Financing

Question 1

Borrowers in California may pay off up to ___% of their original loan balance without penalty.

Answer 1

20%

Question 2

Penalties may not amount to more than __ months’ interest.

Answer 2

6 months

Question 3

With the ________ market, loans are sold directly to borrowers.

Answer 3

Primary market

Question 4

With the ______ market, loans that are executed in the primary market are made to investors.

Answer 4

Secondary market

Question 5

The Federal National Mortgage Association (______________ __________) purchases all types of home loans.

Answer 5

Fannie Mae

Question 6

The Federal Home Loan Mortgage Corporation (_______ _______) purchases conventional loans.

Answer 6

Freddie Mac

Question 7

The Government National Mortgage Association (_______ ______) purchases FHA and VA loans.

Answer 7

Ginnie Mae

Question 8

These loans have no issuance backing from the government. The lender expects the borrower to pay back the loan or endure a foreclosure of the property.

Answer 8

Conventional loans

Question 9

These loans are backed by the Department of Veteran Affairs that the lender will be compensated in the case of the borrower defaulting.

Answer 9

VA-guaranteed loans

Question 10

These loans are administered through the HUD and protect the lender in case the borrower defaults on the loan.

Answer 10

Federal Housing Administration (FHA) loans

Question 11

What does FmHa stand for and what does it do?

Answer 11

Farmer’s Home Administration loans

The loans purchase property and also guarantees loans made by other agencies.

Question 12

What does the Cal-Vet Program do?

Answer 12

The California Department of Veterans Affairs helps veterans purchase property through the California Veterans Farm and Home Purchase Program. The CDVA obtains funds for loans through bond issues, then purchases property and sells it to the veteran on a land contract.

Question 13

This loan is given to a developer or builder on a short-term basis. Funds are received according to construction completion phases. Once built, the builder/developer must obtain long term financing.

Answer 13

Construction loans

Question 14

With this type of mortgage, a developer or contractor is given funds to purchase several lots of land. A release clause is common, which means the developer/contractor can sell a land parcel while maintaining the mortgage on the rest of the property.

Answer 14

Blanket mortgage

Question 15

Personal property and real estate are used as collateral.

Answer 15

Package mortgage

Question 16

Allows the lender to require payment whenever it wants to (mortgage).

Answer 16

Demand mortgage

Question 17

The seller of the property is financing for the buyer. (mortgage)

Answer 17

Purchase money mortgage

Question 18

(mortgage) This loan is in addition to the primary mortgage. In cases where default occurs, this loan may or may not be paid depending on whether or not the primary loan is fully paid.

Answer 18

Junior (second) mortgage

Question 19

This type of mortgage gives the borrower the option of borrowing additional funds on top of what is initially borrowed, up to a certain amount, without complete documentation to rewrite the mortgage.

Answer 19

Open-end mortgage

Question 20

Wraparound mortgage

Answer 20

Merge a new loan and existing loan. Payment is made on both mortgages to the wraparound mortgagee, who then forwards the payments to the appropriate mortgagee.

Question 21

Over the life of this mortgage/loan, the interest rate can increase or decrease, depending on the Treasury Bill Index. There is a cap set on how much the rate can increase during each rate change period and life of loan.

Answer 21

Variable (adjustable) rate mortgage

Question 22

These loans starts by charging a lower than normal fixed-rate loan, but after a certain amount of time, will “balloon.” The time at which the loan balloons varies withe ash lender, but is typically 5, 7, or 10 years. once the loan balloons, the borrower must pay off the loan.

Answer 22

Balloon Loan

Question 23

Shared equity loan

Answer 23

The lender loans the funds at low interest rate in exchange for a portion of the property’s equity.

Question 24

Equity loan

Answer 24

Is a second mortgage. It is used to access the equity in the home, to be utilized for making improvements to the property or other reasons.

Question 25

In this type of amortization, the rate of an adjustable rate mortgage increases, but the payment each month stays the same. This results in the payment not being enough to pay the principal and interest, which means the deficit amount is tacked on to the outstanding principal balance.

Answer 25

Negative amortization

Question 26

Term loan

Answer 26

Loan that is interest only. The total loan amount is due at the maturity date of the loan.

Question 27

A loan that is principal and interest. At the maturity date, the loan will be paid in full.

Answer 27

Fully amortized loan

Question 28

Loan that is principal and interest. This is short term, so a balloon payment will be made at the maturity date.

Answer 28

Partially amortized loan

Question 29

Fixed rate loans.

Answer 29

Set interest rate over the life of the loan. Term, fully amortized and partially amortized loans can include this feature.