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CE Shop > Financing > Flashcards

Financing Flashcards

1
Q

Lenders charge ____ ____ as compensation for processing a new mortgage loan.

A

Loan points

Aka loan origination fees

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2
Q

Borrowers may choose pay ____ ____ at closing to permanently reduce a loan’s interest rate.

A

Discount Points

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3
Q

The ratio of the loan amount to the property value.

sales price or appraised value | whichever is lower

A

Loan-to-value ratio

LTV

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4
Q

A fee paid back to a lender for the use of its money.

A

Interest

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5
Q

A measure of both the interest rate and other fees associated with a mortgage loan.

A

APR

Annual percentage rate

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6
Q

When a down payment is less than 20% on a conventional loan, lenders may require this.

A

Private mortgage insurance PMI

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7
Q

Most common mortgage loan payment includes:

Portion of the principal balance,
Current accrued interest
1/12th portion of the annual property tax
Homeowner’s Insurance

Also known as budget mortgage

A

PITI

Principal
interest
Taxes
Insurance

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8
Q

Documents that are executed (signed) when a borrower receives a mortgage loan.

A

Financing instruments

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9
Q

The borrower’s promise to repay the mortgage loan.

A

Promissory note

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10
Q

This type of deed involves three parties:

The trustor (borrower)
The beneficiary (lender)
The trustee (third party who holds deed of trust)
A

Deed of trust

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11
Q

States that use a deed of trust as the primary security instrument are referred to as ____ ____ states because the lender/trustee holds legal title to the property until the mortgage loan is paid in full.

A

Title Theory

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12
Q

When a borrower has the possessory rights and the right to obtain legal title once they’ve paid the loan off.

A

Equitable Title

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13
Q

Whenever foreclosure becomes necessary in a deed of trust, the lender can use a non-judicial foreclosure.

What is this called?

A

Power of Sale Clause

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14
Q

When the loan is paid in full the lender issues this?

Trustee issues a reconveyance deed.

A

Release of deed of trust

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15
Q

This type of deed involves two parties:

The lender
The borrower

A

Mortgage

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16
Q

States that use a mortgage as the security instrument are referred to as ____ ____ states because the mortgage places a lien against the property it secures.

The lender holds the lien, and the borrower holds legal title to the property.

A

Lien Theory

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17
Q

If foreclosure becomes necessary, the lender may have to use a ____ ____ in order to process.

A

Judicial foreclosure

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18
Q

Orders the lender or trustee to immediately release full title to the borrower once the loan is paid in full.

A

Defeasance clause

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19
Q

Makes the entire debt due immediately if there’s borrower default.

A

Acceleration clause

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20
Q

Requires the borrower to repay the loan when transferring ownership to another.

A

Due-on-sale clause

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21
Q

Permits the lender to charge a specified amount for interest lost when a borrower sells or pays off a loan early.

A

Pre-payment penalty clause

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22
Q

These type of loans can be conforming or non-conforming.

Lenders view these as some of the most secure because they require a down payment of 20%, thus reducing the LTV to 80%

A

Conventional loans

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23
Q

This type of loan meets the loan limit and other criteria (related to borrower qualifications) that Fannie Mae and Freddie Mac set.

A

Conforming loan

24
Q

A conventional loan that fails to meet Fannie Mae and Freddie Mac guidelines for credit scores, LTV or loan amount is a what?

A

Non-Conforming loan

25
Q

A conventional non-conforming loan because it exceeds conforming loan limits but meets other conforming loan requirements.

A

Jumbo loan

26
Q

Insures lenders against loss in case of borrower default.

Borrowers must pay a minimum down payment of 3.5%

A

FHA

The Federal Housing Administration

27
Q

This charge applies to all FHA loans for the life of the loan.

It’s paid upfront at closing and then as an annual premium until the loan is paid off or refinanced.

A

MIP

Mortgage insurance premium

28
Q

Guarantees loans made to qualifying veterans.

A

VA guaranteed loans

29
Q

Offers some state and local mortgage loan programs.

A

USDA

U.S. Department of Agriculture

30
Q

Offers direct guaranteed loans to farmers and ranchers and for rural housing.

A

FSA

USDA Farm Service Agency

31
Q

The loan principal is paid down over the life of the loan.

The monthly principal and interest payment amount is the same each month.

A

Amortized loan

32
Q

Will be paid in full after the last scheduled loan payment (or sooner if the borrower makes additional principal payments during the loan term).

A

Fully amortized loan

33
Q

Includes partial amortization over the loan term and a balloon payment at the end of the term, where the borrower pays off the loan in one lump sum.

A

Partially amortized loan

34
Q

A rate in which the interest rate fluctuates based on some selected economic index.

A

ARM

Adjustable-rate mortgages

35
Q

This occurs when a payment fails to cover the amount of interest due.

A

Negative amortization

36
Q

A temporary, short-term loan that provides funds until buyers can obtain permanent financing.

A

Bridge or Swing Loan

37
Q

This financing strategy requires the buyer to make installment payments to the seller for property purchase.

The seller retains the title while buyer gets equitable title.

A

Land contract | Contract for deed

38
Q

This financing strategy is a loan that the seller issues to the buyer as part of the purchase transaction.

This typically occurs in situations where the buyer cannot qualify for a mortgage through traditional means.

A

Purchase money mortgage

39
Q

The seller holds a mortgage that wraps the new buyer’s mortgage around the seller’s existing mortgage.

The seller continues to make payments on the first mortgage, and buyer makes payments to the seller.

A

Wrap-around mortgage

40
Q

Provides loans to borrowers (mortgagors) and is made up of several lender types

A

Primary mortgage

41
Q

National banks that offer consumer and business loans for resale on the secondary mortgage market

A

Commercial banks

42
Q

Take savings deposits and make loans

A

Savings and loan associations

43
Q

Member-based cooperatives that take deposits, offer savings vehicles, and provide credit for auto and home loans

A

Credit unions

44
Q

Match consumers with lenders; don’t fund loans

A

Mortgage brokers

45
Q

Make loans using in-house loan processors and underwriters

A

Mortgage bankers

46
Q

Lenders in the primary mortgage market put together packages of conforming loans and sell them to the ?

A

Secondary mortgage market

47
Q

Secondary mortgage market payers purchase lender loan packages and re-package them into ?

A

MBS

Mortgage-backed securities

48
Q

Lending institutions that buy loans from other lenders and investors make up the secondary market.

A

Fannie Mae
Freddie Mac
Farmer Mac
Ginnie Mae

49
Q

A privately-held corporation that has a public purpose.

A

GSEs

Government Sponsored Enterprises

50
Q

Functions in the secondary market by buying qualified agricultural loans from lenders.

A

Farmer Mac

51
Q

Purchase mortgage loan packages from lenders

A

Fannie Mae and Freddie Mac

52
Q

Guarantees MBSs that are made up of government insured or guaranteed loans.

A

Ginnie Mae

53
Q

Requires lenders to disclose credit terms and conditions when advertising triggers loan terms, so as not to mislead consumers.

A

TILA

Truth in Lending Act of 1968

54
Q

Ads that would require the full disclosure of all terms include down payment, payment amount, number of payments, and interest rate (other than APR).

A

Trigger terms

55
Q

Requires mortgage lenders to follow TILA disclosure requirements for real estate advertisements that include credit terms.

A

Regulation Z

56
Q

A consumer protection statute designed to protect homebuyers from unscrupulous lending and settlement practices.

A

Real Estate Settlement Procedures Act (RESPA) of 1974

57
Q

Prohibits lenders from making credit unavailable or offering less-favorable terms based on protected class status (race, color, religion, national origin, sex, marital status, or income source) vs. creditworthiness.

A

Equal Credit Opportunity Act (ECOA) of 1974

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