Chapter 16-Real Estate Financing: Practice

Question 1

The Federal Reverse System…

Question 2

Primary Mortgage Market
Made up of lenders that originate mortgage loans….

Question 3

Secondary Mortgage market

Answer 3

Fannie Mae(now government owned)
Ginnie Mae (A government agency)
Freddie Mac (now government owned)

Question 4

Straight Loans

Answer 4

Also called interest-only loan
Regular payments of only interest with a final balloon payment of principal
Also known as Interest-only Loan or Term Loan

Question 5

Straight Loan

Answer 5

Also called an interest-only loan or term loan is a non amortized loan that essentially divides the loan into two amounts to be paid off separately.

Question 6

Amortized Loan(page 310 on book) for another example

Answer 6

Partially pays off both principal and interest.
Fully amortized (level-payment loan)

What is the balance of the principal after the first month on a $100,000 loan for 30 years at 5% interest rate if Monty payment is $575?

1.principal x interest rate=annual interest———-$100,000 x .05 =$5000
2. Annual interest divided by 12(months)= monthly interest amount———5000/12=416.67
3.monthly payment - (minus) monthly interest= monthly amount towards principal——575-416.67=158.33 goes to principal
4.Principal-(minus) monthly amount towards principal= new balance——-100,000-158.33=99,841.67

Question 7

Other kinds of Mortgages

Answer 7

-Adustable-Rate Mortgages (ARMs)
-Balloon payment Loan
-Growing-Equity Mortgage (GEM)
-Reverse MOrtgage
-Nonrecourse Loan

Question 8

Conventional Loans-more secured loans

Answer 8

Are viewed as the most secure loans because their LTV (Loan to Value Ratio) ratios are often lowest.
Loan amount / price value that’s how you get the LTV
80,000loan amount/100,000 value of property=80%LTV
20% down payment.

Question 9

Credit Scores

Question 10

Importance of credit history…

Question 11

Private Mortgage Insurance(PMI)

Answer 11

Protects the lender against you defaulting.

Question 12

FHA-Insured Loans

Answer 12

Refers to a loan that is insured by the agency. It provides security to the lender in additional to the real estate. The borrowed is charged mortgage insurance premium (MIP) for all FHA loans.

No pre-pay penalty
Low down payment loans
Seller concession up to 6 points
Income qualification rat

Question 13

VA-Guaranteed Loans

Answer 13

Certificate of eligibility
Certificate of reasonable value
Reasonable discount points
No prepayment penalty
Assumption rules
Income qualification is only back end of 41%

Question 14

Agricultural Loan Programs

Answer 14

FSA Loans/Fram credit system

Question 15

Purchase-Money Mortgage..

Question 16

Package Loans…

Question 17

Blanket Loans

Question 18

Wraparound Loans..

Question 19

Open-End loans..

Question 20

Constructions Loan

Answer 20

Is made to finance the construction of improvements on real estate such as homes….

Question 21

Buydowns

Answer 21

Is a way to temporarily (or permanently) lower the initial interest rate on a mortgage or deed of trust loan.

Question 22

Home Equity Loan

Answer 22

Provides a source of funds the equity built up in a home. The original mortgage loan remains in place then the home equity loan is junior to the original lien.

Question 23

Truth in lending Act and REgulation Z (page 318)….

Answer 23

Creditor
Tree day right of rescission
Advertising
Penalties
TRID
Loan Estimate

Question 24

TRID and the Loan Estimate…

Answer 24

Must be delivered or placed on the mail no later than the third business day after receiving the consumer’s application.

Question 25

Equal Credit Opportunity Act (ECOA)

Answer 25

Prohibits lenders and other who grant or arrange credit to consumers form discriminating against credit on the basis of
Race
Color
Religion
National origin
Sex
Marital status
Age
Dependence on public assistance

Question 26

Community Reinvested Act (CRA)…

Question 27

Real Estate Settlement Procedures (RESPA)

Answer 27

Applies to any residential real estate transaction involving a new first mortgage loan.