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Chp. 3 (financing) 15Q > Equity And Principal > Flashcards

Equity And Principal Flashcards

0
Q

PMM

Savings and loan

A
  • long term, single family homes

* may offer; conventional, FHA, VA

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1
Q

Primary mortgage market

And

Secondary mortgage market

A

Primary- make loan directly to borrowers

Secondary- buy mortgages from primary market lenders

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2
Q

PMM

Mutual Savings Bank

A

Located NE USA

State chartered originate FHA or VA

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3
Q

PMM

Commercial Banks

A

Short term loans

Example: home improvements, mobile homes, commercial loans

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4
Q

PMM

Insurance companies

A

Specialize in long term loans that finance commercial and industrial properties

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5
Q

PMM

Mortgage Bankers

A

Lend own money and money of investors

Originate loans and package mortgage

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6
Q

PMM

Mortgage brokers

A

Do NOT lend own money

Bring borrowers and lenders together and r paid % of the money borrowed

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7
Q

PMM

Credit Unions

A

Provide a source of fund for their members

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8
Q

PMM

Pension Funds

A

Work through mortgage brokers and bankers in real estate financing

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9
Q

Secondary Mortgage Market

A

Provides rollover of funds:
(so primary lender has money available to meet demands of its new borrowers)

No conforming loans- do not meet secondary guidelines

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10
Q

Federal Reserve

Does

A

Controls money supply and credit available in country

Creates money
Regulates reserves
Sets discount rate of interest

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11
Q

Federal reserve

Over supply and under

Increased and decreased

A

Over=inflation
Under=recession

Reserve increased = money shrinks interest rates go up

Reserve decrease = money grows interest rates go down

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12
Q

Federal home loan corporation

A

Freddie Mac

Assists saving and loan and seconds market

Publicly owned buys mortgages pools them, sells bonds in the open market as mortgaged backed securities

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13
Q

Federal National Mortgage Association

A

Fannie Mae 1938

Provide liquidity and stability in housing market by purchasing mortgages from lending institutions

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14
Q

Government national mortgage association

A

Ginnie Mae 1968

High risk and special assistance programs housing for elderly

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15
Q

MBS

A

Mortgaged Backed Securities

Loans purchased by secondary markets are pooled and sold to investors

16
Q

Unconventional Mortgage

A

Loan that is backed by government

FHA
VA

17
Q

Conventional Mortgage

A

A mortgage (loan) where real property is used as security for the payment

Not backed by government, can be insured or not insured

18
Q

Amortize

A
  • means repay loan in monthly or other periodic payments that include principal and interest
  • a portion is applied to principal balance (loan) and a portion is kept by lender at interest on the loan
19
Q

Partially Amortized Loan

A

Balloon mortgage

Balance remains after final payment is made

20
Q

Non-amortized Loan

A

Periodic interest payments made to lender, but nothing is applied to principal

Ex:
Term mortgage
Straight mortgage
Construction loan

21
Q

Fully Amortized Loan

A

Direct reduction loan

At end of loan principal balance is zero

Ex: 30 year fixed loan

22
Q

Straight Mortgage

A

Term Loan

Pays interest only, and principal is paid in full at the end of the term.

(Construction loan)
Nonamortized

23
Q

ARM

A

Adjustable rate mortgage

Contains escalation clause

24
Q

Usury Laws

A

Limit the max interest

25
Q

Aggregate rate cap

A

Max that the interest can adjust for the life of loan

26
Q

HELOC

A

Home equity loan of credit

Borrower write checks whenever money is needed

27
Q

Principal and interest

A

P=loan balance

Interest = the charge for the use of money

28
Q

ROI

A

Retrun on investment

Measures profit of property

29
Q

Margins

A

Profit charged by lender and added to index to determine the interest.

Margin remains constant, 2% to 7%

Lower margins mean better loan for borrower

30
Q

After tax cash flow

A

atcf
ROI= ____x100%
E

31
Q

Equity

A

The difference between the market value and any liens on the property

Chp. 3 (financing) 15Q (5 decks)

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