Chapter 12 National Book

Question 1

What is PITI? What does it relate to?

Answer 1

Principal
Interest
Taxes
Insurance

the basic costs of owning a house

Question 2

Promissory note

Answer 2

a borrower’s (buyers) promise to pay back loan according to agreed terms

Question 3

What are the two instruments required for a mortgage loan?

Answer 3

a financing instrument

a security instrument

Question 4

Power of sale

Answer 4

enables a sale without court action

Question 5

What is an alienation clause?

Answer 5

a clause that is used when property is sold and payment is full is required so new owner assumes new interest rate
can’t take up old morgage
used when original interest rate is too low

Question 6

Straight loan

Answer 6

interest only loan

Question 7

Adjustable-rate mortgage

Answer 7

interest rate changes with economy

the index

Question 8

Growing-equity mortgage

Answer 8

payments of principal are increased each month to pay off the loan quickly

Question 9

Reverse mortgage

Answer 9

must be 62 years or older

uses built up equity to continue paying off home

Question 10

Short sale

Answer 10

when a lender agrees to sell property less than what its worth
lender loses money
done before property is foreclosed