Ch 7 Loan Types, Terms And Issues Flashcards
What is the formula to calculate interest?
I = PRT
Semi annual equals
Six months
Yearly equals
12 months
Quarterly equals
Four times a year
1 Quarter =
Three months
The term house payment typically includes
A monthly payment of 1/12 of the annual taxes, homeowners insurance and mortgage insurance if any
What are points?
Percentage points based on the loan amount
1 point equals
1% of the loan amount
Discount points are pre-pay interest, and are usually paid when?
At closing
What does amortized mean?
Paid in full
In a fixed rate mortgage, the monthly payment is referred to as
P&I - principal and interest
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
True
What does the index allow?
The rate to move up and down with fluctuations in the financial markets
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 teaser rate or discounted initial rate
What does ARM stand for?
Adjustable rate mortgage
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.
Initial adjustment cap
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?
Falling rate
If a borrower wants to remain in the home for a long term, what mortgage rate is better for them?
Fixed rate mortgage
If a buyer wants to sell their home in the near future, what type of mortgage loan would be best for them?
Adjustable rate mortgage
Construction to permanent loans are also known as
Rehab or rehabilitation loans
What type of mortgage covers more than one piece of property?
A blanket mortgage
What is loan-to-value ratio
Their percentage of the lesser appraise value, or the sales price that the lender will lend
What is one of the fastest growing crimes in the US?
Mortgage fraud
Why is mortgage fraud increasing?
Because it can be very lucrative and relatively easy to carry out, particularly in geographic areas experiencing rapid appreciation
The basic formula for interim interest is
Principal X payment rate / 365 x # of days until the end of the month
Semi annual interest is calculated
Twice per year
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.
An adjustable rate mortgage
