Chapter 7 Flashcards
what are the two types of gov. funding
FHA and VA
What is an FHA loan
insured loans for 1-4 family homes made by approved lenders.
no income limits
what is a mortgage insurance premium
required for all FHA loans, regardless of down payment. initial premium
what is a conditional commitment
to get a FHA loan, borrower must first obtain conditional commitment which shows the lender’s willingness to finance the loan as long as certain conditions are met
usually included FHA appraisal
any repairs that may be req. that bring prop to min FHA standard
what is a VA loan and how do you qualify
for vets guaranteed by gov. and can be used to buy single fam homes or multi fam residences with up to 4 units
to be eligible, borrower must have completed a min of two years active duty in peacetime or at lease 90 days in wartime and must have no honorable discharge. evidenced by certificate of eligibility
what is rescission
the cancellation or termination of a contract
under reg z some borrowers have the right of rescission for three business days after a loan contract is signed.
applies mostly to borrowers who are refinancing or obtaining home equity loans, not for purchase loans
what is regulation z
requires that a lending institution discloses to the borrower the actual, total costs involved in acquiring credit.
when a mortgage is originated, ______ _______ fee is charged by the lender to cover expenses. it’s usually 1% of the loan amount aka ___ _____
loan origination
one point
what are discount points
paid to the lender to make up the difference between the current market interest rate and the rate given to a borrower on a note.
increase a lender’s return/yield on loans with lower-than-market interest rates, allowing lender to give borrower a loan with a lower interest rate
what is a fixed interest rate loan
rate doesn’t fluctuate during fixed rate period of the loan
more accurate predictions of future payments
what is a floating rate
aka variable or adjustable rate loan
total rate paid by the customer “floats” in relation to some base rate, to which a spread or margin is added (or more rarely, subtracted)
