Finance Flashcards
GNMA, FNMA, and FHLMC
Ginnie Mae, Federal Fannie Mae, Freddie Mac.
These are known as the secondary mortgage market. They do not lend their own funds but make the funds of others available for residential real estate financing.
Portfolio loans
Doesn’t conform, not getting sold to the secondary market.
Conforming loans do get sold to Ginnie Mae Fannie Mae and Freddie Mac.
Point
Equals 1% of loan amount. Points buy down the interest rate.
Ex.. Sale price 100k - down payment 20k = 80k loan amount x .01 = 800
What are the different kinds of loans?
- Rural development, RD
- Maine state housing authority MSHA
- Federal housing authority FHA
- Veterans administration VA
TILA
Truth in lending act
So the consumer can understand the true cost of borrowing, Congress and acted the truth in lending act.
The goal of truth in lending is to help consumers shopping for credit by doing what three things?
- annual percentage rate APR
- advertising consumer credit.
- three day right of rescission
RESPA
Real estate settlement procedures act
- prohibits kickbacks
- provide consumers w/settlement costs
- provide consumers with estimate closing cost
- Require a uniform disclosure form for closings on 1-4 family properties
What are kickbacks?
When a loan originator offers a licensee that they will pay a referral fee for every buyer the licensee sends to the loaner. This is illegal.
TRID
Trid, real estate settlement procedures act, Integrated, disclosure.
A new system that lenders have to follow.
Underwriting loans
When the application is complete, it goes to the lenders underwriting department. This is where they verify that all the representations are true and to see if it’s a conforming loan.
PITI
Principal interest taxes and insurance
Should be around 15-20% of the borrows monthly payments
FICO
Fair Isaac Corporation
FICO tracks credit scores. Credit scores range from a low 300 to a perfect score of 850.
MI
Mortgage insurance
If the buyer is not able to pay 20% down then they are required to get mortgage insurance.
ARM
Adjustable rate mortgage
Interest rates that I just overtime. The interest rate is fixed for pick period of years after that, it can be periodically adjusted
FHA
Federal housing authority
Mortgage with as little as 3.5% down payment. FHA is insured by the government.
FHA 203K program
Permits buyers to finance up to 35,000 into their mortgage to repair improve or upgrade their home.
RD
Rural development
A loan for low income customers it will finance up to 100%.
RD can do, direct housing loans and guaranteed housing loans
VA
Veterans administration
VA loans are provided by private lenders such as banks and mortgage companies. They are guaranteed and not insured like FHA. Veterans need a certificate of illegibility COE.
No down payment is required
Term loan
A loan made for a specific amount of time. Most loans are term loans, they must be paid off by the end of a specific term, 15 years, 20 years, 30 years.
Package Loan
A loan that will also pay for personal property such as appliances and furniture. Everything is paid for in one loan, fully furnished.
Conventional Insured
When the borrower does not pay 20% more or down there acquired for mortgage insurance. This is still a conventional loan
Construction loan
When the buyer closes on a house that has not even started construction yet. The buyer will start paying mortgage payments as the house is being built
Conventional loan
Is a loan with at least 20% down for any numbers of years. It may have a six or variable interest rate. It is neither in shored nor guaranteed by the government.
HELOC
Home equity line of credit
Homeowners have a second mortgage on their Home, allows them to borrow against the equity in their property and then repay the loan when they have the cash to do so.
Junior Mortgage
When a property owner has more than one mortgage on a piece of property. The first loan is considered a senior mortgage and the second loan is a junior mortgage.
Amortizing loan
Made up of both principal and interest. All payments for the term of the loan are the same. Most buyers use this type of loan
Blanket mortgage
Is used to describe a loan that covers more than one parcel of real estate.
Balloon mortgage
The borrower and lender agreed to read payment terms that call for one or more larger payments of principal from time to time
Seller financing
Seller acting as the lender, Also called owner financing
Installment sale
The buyer makes payments to the seller overtime, and summons, and when all payments have been made the seller gives a deed to the buyer.
Promissory note
You borrow money and promise to pay it back, that is a promissory note
Civil action
A complaint from the bank for a borrower or not making payments
Short sale
When a seller has to bring money to closing because the house closed for less amount they bought it for.
APR
Annual percentage rate
TILA law requires all lenders to disclose the true cost of the loan as an annual percentage rate or APR.
Advertising consumer credit
Truth and lending regulates that if an advertiser is promoting financing then the ad must also include cash price, required down payment, Number amounts and due dates of all payments.
Three-day right of rescission
Any homeowner who enters into a transaction that will result in a lien on their phone has three days from the date of signing the papers to design the transaction. This does not apply to your first mortgage. It does apply for homeowners association
The loan must meet the conforming standards to be sold into the secondary market, what are those three standards?
- credit
- Collateral
- capacity
Collateral
Is the real estate worth what the buyer is paying? Is the title clear? Is there insurance in place to cover all the major risk?
This is when the appraisal happens and then needs to be excepted by underwriting.
A mortgage loan inspection plan is often done
Capacity
Does the buyer has the capacity to repay the loan? What are his income and assets?
A loaner will check the buyers credit history, employment history, income, savings, short-term and long-term debts.
What are examples of default on the loan?
When the borrower does not live up to his obligations. Such as…
– Failure to make payments
– Failure to pay taxes
– Failure to maintain the property
– Lose title to property voluntary or involuntary
What are some examples of voluntary passing of title?
– sale
– Gift
– Exchange with a neighbor
What are some examples of involuntary transfer of title that would trigger the acceleration clause?
– Foreclosure of lien, when the borrower has not paid his property taxes.
– Foreclosure of mortgage, if the borrower has two mortgages and one is foreclosed.
– Eminent domain
What are the two mortgage documents?
– promissory note
-mortgage deed
Mortgage deed
If borrower cannot repay the loan this document gives the lender the legal right to foreclose or take property away from the borrower and sell it.
