CH 5 - Financing Flashcards
What’s a straight term mortgage?
an interest only loan
What’s a loan with a fixed payment over a set term (conventional)?
a fully amortized mortgage
What’s a partially amortized mortgage?
series of payments followed by a balloon payment at maturity
a 10 year loan, with a 30 year amortization schedule, and a balloon payment at the end of 10 years is a __________
partially amortized mortgage
What type of loan has its interest rate tied to an economic index and can be periodically adjusted?
adjustable rate mortgage (ARM)
What type of loan has 80% LTV (at the lowest) and requires PMI if LTV is higher than 80%?
conventional mortgage loan
age requirement for a Reverse Annuity Mortgage (RAM)
62 or older
to qualify for a RAM, you must
be 62 or older and own your home
What is an open-end mortgage?
permits borrowing additional money in the future without refinancing the loan
What is a sub-prime loan?
borrower who could not qualify for a prime loan
What generally prevents a wrap-around mortgage?
the due-on-sale clause
How does a wrap-around mortgage work?
it’s like a man-in-the-middle attack… the wrap-around lender creates a new mortgage for the borrower, takes his payments and then remits payment to the original lender (assumes the loan)
What is negative amortization?
interest only, but the payment doesn’t cover all interest due
Explain a package mortgage.
allows the borrower to finance real and personal property together
Explain a blanket mortgage.
developer finances a large tract of land, as he sells off lots, the lots drop from the loan
Contract for Deed (installment land contract)
seller keeps title until debt is paid off, owner financed
Purchase Money Mortgage
title passes to the buyer at time of agreement, another type of owner financing
Two types of seller/owner financing
- purchase money mortgage
2. contract for deed
Difference between primary market lenders and secondary mortgage market?
Primary market lenders make loans; secondary mortgage market buys loans from primary market
The FHA functions like a ___________
an insurance company, insuring loans
FHA-insured loans only require __ % down
3% down or less
VA will guarantee a max of ___ % of a home loan up to $______
25% up to $104,250
Who can assume a VA loan?
anyone
Under what circumstances will the VA loan up to 100% of the purchase price?
As long as the purchase price isn’t more than the Certificate of Reasonable Value
If the purchase price is higher than the CRV, the borrower of a VA loan will need to _______________.
come up with the difference from personal funds, cannot be borrowed or gifted
Explain purchasing “subject to”
Seller remains liable for payments
Assuming a mortgage loan with “novation”
seller is released from liability and buyer is responsible for making payments
South Carolina is ____ Theory state
Lien Theory state, meaning the title does not pass to the lender
What’s the law about pre-payment penalties in SC?
They are not permitted for loans of $180,000 or less.
To calculate interim interest, you do what
Loan amount * interest rate = annual interest
annual interest / 365 = daily interest
daily interest * # days from closing to EOM
always count closing day
what does a promissory note do?
makes the borrower personally liable
the federal Truth In Lending Act is part of
National Consumer Protection Act
Truth in Lending is also known as:
Regulation Z
Regulation Z does what?
regulates advertisement of a lender’s credit terms, and applies to residential home loans
In advertisement, what are the five triggering terms?
- amount of down payment
- amount of any payment
- number of payments
- period of repayment
- amount of any finance charge
If triggering terms are mentioned in an ad, these three disclosures must be made:
- the amount or percentage of down payment
- the terms of repayment
- the annual percentage rate
This replaces the Good Faith Estimate
Loan Estimate
What replaces the HUD-1
Closing Disclosure
TRID rule does not apply to
- HELOCs
- mobile homes
- RAMs
RESPA prohibits a broker or agent from receiving __________ for referring business
a thing of value
Usury is the act of what
lending money at an unreasonably high interest rate, also called “predatory lending”
Maximum interest rate in SC is
6% orally
no max if in writing
What’s a deficiency judgment
personal judgment against a borrower for oustanding debt
federal law which prohibits creditors from certain forms of discrimination
Equal Credit Opportunity Act
