Conventional, FHA, and VA loans

Question 1

equity

Answer 1

home’s equity is the difference between how much your home is worth and how much you owe on your mortgage

Question 2

interest

Answer 2

the charge for using someone else’s money

Question 3

loan-to-value ratio (LTV)

Answer 3

calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage

Question 4

amortized loans

Answer 4

loan with scheduled, periodic payments that are applied to both the loan’s principal amount and the interest accrued

Question 5

self-liquidating loans

Answer 5

a type of short term loan whereby the funds borrowed are used to buy some asset, which is in turn sold at the loan’s maturity to repay the loan.

Question 6

fixed rate mortgage

Answer 6

interest rate does not change throughout the entire term of the loan

Question 7

what are the four fixed-rate loans?

Answer 7

1. fully amortized loan
2. straight payment plan
3. partially amortized loan
4. biweekly mortgage

Question 8

fully amortized plan

Answer 8

one where if you make every payment according to the original schedule on your term loan, your loan will be fully paid off by the end of the term

Question 9

straight payment plan

Answer 9

periodic payments of interest only, with the principal to be paid in full at the end of the loan term

Question 10

straight loan

Answer 10

A non amortized loan in which only interest is paid during the term of the loan, with the entire principal amount due with the final interest payment.

Question 11

balloon payment

Answer 11

a larger-than-usual one-time payment at the end of the loan term

Question 12

biweekly mortgages

Answer 12

loan where half payments are made every two weeks instead of once a month

extra money is applied entirely to the principal

Question 13

adjustable-rate mortgages

Answer 13

a home loan with a variable interest rate. With an ARM, the initial interest rate is fixed for a period of time. After that, the interest rate applied on the outstanding balance resets periodically

Question 14

adjustment period

Answer 14

the time within which the interest rate on an adjustable-rate mortgage (ARM) can reset

Question 15

index

Answer 15

the benchmark interest rate an adjustable-rate mortgage’s (ARM’s) fully indexed interest rate is based on

Question 16

margin

Answer 16

a percentage that determines the maximum interest rate that the borrower can set for the duration of the loan

Question 17

cap

Answer 17

limit in ARM on how much the interest rate/payment can be raised in each adjustment period

Question 18

ceiling

Answer 18

maximum allowable interest rate

Question 19

negative amortization

Answer 19

whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases

Question 20

convertibility

Answer 20

ability to change a loan from an adjustable rate schedule to a fixed rate schedule

Question 21

assumable

Answer 21

assumable mortgage provides a buyer the opportunity to purchase a home by taking over the seller’s mortgage loan

Question 22

hybrid mortgage loan

Answer 22

a home loan with a fixed interest rate for a specific period of time, after which the rate adjusts periodically for the remaining loan term.

Question 23

amortization schedule

Answer 23

a table that lists each regular payment on a mortgage over time

Question 24

points

Answer 24

lower your interest rate in exchange paying for an upfront fee.

each point is 1% of new loan

Question 25

buydown

Answer 25

a mortgage financing technique with which the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage or possibly its entire life

Question 26

PITI

Answer 26

principal, interest, and tax and insurance reserves what monthly loan payments consist of

Question 27

budget loan

Answer 27

A mortgage that consolidates insurance and tax payments into the principal and interest

Question 28

conventional loan

Answer 28

loans arranged entirely between borrower lending institutions

Question 29

government-backed loan

Answer 29

loans insured by FHA or guaranteed by the VA actual loan comes from local lending institution

Question 30

loans directly from the government include

Answer 30

NJ Housing and Mortgage Finance Agency mortgages and Rural Economic Community Development

Question 31

private mortgage insurance

Answer 31

a type of mortgage insurance you might be required to pay for if you have a conventional loan protects the lender not you

Question 32

Federal Housing Administration

Answer 32

subdivision of HUD that provides mortgage insurance on loans made by FHA-approved lenders

Question 33

FHA 203(b)

Answer 33

the most widely used FHA mortgage required Mortgage insurance premium max loan is percentage of appraised value

Question 34

amendatory clause

Answer 34

a disclosure that gives FHA homebuyers extra protection to cancel a transaction and receive a refund of any upfront earnest money if the value of the home is below the agreed-upon sales price.

Question 35

VA mortgages

Answer 35

intended for owner-occupied property owned or co-owned by a veteran 1-4 family dwellings only

Question 36

Certificate of Reasonable Value

Answer 36

VA appraisal

Question 37

funding fee

Answer 37

the VA's version of mortgage insurance – your payment is due when you close on your home, and it can be financed if necessary.

Question 38

qualifications for VA loans

Answer 38

must have "other than dishonorable' discharge 1. 90 consecutive days of active service during wartime 2. 181 days of consecutive service during peacetime 3. six years in the reserves or national guard

Question 39

The New Jersey Housing and Mortgage finance agency

Answer 39

offers below-market-interest loans, with little to no down payment for buyers who purchase property in urban target areas

Question 40

target areas

Answer 40

neighborhoods in which the state wishes to strengthen housing stock

Question 41

estimate of value

Answer 41

FHa appraisal

Question 42

FHA 203 k loan

Answer 42

type of government loan that can be used to fund both a home's purchase and renovations under a single mortgage