Financing Flashcards
One loan point is equal to ___ % of the borrower’s loan amount
1
the ratio of the loan amount to the property value is called
loan-to-value ratio
Lenders must cancel PMI when the principle balance is 78% or when the mortgage loan reaches its originally scheduled ____ midpoint
amortization
______ are documents that are executed (signed) when a borrower receives a mortgage loan. These instruments include a promissory note and a security instrument
Financing instruments
Define promissory note
the borrower’s promise to repay the mortgage loan.
Define security instrument
an instrument attached to a promissory note pledging the subject property as collateral -may be either a deed of trust or a mortgage
The deed of trust includes three parties:
_____ (borrower)
_____ (lender)
_____ (3rd party holder)
trustor
beneficiary
trustee
What is the defeasance clause in a security instrument?
orders the lender or trustee to immediately release full title to the borrower once the loan amount is paid in full
What is the acceleration clause in a security instrument?
makes the entire debt due immediately if there’s borrower default - must occur before a foreclosure can occur.
What is the due-on-sale clause in a security instrument?
requires the borrower to repay the loan when transferring ownership to another
What is a pre-payment penalty clause in a security instrument?
permits the lender to charge a specified amount for interest lost when a borrower sells or pays off a loan early. Pre-payment penalties are rare in today’s market.
_______ loans aren’t government issued or guaranteed.
conventional
_______ loans can be either conforming or non-conforming
conventional
a conforming loan meets the loan limits and other criteria set by _______
Fannie Mae and Freddie Mac
A conventional loan that fails to meet Fannie Mae and Freddie Mac credit score requirements, LTV and/or loan amount is called a ________ loan.
non-conforming
A ____ is a conventional non-conforming loan because it exceeds conforming loan limits, but meets other conforming loan requirements.
jumbo loan
The USDA ______ (FSA) offers direct guaranteed loans to farmers and ranchers for rural housing. Congressional appropriation funs these loans.
Farm Service Agency
Define adjustable-rate mortgages (ARM)
a mortgage in which the interest rate fluctuates based on some selected economic index
Define negative amortization
something that occurs when a payment fails to cover the amount of interest due. The difference in interest owed and interest paid is added to the principal of the loan.
what is a land/contract / contract for deed
owner financing that requires the buyer to make installment payments to the seller for the property purchase. The seller retains the title while buyer gets equitable title.
What is a purchase money mortgage?
a loan a 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.
What is a wrap-around mortgage?
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 on the wrap-around mortgage.
What does TILA stand for and what does it require?
Truth in lending act
lenders to disclose credit terms and conditions when advertising triggers loan terms
The _____ prohibits lenders from making credit unavailable or offering unfavorable terms to those in a protected class, based on their class
Equal Credit Oppurtunity Act (ECOA)
