Ch 7 Loan Types, Terms And Issues Flashcards

1
Q

What is the formula to calculate interest?

A

I = PRT

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2
Q

Semi annual equals

A

Six months

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3
Q

Yearly equals

A

12 months

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4
Q

Quarterly equals

A

Four times a year

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5
Q

1 Quarter =

A

Three months

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6
Q

The term house payment typically includes

A

A monthly payment of 1/12 of the annual taxes, homeowners insurance and mortgage insurance if any

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7
Q

What are points?

A

Percentage points based on the loan amount

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8
Q

1 point equals

A

1% of the loan amount

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9
Q

Discount points are pre-pay interest, and are usually paid when?

A

At closing

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10
Q

What does amortized mean?

A

Paid in full

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11
Q

In a fixed rate mortgage, the monthly payment is referred to as

A

P&I - principal and interest

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12
Q

True or false: in a fixed rate mortgage, as the loan is repaid, the balance of the loan is reduced overtime until it is fully amortize

A

True

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13
Q

What does the index allow?

A

The rate to move up and down with fluctuations in the financial markets

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14
Q

What allows the lender to offer lower interest rate during the first year or more on the loan as an incentive to attract borrowers?

A

A teaser rate or discounted initial rate

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15
Q

What does ARM stand for?

A

Adjustable rate mortgage

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16
Q

The arm that offers a fixed rate. During the first years of the loan that has an initial rate cap that is higher than the per adjusted cap.

A

Initial adjustment cap

17
Q

If a borrower anticipates that interest rates are likely to fall or stay low for a long what advantage of arm mortgage loan is this?

A

Falling rate

18
Q

If a borrower wants to remain in the home for a long term, what mortgage rate is better for them?

A

Fixed rate mortgage

19
Q

If a buyer wants to sell their home in the near future, what type of mortgage loan would be best for them?

A

Adjustable rate mortgage

20
Q

Construction to permanent loans are also known as

A

Rehab or rehabilitation loans

21
Q

What type of mortgage covers more than one piece of property?

A

A blanket mortgage

22
Q

What is loan-to-value ratio

A

Their percentage of the lesser appraise value, or the sales price that the lender will lend

23
Q

What is one of the fastest growing crimes in the US?

A

Mortgage fraud

24
Q

Why is mortgage fraud increasing?

A

Because it can be very lucrative and relatively easy to carry out, particularly in geographic areas experiencing rapid appreciation

25
Q

The basic formula for interim interest is

A

Principal X payment rate / 365 x # of days until the end of the month

26
Q

Semi annual interest is calculated

A

Twice per year

27
Q

Beyoncé and Jay-Z are on a fixed income. They want to buy a home in our researching different loan options which loan would be a poor choice for them.

A

An adjustable rate mortgage