Ch 7 Loan Types, Terms And Issues

Question 1

What is the formula to calculate interest?

Answer 1

I = PRT

Question 2

Semi annual equals

Answer 2

Six months

Question 3

Yearly equals

Answer 3

12 months

Question 4

Quarterly equals

Answer 4

Four times a year

Question 5

1 Quarter =

Answer 5

Three months

Question 6

The term house payment typically includes

Answer 6

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

Question 7

What are points?

Answer 7

Percentage points based on the loan amount

Question 8

1 point equals

Answer 8

1% of the loan amount

Question 9

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

Answer 9

At closing

Question 10

What does amortized mean?

Answer 10

Paid in full

Question 11

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

Answer 11

P&I - principal and interest

Question 12

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

Answer 12

True

Question 13

What does the index allow?

Answer 13

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

Question 14

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

Answer 14

A teaser rate or discounted initial rate

Question 15

What does ARM stand for?

Answer 15

Adjustable rate mortgage

Question 16

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.

Answer 16

Initial adjustment cap

Question 17

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?

Answer 17

Falling rate

Question 18

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

Answer 18

Fixed rate mortgage

Question 19

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

Answer 19

Adjustable rate mortgage

Question 20

Construction to permanent loans are also known as

Answer 20

Rehab or rehabilitation loans

Question 21

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

Answer 21

A blanket mortgage

Question 22

What is loan-to-value ratio

Answer 22

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

Question 23

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

Answer 23

Mortgage fraud

Question 24

Why is mortgage fraud increasing?

Answer 24

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

Question 25

The basic formula for interim interest is

Answer 25

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

Question 26

Semi annual interest is calculated

Answer 26

Twice per year

Question 27

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.

Answer 27

An adjustable rate mortgage