Finance 8 - Government Loans Flashcards
Costs of closing that follow FHA guidelines as to what may be charged to the borrower; the seller may contribute up to 6% of the sales price to cover points and other allowable closing costs.
allowable closing costs
Sets forth the maximum guarantee to which the veteran is entitled when applying for a VA loan.
certificate of eligibility
A form indicating the appraised value of a property being financed with a VA loan.
certificate of reasonable value (CRV)
Allows approved lenders to underwrite FHA loans; leaves the FHA with risk of default, but the FHA can remove the lender from the program.
direct endorsement program
Mortgage that included funding for energy-efficient features to new or existing houses.
Energy Efficient Mortgage (EEM)
The amount of the sales price guaranteed by the VA for a VA mortgage loan.
entitlement
An amount charged on a VA loan to protect the VA in case of default by the borrower; amount varies according to time in service.
funding fee
FHA’s reverse mortgage program designed to provide extra income for those 62 years of age or older.
Home Equity Conversion Mortgage (HECM)
A percentage of gross monthly income set aside for total housing expense, including principal, interest, taxes, homeowners insurance, mortgage insurance, and any condominium or homeowners associate fees.
housing ratio
An insurance policy premium used in FHA loans that the borrower is charged. The premium depends on the length of the loan and the loan-to-value (LTV) ratio.
mortgage insurance premium (MIP)
A veteran who has used the full entitlement in the past may be eligible for additional entitlement if the guarantee amount has increased; subtract the amount previously used from the current entitlement to obtain the partial entitlement. The bank will lend four times that amount with zero money down payment.
partial entitlement
A special type of FHA loan that provides funds to both purchase the property and make needed repairs and improvements.
rehabilitation loan FHA 203(k)
Releases the veteran seller from any remaining liability for a default on the loan.
release of liability
On a VA loan, the lender must also take into account how much money will be left over (residual) after making the mortgage payment plus other fixed expenses. IF the residual income is not considered sufficient, the loan will not be approved.
residual income
One veteran can substitute entitlement when purchasing another veteran’s property, releasing the original veteran borrower from all liability on the loan.
substitution of entitlement
