Chapter 14 - Financing 1: Conventional, FHA, and VA Loans

Question 1

For either a FHA or VA mortgage loan, an ___ clause is added that if the appraisal comes in less than the agreed upon sale price, the buyer is not obligated to complete the purchase.

Answer 1

Amendatory clause

Question 2

An ___ ___ that shows the payment of principal, interest and remaining balance.

Answer 2

Amortization schedule

Question 3

An ___ ___ is the most frequently used mortgage plan. It requires the mortgagor to pay a constant amount, usually each month

Answer 3

Amortized loan

Question 4

An ___ mortgage is one that is able to be transferred to another owner of the property.

Answer 4

Assumable

Question 5

___ ___ payments involve half payments every two weeks instead of monthly. Twenty six half payments, the equivilent of 13 monthly payments a year. Can reduce time on a fixed-rate loan from30 years to to 22 or 23 years.

Answer 5

Biweekly mortgage

Question 6

Licensee’s written estimate of market value, used by lenders and mortgage companies where they believe the expense and delay on appraisal is not needed, is a ___ ___ ___.

Answer 6

Brokers price opinion (BPO)

Question 7

A ___ ___ includes a PITI, assures that all bills are being paid by borrower for insurance and taxes.

Answer 7

Budget Loan

Question 8

With some mortgage plans, lending institutions are willing to lower the interest rate in return for an extra payment of points. This arrangement is know as a ___.

Answer 8

Buydown

Question 9

Limit on increase or single adjustment is a ___.

Answer 9

Cap

Question 10

___ is sometimes referred to as a lifetime cap, is a maximum interest rate.

Answer 10

Ceiling

Question 11

A ___ of ___ ___ is a VA appraisal statement.

As with FHA, the contract must contain a clause stating that if the appraisal comes in lower than the purchase price, the veteran can get out of the contract at no penalty - or at the veterans option, make up the difference.

Answer 11

Certificate of reasonable value

Question 12

___ ___ ___ insures low-down-payment loans, does not make loans.

Answer 12

Federal Housing Administation or FHA

• Aggressive, often 96.5% LTV
• MIP Mortgage Insurance Premium
• Loan limits vary by county
• Amendatory Clause
• Repair list by appraiser
• Owner occupied (with some exceptions)

Question 13

____ loan is the most widely used FHA mortgage and includes certain requirements. An upfront MIP either added to the loan or paid in cash at 1.75%, down payment can be a gift (not a loan). for FHA loans placed between January 1, 2001 and June 2, 2013, mortgage insurance premium can be dropped when equity reaches 78% of the original appraisal at the time of purchase, but only after the first five years of the loan.

Answer 13

FHA 203B(b)

Question 14

The ___ rate on an adjustable rate loan - may go up or down, following the trend for interest rates across the country.The lender must use a national indicator of current rates. The most widely used is the one-year US Treasury bills. The ___ is a benchmark interest rate that reflects general market conditions.

Answer 14

Index

Question 15

___ is a charge for the use of someone else’s money. The ___ rate is made up of the Index and the Margin.

Answer 15

Interest

Question 16

_ _ _ ratio is the mortgage loan in relation to the value of a home. Increased from 40% in 1920 to as much as 95% or 100% today.

Answer 16

Loan-to-value (LTV) ratio

Question 17

Borrower pays a specific percentage above the index on a mortgage this is called a ___. A lenders ___ stays fixed throughout time of the loan.

Answer 17

Margin

Question 18

When the monthly payment isn’t enough to cover the interest due, as a result the debt increases. This is known as ___ ___.

Answer 18

Negative amortization

Question 19

This entity offers below-market interest loans, with low or no down payment, to qualified buyers who purchase homes in urban target areas, located in mainly inner cities. Outside the target areas loans may be offered to first-time buyers. Loans are possible on one-four family dwellings and are not available to investors. The maximum allowable family income ranges depending on the size of the family and the county in which the property is located. The entity is called the ___ ___ ___ and ___ ___ ___.

Answer 19

New Jersey Housing and Mortgage Finance Agency (NJHMFA)

Question 20

Principal interest taxes and insurance is also known as ___.

Answer 20

PITI

Question 21

With some mortgage plans, lending institutions are willing to lower interest rates in return for extra payment of ___. the arrangement is know as a buydown.

Answer 21

Points

Question 22

With any down payment below 20%, a conventional loan must be accompanied by ___ ___ ___. The borrower pays a monthly premium for insurance that protects the lender in case of loss at a foreclosure.

Answer 22

Private mortgage insurance (PMI)

Question 23

Calls for periodic payments of interest only. Such plans are generally used for home improvement loans and second mortgages rather than first mortgage loans are called ___ loans.

Answer 23

Straight(term) loan

Question 24

See New Jersey Home Mortgage Finance Agency (NJHMFA) for qualified buyers who purchase home in urban areas also called ___ areas.

Answer 24

Target area

Question 25

__ Mortgage is a mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veteran Affairs.

Answer 25

VA (Veteran Affairs) Mortgage

• Appraisal is called Certificate of Reasonable Value (CRV)
• Owner occupied only
• Only for 1-4 family residences
• Amendatory clause
• Repair list by appraiser

Question 26

___ ___ ___ shift the risk and reward of changing interest rates from the lender to the borrower, with corresponding changes in the monthly payments who stand to benefit if interest rates drop during the period of the loan.

These type of loans are know for the following:

Answer 26

Adjustable-rate mortgages (ARM)

• Cap
• Ceiling
• Negative Amorization
• Convertability

Question 27

Any loan not insured or guaranteed by the Federal Government.

Answer 27

Conventional Loan

• Generally the tightest lending standard
• Private Mortgage Insurance (PMI)
• PMI can be canceled at 80% LTV and automatically canceled at 78%

Question 28

___ - __ is a way of purchasing real estate where the real estate investor takes title to the property but the existing loan stays in the name of the seller. In other words, “___-__” the existing financing. The investor now controls the property and makes the mortgage payments on the seller’s existing mortgage.

Answer 28

“Subject-To”