Chapter 4: Conventional Loans

Question 1

conventional loan

Answer 1

usually made by a bank or institutional lender and that is not insured or guaranteed by a government entity or agency, such as FHA or VA. typically long-term, fully amortizing, fixed-rate real estate loans.

Question 2

Amortization

Answer 2

reduction of the balance of the loan by paying back some of the principal owed on a regular basis.

Question 3

fully amortizing loan

Answer 3

the total payments over the life of a loan pay off the entire balance of principal and interest due at the end of the term. This is also known as self-liquidating.

Question 4

Negative amortization

Answer 4

occurs anytime the monthly payment is not sufficient to cover the accrued interest from the previous month.

Question 5

Fixed-rate loans

Answer 5

have interest rates, but not necessarily payments, that remain constant for the duration of the loan

Question 6

A-Minus Conventional Loan

Answer 6

This loan program allows a borrower with a less than perfect credit history, limited money for down payments, or a higher debt-to-income ratio to get a loan that could be sold on the secondary market.

Question 7

Private mortgage insurance

Answer 7

offered by private companies to insure a lender against default on a loan by a borrower where there is a loss of collateral value at the time of the default.

Question 8

Qualifying Standards

Answer 8

Home Expense Ratio 28% and Debt to Income Ratio 36% for Conforming Loans (Conventional)