Chapter 13 Flashcards
What does a lender do to qualify a buyer for a loan?
Check Credit History
Check income
What is the Housing Expense Ratio (HER)?
Percentage of borrower’s gross monthly income that is used to pay the monthly loan payment.
How much of your income is going to go to the house expense
Monthly loan payment is 1/12 of the principal, the interest, taxes, and insurance
What is the PITI?
It is the items used to calculate a loan’s monthly payment:
Principal
Interest
Taxes
Insurance
How is the Housing expense ratio calculated?
PITI / Gross income x 100%
What is the Total Obligations Ratio (TOR)?
The percentage of your income that goes towards all your monthly expenses including the mortgage and escrow payments (credit cards, car loan, child support, etc)
How is the Total Obligations Ratio calculated?
Total obligations / Gross income * 100%
What does the Federal Housing Administration (FHA) do?
FHA insures loans. They do not make loans
When do you need to have a PMI in a conventional loan?
when your loan to value ratio is above 80%
What does the HUD do?
it limits the max amount of an FHA insured loan
What is the max housing expense ratio and total obligation ratio a borrower can have for an FHA loan?
housing expense cannot exceed 31%
total obligations cannot exceed 43%
Can a borrower prepay an FHA insured loan?
yes, without a penalty
What does the VA mortgage program do?
They guarantee loans
What are the requirements for a VA loan?
Must be for owner-occupied residences
Veteran must have a certificate of eligibility
Veteran must have served for a specified amount of time and be honorably discharged
Which is the most abrupt control device used by the Federal Reserve?
Changes in the reserve
What can the federal reserve do if a bank does not balance their deposit accounts daily?
impose severe fines, other disciplinary actions, or possible withdrawal of the bank’s federal charter
Which is the least effective tool of the Federal Reserve?
Changes in discount rate
It still generates the most publicity
What is the primary mortgage market?
this is where loans are originated
Does the secondary mortgage market deal with the public?
no, only primary mortgage market deals with the public
Which lenders are only interested in giving large loans?
Life insurance companies
Which are the types of private lenders?
Savings accounts
Commercial Banks
Life insurance
What type of loans do commercial banks do?
only short term loans to assist commerce
Which type of lender finances most apartment buildings and commercial properties?
Life insurance companies
What do mortgage loan originators (MLOs) do?
They do not make loans
They arrange loans by shopping around for lenders with lowest interest rates and easiest borrower qualifications
What is the purpose of the secondary mortgage market?
They provide liquidity to the primary market, so they don’t run out of funds
Which are the main secondary mortgage market lenders?
FNMA - Fannie Mae
FHLMC - Freddie Mac
GNMA - Gennie Mae
Lenders cannot discriminate against:
Race
Color
National Origin
Religion
Age
Sex
Marital Status
what does RESPA do?
Requires lenders to provide an estimate of closing costs within 3 business days of the loan application being submitted
Requires lenders to provide a “Your home loan toolkit” booklet
Requires the lender to send a disclosure indicating whether they will be servicing the loan or transferring it to another lender
What is the Truth-in-lending act?
Assures the consumers receive meaningful information concerning the true cost of credit
What are the triggering terms?
CHOOSE THE ANSWER WITH NO NUMBERS IN IT
