Finance Basics Flashcards
Primary markets
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.
Fannie Mae FNMA
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
Freddie Mac
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.
GNMA ginnie Mae
Fha and va
FAMC farmer Mac
Federal agricultural mortgage corporation a government agency created for agricultural financing created in 87
Insurance companies
Are large investors in mortgage loans they primarily buy bonds in notes offered by Frannie Mae or Freddie Mac
Pension plans
Invest in bonds, jumbo mortgages and commercial mortgages
Capital Markets
Majority of money used for loans is from capital markets.
FTC federal trade commission
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*
Department of housing and urban development
Umbrella for FHA, VA, USDA, farmers hike administration
Federal reserve
1913-manipulates the money supply. Raises the discount rate in an effort to reduce inflation. 
Prime rate
The rate that banks charge their lowest risk borrowers
Underwriter
The person who reviews each loan application file, and determine if the loan conforms to the lenders guidelines
Origination Fee
Fee to the broker
PAR rate
Market rate interest.
Discount points
Fee paid at closing to get below par rate
Prepaid interest***
Qualifying
Credit
Capacity to repay (income vs debt)
Capital (assets)
Collateral
Debt to income front end
Mortgage just for the home, no other debt. HOA as well.
PITI- housing ratio
Back end DTI
Debt plus PITI, credit report debt
Court ordered debt
2106 form
Employee business expense, this would be used it for a W-2 income employee with non-reimbursed expenses 
1040 tax form
Personal income tax returns
Schedule A. itemized deductions
Schedule B interest and dividends
Schedule, see profit and loss from businesses
Schedule D capital gains 
Schedule D
Partnerships gains and losses
K1
Partners share of income
1120- form
Corporate income tax return can be scheduled D or 1099
1065
Partnership and limited liability 
1120
Corporation, S, Corp.
Fannie Mae application number or Freddie Mac
1003 Fannie
65 Freddie
1008
Uniform underwriting and transmittal summary. Provides a complete snapshot of the borrower is capacity.
Form 65
Standard an identical form used for Fannie Mae and Freddie Mac
Ratios for FHA
31/43
FHA insured loan features
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. 
VA loan features
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