ch11 Flashcards
A mortgage broker:
brings lenders and borrowers together.
A mortgage broker brings buyers and lenders together. A mortgage banker originates and services real estate loans.
A conforming loan:
meets the standard requirements for sale on the secondary market.
Conventional loans are classified as either conforming or nonconforming. The secondary market establishes the maximum loan amount for the various types of conventional loans that are sold to the secondary market. Loan products that fall within the established maximum are known as conforming.
A percentage of the loan charged at the beginning of the loan to increase the lender’s yield is referred to as:
discount points.
The purpose of discount points is to lower the monthly payment by collecting a lump sum of interest money up front, thereby funding the loan at a lower interest rate for the term of the loan.
______________ is the payment of discount points to reduce the interest rate.
A buydown
A “buydown” is the payment of discount points to buy down (to reduce) the interest rate charged to the borrower.
A REIT is:
an unincorporated association of at least 100 real estate investors.
A REIT (Real Estate Investment Trust) is a business trust set up very much like a corporation wherein shares of stock are issued to investors. With a REIT, however, an investor buys shares of a beneficial interest in purchased real estate, primarily commercial, and only the shareholder pays tax on earned income. A REIT is an unicorporated association of 100 or more real estate investors.
APR refers to:
the base interest rate plus any charges that are part of the total cost to the borrower.
The annual percentage rate (APR) is the base interest rate plus any applicable fees, charges, closing costs, points, etc. that are part of the total cost to the borrower. It tells a borrower the total cost of financing a loan in percentage terms, as a relationship of the total finance charges to the total amount financed.
In an adjustable rate mortgage, the difference between the index rate and the interest rate charged to the borrower is known as the:
margin.
The difference between the index rate and the interest rate charged the buyer in an adjustable rate mortgage is known as the margin.
Loans that meet the standard requirements of the secondary mortgage market are known as:
conforming loans.
Loan products that fall within the established maximum loan amounts set by the secondary market are known as conforming loans.
The relationship between the loan amount and the sales price or appraised value of the property (whichever is less) is the:
loan-to-value ratio.
The loan-to-value ratio represents the percentage amount of the lower of sales price or appraisal value the lender is willing to loan. An 80% loan would represent the lenders willingness to loan 80% of the sales price or appraisal value, whichever is less.
A veteran who wants a VA loan must be in possession of a __________ obtained from the Department of Veterans Affairs.
Certificate of Eligibility
A Certificate of Eligibility ensures the lender that the veteran meets the basic military requirement of eligibility for a VA loan.
Generally, FHA loans:
require a mortgage insurance premium (MIP).
have less stringent qualifying guidelines.
FHA loans generally require mortgage insurance premiums (MIP), and have less stringent qualifying guidelines. FHA loans are insured by FHA and not directly funded.
Loans with a loan-to-value ratio that exceeds 80% generally require:
private mortgage insurance (PMI).
If the loan amount exceeds 80% of the value, most conventional loans require private mortgage insurance (PMI).
The Department of Veterans Affairs will issue a __________ based upon the results of an approved appraisal.
Certificate of Reasonable Value (CRV)
The Department of Veterans Affairs issues a Certificate of Reasonable Value following an approved appraisal, which sets forth the current market value based upon the appraisal.
The Truth in Lending Act is implemented by:
Regulation Z.
The Federal Reserve Board’s Regulation Z implements the Truth in Lending Act.
Which of the following fees will impact the actual annual percentage rate (APR)?
Loan origination fees, discount points, and buy-downs can affect the APR.
