Finance Basics

Question 1

Primary markets

Answer 1

Originates loans with a borrower. Can include commercial banks, credit unions, savings and loans, pension plans, mutual savings, insurance, companies, mortgage companies, private individuals, including parents, friends, etc. and mortgage brokers.

Question 2

Fannie Mae FNMA

Answer 2

Originally formed to finance FHA insured loans was very successful and quickly expanded into loans not insured by FHA currently the largest purchaser of conventional non-government loans

Question 3

Freddie Mac

Answer 3

Originally charted by Congress as a source of funds for savings and loan industry. Now a current major source of funds for conventional home loan industry, privately owned the government regulated.

Question 4

GNMA ginnie Mae

Answer 4

Fha and va

Question 5

FAMC farmer Mac

Answer 5

Federal agricultural mortgage corporation a government agency created for agricultural financing created in 87

Question 6

Insurance companies

Answer 6

Are large investors in mortgage loans they primarily buy bonds in notes offered by Frannie Mae or Freddie Mac

Question 7

Pension plans

Answer 7

Invest in bonds, jumbo mortgages and commercial mortgages

Question 8

Capital Markets

Answer 8

Majority of money used for loans is from capital markets.

Question 9

FTC federal trade commission

Answer 9

Originally established in 1914 has a primary mission of protecting consumers, the FTC enforces federal consumer protection laws now under the jurisdiction of the consumer, financial protection bureau CFPB*

Question 10

Department of housing and urban development

Answer 10

Umbrella for FHA, VA, USDA, farmers hike administration

Question 11

Federal reserve

Answer 11

1913-manipulates the money supply. Raises the discount rate in an effort to reduce inflation. 

Question 12

Prime rate

Answer 12

The rate that banks charge their lowest risk borrowers

Question 13

Underwriter

Answer 13

The person who reviews each loan application file, and determine if the loan conforms to the lenders guidelines

Question 14

Origination Fee

Answer 14

Fee to the broker

Question 15

PAR rate

Answer 15

Market rate interest.

Question 16

Discount points

Answer 16

Fee paid at closing to get below par rate
Prepaid interest***

Question 17

Qualifying

Answer 17

Credit
Capacity to repay (income vs debt)
Capital (assets)
Collateral

Question 18

Debt to income front end

Answer 18

Mortgage just for the home, no other debt. HOA as well.

PITI- housing ratio

Question 19

Back end DTI

Answer 19

Debt plus PITI, credit report debt
Court ordered debt

Question 20

2106 form

Answer 20

Employee business expense, this would be used it for a W-2 income employee with non-reimbursed expenses 

Question 21

1040 tax form

Answer 21

Personal income tax returns
Schedule A. itemized deductions
Schedule B interest and dividends
Schedule, see profit and loss from businesses
Schedule D capital gains 

Question 22

Schedule D

Answer 22

Partnerships gains and losses

Question 23

K1

Answer 23

Partners share of income

Question 24

1120- form

Answer 24

Corporate income tax return can be scheduled D or 1099

Question 25

1065

Answer 25

Partnership and limited liability 

Question 26

1120

Answer 26

Corporation, S, Corp.

Question 27

Fannie Mae application number or Freddie Mac

Answer 27

1003 Fannie
65 Freddie

Question 28

1008

Answer 28

Uniform underwriting and transmittal summary. Provides a complete snapshot of the borrower is capacity.

Question 29

Form 65

Answer 29

Standard an identical form used for Fannie Mae and Freddie Mac

Question 30

Ratios for FHA

Answer 30

31/43

Question 31

FHA insured loan features

Answer 31

Seller contributions are limited to 6% of the sales price. Maximum loan amount is based on the lesser of the loan amount the sales price or the appraised value, chapter 7 and chapter 13 bankruptcy require two years time elapsed, and three years from the date of last foreclosure Commission must be averaged over the previous two years. Housing ratios must be 31% on front end and 43% on the backend. Season funds must be held for three months or more. 

Question 32

VA loan features

Answer 32

No prepayment penalty loans are assumable by other qualified veterans. Seller’s contributions are limited to 4% of the selling price. The CRV is used instead of an appraisal. 41/41 on ratios 
Must have a certificate of eligibility