CH 5 - Financing

Question 1

What’s a straight term mortgage?

Answer 1

an interest only loan

Question 2

What’s a loan with a fixed payment over a set term (conventional)?

Answer 2

a fully amortized mortgage

Question 3

What’s a partially amortized mortgage?

Answer 3

series of payments followed by a balloon payment at maturity

Question 4

a 10 year loan, with a 30 year amortization schedule, and a balloon payment at the end of 10 years is a __________

Answer 4

partially amortized mortgage

Question 5

What type of loan has its interest rate tied to an economic index and can be periodically adjusted?

Answer 5

adjustable rate mortgage (ARM)

Question 6

What type of loan has 80% LTV (at the lowest) and requires PMI if LTV is higher than 80%?

Answer 6

conventional mortgage loan

Question 7

age requirement for a Reverse Annuity Mortgage (RAM)

Answer 7

62 or older

Question 8

to qualify for a RAM, you must

Answer 8

be 62 or older and own your home

Question 9

What is an open-end mortgage?

Answer 9

permits borrowing additional money in the future without refinancing the loan

Question 10

What is a sub-prime loan?

Answer 10

borrower who could not qualify for a prime loan

Question 11

What generally prevents a wrap-around mortgage?

Answer 11

the due-on-sale clause

Question 12

How does a wrap-around mortgage work?

Answer 12

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)

Question 13

What is negative amortization?

Answer 13

interest only, but the payment doesn’t cover all interest due

Question 14

Explain a package mortgage.

Answer 14

allows the borrower to finance real and personal property together

Question 15

Explain a blanket mortgage.

Answer 15

developer finances a large tract of land, as he sells off lots, the lots drop from the loan

Question 16

Contract for Deed (installment land contract)

Answer 16

seller keeps title until debt is paid off, owner financed

Question 17

Purchase Money Mortgage

Answer 17

title passes to the buyer at time of agreement, another type of owner financing

Question 18

Two types of seller/owner financing

Answer 18

1. purchase money mortgage

2. contract for deed

Question 19

Difference between primary market lenders and secondary mortgage market?

Answer 19

Primary market lenders make loans; secondary mortgage market buys loans from primary market

Question 20

The FHA functions like a ___________

Answer 20

an insurance company, insuring loans

Question 21

FHA-insured loans only require __ % down

Answer 21

3% down or less

Question 22

VA will guarantee a max of ___ % of a home loan up to $______

Answer 22

25% up to $104,250

Question 23

Who can assume a VA loan?

Answer 23

anyone

Question 24

Under what circumstances will the VA loan up to 100% of the purchase price?

Answer 24

As long as the purchase price isn’t more than the Certificate of Reasonable Value

Question 25

If the purchase price is higher than the CRV, the borrower of a VA loan will need to _______________.

Answer 25

come up with the difference from personal funds, cannot be borrowed or gifted

Question 26

Explain purchasing “subject to”

Answer 26

Seller remains liable for payments

Question 27

Assuming a mortgage loan with “novation”

Answer 27

seller is released from liability and buyer is responsible for making payments

Question 28

South Carolina is ____ Theory state

Answer 28

Lien Theory state, meaning the title does not pass to the lender

Question 29

What’s the law about pre-payment penalties in SC?

Answer 29

They are not permitted for loans of $180,000 or less.

Question 30

To calculate interim interest, you do what

Answer 30

Loan amount * interest rate = annual interest
annual interest / 365 = daily interest
daily interest * # days from closing to EOM

always count closing day

Question 31

what does a promissory note do?

Answer 31

makes the borrower personally liable

Question 32

the federal Truth In Lending Act is part of

Answer 32

National Consumer Protection Act

Question 33

Truth in Lending is also known as:

Answer 33

Regulation Z

Question 34

Regulation Z does what?

Answer 34

regulates advertisement of a lender’s credit terms, and applies to residential home loans

Question 35

In advertisement, what are the five triggering terms?

Answer 35

1. amount of down payment
2. amount of any payment
3. number of payments
4. period of repayment
5. amount of any finance charge

Question 36

If triggering terms are mentioned in an ad, these three disclosures must be made:

Answer 36

1. the amount or percentage of down payment
2. the terms of repayment
3. the annual percentage rate

Question 37

This replaces the Good Faith Estimate

Answer 37

Loan Estimate

Question 38

What replaces the HUD-1

Answer 38

Closing Disclosure

Question 39

TRID rule does not apply to

Answer 39

1. HELOCs
2. mobile homes
3. RAMs

Question 40

RESPA prohibits a broker or agent from receiving __________ for referring business

Answer 40

a thing of value

Question 41

Usury is the act of what

Answer 41

lending money at an unreasonably high interest rate, also called “predatory lending”

Question 42

Maximum interest rate in SC is

Answer 42

6% orally

no max if in writing

Question 43

What’s a deficiency judgment

Answer 43

personal judgment against a borrower for oustanding debt

Question 44

federal law which prohibits creditors from certain forms of discrimination

Answer 44

Equal Credit Opportunity Act