Conventional, FHA, and VA loans Flashcards
equity
home’s equity is the difference between how much your home is worth and how much you owe on your mortgage
interest
the charge for using someone else’s money
loan-to-value ratio (LTV)
calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage
amortized loans
loan with scheduled, periodic payments that are applied to both the loan’s principal amount and the interest accrued
self-liquidating loans
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.
fixed rate mortgage
interest rate does not change throughout the entire term of the loan
what are the four fixed-rate loans?
- fully amortized loan
- straight payment plan
- partially amortized loan
- biweekly mortgage
fully amortized plan
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
straight payment plan
periodic payments of interest only, with the principal to be paid in full at the end of the loan term
straight loan
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.
balloon payment
a larger-than-usual one-time payment at the end of the loan term
biweekly mortgages
loan where half payments are made every two weeks instead of once a month
extra money is applied entirely to the principal
adjustable-rate mortgages
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
adjustment period
the time within which the interest rate on an adjustable-rate mortgage (ARM) can reset
index
the benchmark interest rate an adjustable-rate mortgage’s (ARM’s) fully indexed interest rate is based on
margin
a percentage that determines the maximum interest rate that the borrower can set for the duration of the loan
cap
limit in ARM on how much the interest rate/payment can be raised in each adjustment period
ceiling
maximum allowable interest rate
negative amortization
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
convertibility
ability to change a loan from an adjustable rate schedule to a fixed rate schedule
assumable
assumable mortgage provides a buyer the opportunity to purchase a home by taking over the seller’s mortgage loan
hybrid mortgage loan
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.
amortization schedule
a table that lists each regular payment on a mortgage over time
points
lower your interest rate in exchange paying for an upfront fee.
each point is 1% of new loan
buydown
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
PITI
principal, interest, and tax and insurance reserves
what monthly loan payments consist of
budget loan
A mortgage that consolidates insurance and tax payments into the principal and interest
conventional loan
loans arranged entirely between borrower lending institutions
government-backed loan
loans insured by FHA or guaranteed by the VA
actual loan comes from local lending institution
loans directly from the government include
NJ Housing and Mortgage Finance Agency mortgages and Rural Economic Community Development
private mortgage insurance
a type of mortgage insurance you might be required to pay for if you have a conventional loan
protects the lender not you
Federal Housing Administration
subdivision of HUD that provides mortgage insurance on loans made by FHA-approved lenders
FHA 203(b)
the most widely used FHA mortgage
required Mortgage insurance premium
max loan is percentage of appraised value
amendatory clause
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.
VA mortgages
intended for owner-occupied property owned or co-owned by a veteran
1-4 family dwellings only
Certificate of Reasonable Value
VA appraisal
funding fee
the VA’s version of mortgage insurance – your payment is due when you close on your home, and it can be financed if necessary.
qualifications for VA loans
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
The New Jersey Housing and Mortgage finance agency
offers below-market-interest loans, with little to no down payment for buyers who purchase property in urban target areas
target areas
neighborhoods in which the state wishes to strengthen housing stock
estimate of value
FHa appraisal
FHA 203 k loan
type of government loan that can be used to fund both a home’s purchase and renovations under a single mortgage
