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KY Real Estate Salesperson > CHP 15 - Real Estate Finance > Flashcards

CHP 15 - Real Estate Finance Flashcards

1
Q

Financing instrument that creates a lien against a property

A

Mortgage

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2
Q

Promissory Note

A

Describes the amount of money borrowed, terms and conditions.

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3
Q

If a person takes title to a property “subject to” the mortgage

A

The person is not personally liable to lender, seller is.

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4
Q

Straight (Interest Only)

A

Monthly payments all go towards interest. Buyer must pay entire principal or get another loan

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5
Q

Amortized

A

Principal + Interest - monthly

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6
Q

Fully Amortized Loan

A

Same payment each month

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7
Q

Straight amortized loan

A

Differen tamount with each payment. Fixed principal and, interest varies

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8
Q

Balloon Mortgage

A

One large final payment - this is a partially amortized loan

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9
Q

Adjustable Rate Mortgage (ARM)

A

Better when interest rates are high. 1980’s

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10
Q

Index

A

Measure of economic conditions (use as starting point for calculation)

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11
Q

Margin

A

Usually between 2-3%. THis is added to the index to set interest rate

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12
Q

Most common adjustment periods

A

3-5 years

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13
Q

Other names for interest rate caps

A

rate caps
ceilings
lifetime caps

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14
Q

Whats the 1st interest rate cap

A

The periodic cap - sets teh amoutn of increase or decrease allowed each period

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15
Q

What’s the 2nd interest rate cap

A

Overall/Aggregate Cap sets a max interest rate increase over life of loan

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16
Q

Payment Cap

A

ensures a set monthly payment

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17
Q

Negative Amortization Cap

A

Limits unpaid interest that lender can add to principal balance

18
Q

2 Types of Mortgages

A

Conventional

Government-Backed

19
Q

Gov’t Backed Loans

A

FHA
DVA
RHS

20
Q

Benefits to conventional loans

A

less time
fewer forms
no legal limit on loan amount
lenders are more flexible

21
Q

Disadvantages to conventional

A

higher down pymt

prepay penalties

22
Q

2 Features of fixed rate fully amortized

A
  1. interest rate fixed for life

2. The pymnts remain level for life of loan

23
Q

2 ways to avoid PMI

A

1) Lender Paid Mortgage Insurance

2) 80-10-10 (1st, 2nd, down pymnt)

24
Q

Downfall to a straight loan

A

Interest only

25
Q

What kinds of limits are placed on interest rate in ARM

A

caps limit amount of interest borrower can be charged.

Periodic caps limit amount rate can change over time

26
Q

Law on PMI

A

Must terminate after 22% equity (78% Loan-to-Value ratio) and current with payments

BUT borrower can request cancellation at 20%

27
Q

When is a bridge loan used

A

1) To cover time b/t end of loan and beginning of another

2) To borrow money on an unsold home when seller won’t accept property sale contingency

28
Q

Purchase Money Mortgage

A

Buyer borrows from seller in addition to lender

29
Q

Package Mortgage

A

Includes all personal property and appliances - used in condo sales

30
Q

Shared Equity Mortgage

A

Lender shares in appreciation if and when the property sales

31
Q

A Builder offers $5K closing cost as an incentive; what type of mortgage is this

A

Buydown

32
Q

What’s a release clause and what mortgage has it

A

Blanket mortgage - Allows for release of individual lots

33
Q

Reverse Annuity

A

Lender makes payment to borrower on equity

34
Q

FHA Loan characteristics

A

1) Either fixed 10-30 or one year adjustable
2) Max loan term in 30 yrs or 75% of remaining economic life whichever is less
3) Down payments are low (Buyer must have cash down payment and closing costs)
4) Max loan fee is 1% of loan amount, typically paid by buyer

35
Q

Two Insurance premiums

A

MIP (Mortage Ins. Pre)

MMI (Mutual Morgage Ins.)

36
Q

FHA does NOT….

A

loan funds, they insure bank backed loans

37
Q

Certificate of Reasonable Value (CRV)

A

value of property in relation to sales price

38
Q

GPM Graduated Pymt Mortgage

A

Monthly pymnt increases each yr and then levels

39
Q

PAM (Pledged Acct Mortgage)

A

Borrower contributes a sum into an account pledged to lender

40
Q

Open End Loan

A

Expandable loan giving borrow a limit

41
Q

Allows borrow to take a second loan without paying off the first

A

Wraparound Mortgage

KY Real Estate Salesperson (57 decks)

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