Financing 1- Conventional, FHA and VA Loans

Question 1

LTV

Answer 1

Loan-to-value

Question 2

What is interest?

Answer 2

The “rent” the borrower pays the lender for the use of the lender’s money.

Question 3

What is the “rent” the borrower pays the lender for the use of the lender’s money?

Answer 3

Interest

Question 4

How do you know the property’s value?

Answer 4

Either the APPRASIAL or SALE PRICE, depending on which is LOWER.

Question 5

Amortized

Answer 5

Paying off over time

Question 6

What is the loan-to-value?

Answer 6

The amount of a mortgage loan in relation to the value of a home. In a comventional loan, if the loan is more than 80% of the value, PMI is required.

Question 7

Straight loan

Answer 7

Interest only loan

Question 8

Fixed-Rate Loan payment types

Answer 8

-Fully amortized loan
-Straight payment
-Balloon payment, or partially amortized loan
-Biweekly mortgage

Question 9

ARM

Answer 9

Adjustable-rate Mortgage

Question 10

What is a ceiling?

Answer 10

The lifetime cap over the life of an adjustable-length mortgage.

Question 11

Lifetime cap over the length of an adjustable-rate mortgage.

Answer 11

Ceiling

Question 12

Conversion

Answer 12

Changing an adjustable-rate loan to a fixed-rate loan.

Question 13

Negative amortization

Answer 13

When the monthly payments are not enough to cover the interest and principal and the difference is added to the back of the loan, causing it to go up over time instead of down.

Question 14

What is it called when the monthly payments are not enough to cover the interest and principal and the difference is added to the back of the loan, causing it to go up over time instead of down?

Answer 14

Negative amortization

Question 15

Hybrid mortgage loan

Answer 15

Combination of fixed and adjustable rate loans. They offer an initial fixed interest rate followed by annual rate adjustments for the balance of the term.

Question 16

HELOC

Answer 16

Home Equity Line of Credit

Question 17

SALT

Answer 17

State and local tax

Question 18

SALT deduction tax maximum

Answer 18

$10,000

Question 19

Loan types

Answer 19

-Conventional
-Government backed (FHA, VA)
-Directly from the government

Question 20

What is PMI and what does it do?

Answer 20

Private mortgage insurance. It protects the lender from loss due to foreclosure in a conventional loan.

Question 21

When must PMI be dropped by the lender?

Answer 21

-When equity reaches 20% and borrower requests to have it dropped OR
-Automatically when equity reaches 22%.
A new appraisal may be required

Question 22

MIP

Answer 22

Mortgage Insurance Premium. Required mortgage insurance on an FHA loan.

Question 23

Appraisal in a VA loan

Answer 23

Certificate of Reasonable Value (CRV)

Question 24

NJHMFA

Answer 24

New Jersey Housing Mortgage Finance Agency

Question 25

RECD

Answer 25

Rural Economic and Community Development

Question 26

Rate lock

Answer 26

Lender agrees to hold the quoted rate for a certain period of time.

Question 27

What is it called when a lender agrees to hold the quoted rate for a certain period of time?

Answer 27

Rate lock

Question 28

What do points do?

Answer 28

Allow the buyer to pay for a lower interest rate.

Question 29

Who qualifies for a VA loan?

Answer 29

-Qualified active duty military
-Veterans
-Unmarried spouses of a veteran who died of a service-connected disability.

Question 30

CRV

Answer 30

Certificate of Reasonable Value. The appraisal of a property under a VA loan.