cash for a down
payment and closing costs. These items cannot be added to the sales price
and become part of the loan repayment.
The maximum loan fee is 1 percent of the loan amount and is typically paid
by the buyer.

Question 27

_______ provides low interest rate
mortgages to low-and-moderateincome families in the State of New
York.

Answer 27

SONYMA (State of New

York Mortgage Association)

Question 28

A \_\_\_\_\_\_\_ shows the value of a
property in relation to its sales
price. It is issued by an approved
VA appraiser when a veteran is
seeking a DVA loan.

Answer 28

A Certificate of Reasonable

Value (CRV)