General Mortgage Knowledge Flashcards
1
Q
The difference between the money made from an investment and the money actually invested.
A
Profit
2
Q
An agreement between two or more parties to do or not do something. Contracts are legally enforceable promises, with the law providing remedies for breach.
A
Contract
3
Q
An easement that benefits a person or company, rather than benefiting another parcel of land.
A
Easement in Gross
4
Q
Any claim, lien, charge, or liability that affects or limits the fee simple title to real property.
A
Encumbrance
5
Q
The buyer in a land contract.
A
Vendee
6
Q
The sum of money loaned to a borrower; the outstanding balance of a loan.
A
Principal
7
Q
A final lump-sum payment at the end of a loan term to pay off the entire remaining balance of principal and interest not covered by payments during the loan term.
A
Balloon Payment
8
Q
The interest rate charged by the Federal Reserve Banks on loans to member commercial banks. Also referred to as the Federal Discount Rate.
A
Discount Rate
9
Q
A loan containing a clause that allows the mortgagor to borrow additional money without rewriting the mortgage.
A
Open-End Mortgage
10
Q
The short-term interest rate a bank charges its most creditworthy customers.
A
Prime Rate
11
Q
The interest earned by an investor on the investment
A
Yield
12
Q
A loan taken by a homeowner that is secured by a mortgage on her principal residence; not for the purchase of the property.
A
Home Equity Loan
13
Q
The property owner who grants a trust to a third party for the benefit of someone else.
A
Trustor
14
Q
The maximum dollar amount of a loan guarantee to which an eligible veteran is entitled.
A
Entitlement
15
Q
The interest a creditor may acquire in the debtor’s property to ensure that the debt will be paid.
A
Security Interest
16
Q
The interval at which a borrower’s actual interest rate changes with an ARM. Most often 1 year.
A
Rate Adjustment
17
Q
A limit on the amount of mortgage payment increases that can occur with an adjustable-rate mortgage.
A
Payment Cap
18
Q
- A separate account maintained by a broker for the deposit of clients’ money (i.e., good faith deposits). Also called Trust Account. 2. The account a lender maintains to hold a borrower’s monthly payments for property insurance and property tax until those bills are due. Also called Reserve Account or Impound Account
A
Escrow Account
19
Q
A real estate installment agreement under which the buyer (vendee) makes payment to the seller (vendor) in exchange for the right to occupy and use the property. No deed or title is transferred until all, or a specified portion of, payments have been made. Also called Agreement for Sale, Installment Sales Agreement, Contract for Deed, or Land Sales Contract.
A
Land Contract
20
Q
A deed in which the grantor warrants the title against any and all defects that might have arisen before or during his or her period of ownership. Also called Standard Warranty Deed or Simple Warranty Deed.
A
General Warranty Deed
21
Q
An action in which one party agrees to take over payments of another party’s debt, with terms of the note staying unchanged.
A
Assumption
22
Q
A fixed-rate mortgage set up like a conventional loan, but payments increase regularly.
A
Growth Equity Mortgage
23
Q
A binding, legally enforceable contract. It meets all of the legal requirements for contract formation.
A
Valid Contract
24
Q
A financial domain in which investors buy and sell securities-such as stocks, bonds, or mortgage loans-that were created in the primary market.
A
Secondary market
25
An index published monthly by the United States Bureau of Labor Standards (BLS) considered by many to be the basic indicator of inflation in the U.S.
Consumer Price Index (CPI)
26
The maximum increase in the interest rate, or the maximum interest rate, that a lender can charge on an adjustable rate mortgage.
Cap
27
A loan that meets the qualifying standards of Fannie Mae or Freddie Mac, and thus can be sold on the secondary market.
Conforming Loan
28
Under the Dodd-Frank Act, HOEPA protections are triggered where a loan's APR exceeds the average prime offer rate by 6.5 percentage points for most first-lien mortgages and 8.5 percentage points for subordinate lien mortgages; where a loan's points and fees exceed 5 percent of the total transaction amount, or a higher threshold for loans below $20,000; or where the creditor may charge a prepayment penalty more than 36 months after loan consummation or account opening, or penalties that exceed more than 2 percent of the amount prepaid. Note that the loan threshold amount in this definition ($20,000)is adjusted annually.
High-Cost Loan
29
Loan program through the U.S. Department of Agriculture that either guarantees loans made by approved private lenders or makes direct loans if no local lender is available.
Section 502 Loan
30
A financial debt that is paid off over a period of time by a series of periodic payments. A loan can be fully amortized or partially amortized requiring a balloon payment to satisfy the debt at the end of the term.
Amortized Loan
31
The process of a second lien holder moving back into second position in a refinance.
Subordination
32
An encumbrance that is second in priority to a previously recorded lien or to a lien to which the encumbrance has been subordinated.
Junior Lien
33
The interest on a loan that has accumulated since the principal investment or since the previous coupon payment if there has been one already. When calculating interest accrued, multiply the principal by the APR and number of months, then divide by the total number of months in the year.
Accrued Interest
34
A loan that uses only personal property as security.
Chattel Mortgage
35
A view easement; considered a negative easement. In the case of a negative easement, the dominant tenant can prevent the subservient tenant from doing something on the land because it could affect the dominant land. Also called View Easement.
Easement for Light and Air
36
A lender credit is when a lender gives a borrower money to offset closing costs, and in exchange for the lender credit, the borrower pays a higher interest rate. The more lender credits a borrower receives, the higher the borrower's loan interest rate will be.
Lender Credit
37
A loan that has more risks than allowed in the conforming market. Also called B-C Loans or B-C Credit.
Subprime Loan
38
USDA Rural Development operates over 50 financial assistance programs for a variety of rural applications. For example, single-family housing programs families and individuals have the opportunity to buy, build, repair, or own safe and affordable homes located in rural America. Low interest, fixed-rate Homeownership loans are provided to qualified persons directly by USDA Rural Development. Financing is also offered at fixed-rates and terms through a loan from a private financial institution and guaranteed by USDA Rural Development for qualified persons.
USDA Rural Development Financial Assistance Programs
39
A vehicle for a borrower who has substantial equity in a property to convert that accumulated equity-at a cost-to cash and additional debt without selling the property and without making payments to the lender. With a typical reverse mortgage, the balance of the loan rises as the borrower receives money from the lender and incurs interest to the outstanding loan balance. Also called a reverse equity mortgage or reverse annuity mortgage.
Reverse Mortgage
40
An easement created by open and notorious, hostile, and adverse use of another person's land for a specific period of time determined by state law. Prescriptive use does not have to be exclusive (the owner may be using the property, too), and the user does not acquire title to the property. Also called Prescriptive Easement.
Easement by Prescription
41
Money offered as an indication of good faith regarding the future performance of a purchase agreement.
Earnest Money
42
A mortgage subordinate to a first mortgage. Also called Junior Mortgage.
Second Mortgage
43
Occurs when a loan balance decreases because of periodic installments paid on the principal and interest.
Amortization
44
Additional funds in the form of points paid to a lender at the beginning of a loan to lower the interest rate and monthly payments
Buydown
45
A security instrument that creates a voluntary lien on real property to secure repayment of a debt.
Mortgage
46
A financial domain in which various entities-including banks and other financial institutions-produce and issue new securities, such as stocks, bonds, and mortgage loans.
Primary Market
47
Generally describes a mortgage used to finance the purchase of real property; may specifically refer to a situation where the seller finances all or part of the sale price of real property for the buyer.
Purchase Money Mortgage
48
In some states, property acquired during marriage that is owned jointly by the married couple.
Community Property
49
A loan that is used to pay off a construction loan when construction is complete.
Takeout Loan
50
The collection of mortgages and other securities held by a lender and not sold on the secondary market.
Portfolio
51
The government's plan for spending, taxation, and debt management.
Fiscal Policy
52
The interest rate stated in a note. Also called Nominal Rate.
Note Rate
53
The interval at which a borrower's actual mortgage payments change with an ARM.
Payment Adjustment Period
54
A written document used in the borrowing or lending of money. The most common type is promissory note.
Finance Instrument
55
Act of pooling mortgages, then selling them as mortgage-backed securities.
Securitization
56
A loan for which the interest rate remains constant.
Fixed-Rate Loan
57
A written instrument transferring the grantor's ownership of, or interest in, real property.
Deed
58
A deed that grants any interest in property that the grantor may have without making any promises, including the promise that the grantor has any interest in the property being conveyed; often used to clear clouds on title.
Quitclaim Deed
59
The payment of points by a borrower to a lender to reduce the interest rate and payments early in a loan, with interest rate and payments rising later. Plans can be level payment, where the interest rate is reduced, but the payment is constant throughout the buydown period, or graduated payment, where payment subsidies in the early years of a loan keep payments low, but payments increase each year until they are sufficient to fully amortize the loan. Payment for the additional points can be made by the borrower or a third party (e.g., seller, builder), subject to the lender's or investor's requirements.
Temporary Buydown
60
A piece of personal property.
Chattel
61
A person appointed to manage a trust.
Trustee
62
This loan just provides financing for the construction of the home. Once the construction is completed, a mortgage for the permanent financing would have to be obtained.
Construction-Only Loan
63
A temporary buydown plan where payment subsidies, usually from a seller or developer, in the early years of the loan keep payments low, but payments increase each year until they're sufficient to fully amortize the loan.
Graduated Payment Buydown
64
A mortgage loan insured by the Federal Housing Administration that protects the lender against losses from default.
FHA-Insured Loan
65
A loan where the APR of the mortgage loan exceeds the average prime offer rate by 1.5% for a conventional first lien mortgage, 2.5% for a "jumbo" loan, or 3.5% for a subordinate-lien mortgage.
Higher-Priced Loan
66
A loan that exceeds the maximum loan amount that Fannie Mae and Freddie Mac will buy, making it nonconforming.
Jumbo Loan
67
Loan that does not meet Fannie Mae/Freddie Mac standards and, thus, cannot be sold on the secondary market.
Nonconforming Loan
68
A method of loan repayment in which the dollar amount of each payment is the same. A portion of each payment is applied to interest, and the remainder reduces the principal. Over the life of the mortgage, the outstanding balance is reduced to zero.
Fully Amortized Mortgage
69
An electronic system that puts lenders in direct contact with Freddie Mac, providing a streamlined process of document submission, underwriting, and loan approval.
Loan Advisor;
70
The interest rate a lender will charge a borrower without adjustments for lender credits or discount points.
Par Rate
71
A mortgage loan that occurs between the termination of one mortgage and the commencement of another. When the next mortgage is taken out, the bridge is repaid.
Bridge Mortgage
72
The right acquired by the owner of one parcel of land to use another's adjacent land for a specific purpose. There must be two tracts of land; one becomes the dominant tenement (it benefits from the easement), and the other becomes the servient tenement.
Easement Appurtenant
73
Available money that a homeowner can borrow, secured by a second mortgage on the principal residence. The homeowner can access HELOC funds at any time up to a predetermined borrowing limit and use them for non-housing expenditures.
Home Equity Line of Credit (HELOC)
74
A mortgage based on the calculation of interest daily is called a simple-interest mortgage. This mortgage is different from a traditional mortgage where interest calculations happen on a monthly basis. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.
Simple-Interest Mortgage
75
A statistical report that is generally a reliable indicator of the approximate change in the cost of money, and is often used to adjust the interest rate in ARMs.
Index
76
The fee charged for FHA mortgage insurance coverage. The initial premium can be financed, and there is a monthly premium. Also called Upfront Mortgage Insurance Premium (UFMIP).
Mortgage Insurance Premium - (MIP)
77
Occurs when a mortgage loan is funded by an advance of loan funds and an assignment of the loan to the same entity advancing the funds. Generally undertaken by correspondent lenders.
Table Funding
78
A situation in the housing market when there are many homes available for sale, but few buyers.
Buyer's Market
79
A physical object intruding onto neighboring property, often due to a mistake regarding the boundary.
Encroachment
80
Any present right to acquire legal title to property.
Equitable Title
81
The seller in a land contract.
Vendor
82
The interest rate that people or businesses must pay to use another's money for their own purposes.
Cost of Money
83
A mortgage loan that covers more than one parcel of real estate that is typically used to finance entire subdivision developments rather than an individual unit or lot.
Blanket Mortgage
84
The Federal Reserve's target for short term interest rates.
Federal Funds Rate
85
A mortgage where personal property (e.g., appliances) is included in a real estate sale and financed with one contract.
Package Mortgage
86
A financing instrument that evidences a promise to pay a specific amount of money to a specific person within a specific time frame. A written, legally binding promise to repay a debt.
Promissory Note
87
A security instrument placing into the hands of a disinterested third party a specific financial interest in the title to real property as security for the payment of a note. Also called Trust Deed.
Deed of Trust
88
Something that is owned, real or personal, and includes the rights of ownership in that thing.
Property
89
An owner's unencumbered interest in property; the difference between the value of the property and the liens, such as a mortgage, against it.
Equity
90
The greatest estate one can have in real property. It is freely transferable and inheritable, and of indefinite duration, with no conditions on the title.
Fee Simple
91
The interest rate stated in a note. Also called Coupon Rate or Note Rate.
Nominal Rate
92
A legal arrangement in which title to property (or funds) is vested in one or more trustees who manage the property (or invest the funds) on behalf of the trust's beneficiaries, in accordance with instructions set forth in the document establishing the trust.
Trust
93
A written, legally binding promise to repay a debt. Also called a Promissory Note.
Note
94
The standard FHA-insured loan program. There are no income limits on this type of loan. The borrower must meet all FHA qualifying standards and the property cost must not exceed the maximum FHA mortgage amounts.
Section 203(b) FHA Loan
95
A nonpossessory interest and an encumbrance on property that grants the right to use another person's real property for a particular purpose.
Easement
96
A financing arrangement in which an existing loan on a property is retained while the lender gives the borrower another, larger loan.
Wraparound Mortgage
97
The payment of points by a borrower to a lender to reduce the interest rate and loan payments for the entire life of the loan.
Permanent Buydown
98
A loan made by an institutional lender or a private party with real estate as security for the loan that the government neither guarantees nor insures.
Conventional Loan
99
A mortgage on real estate in which the lender's rights are superior to the rights of subsequent lenders. (Recorded first)
First Mortgage
100
The act of pledging property to be the security for a loan without giving up possession of it (as with a mortgage).
Hypothecation
101
A tool that mortgage brokers can use to lower the upfront closing costs for a borrower.
Yield Spread Premium (YSP)
102
Property zoned and used for business purposes, such as warehouses, restaurants, and office buildings (as distinguished from residential, industrial, or agricultural property).
Commercial Property
103
A mortgage loan made by lenders to eligible veterans that is guaranteed by the U.S. Department of Veterans Affairs, protecting the lender up to specified dollar amounts.
VA-Guaranteed Loan
104
When a loan is taken out on property already owned, and the loan amount is above and beyond the cost of the transaction, payoff of existing liens, and related expenses.
Cash-Out Refinancing
105
A loan in which, in the event of default, the lender can take action against the borrower personally in addition to foreclosing on the property.
Recourse Loan
106
A method of loan repayment in which the balance of the outstanding loan is not zero at maturity, and thus a balloon payment is due at that time.
Partially Amortized Mortgage
107
A written agreement between lienholders on a property that changes the priority of mortgages, judgments, and other liens.
Subordination Agreement
108
A non-amortized loan in which the regular payments cover only the interest over the term of the loan. Also called Bullet Loan or Term Mortgage.
Straight Loan
109
The effect when a loan balance grows because of deferred interest when payments are not covering the interest portion of the loan.
Negative Amortization
110
A type of loan structure that permits the lender to periodically change or vary the interest rate charged, based on a standard index.
Adjustable-Rate Mortgage (ARM)
111
A loan that can be changed or converted; such as with an ARM loan where the borrower can change from a variable rate to a fixed rate. Often stated in a conversion option clause.
Convertible Loan
112
Federal Housing Administration's (FHA) reverse mortgage program. This is the most popular reverse mortgage product.
Home Equity Conversion Mortgage (HECM)
113
Additional money charged by a lender for the borrower paying a loan off early. Not permitted for FHA-insured loans or VA-guaranteed loans.
Prepayment Penalty
114
A loan made on the signature and credit of the borrower, not secured by collateral.
Unsecured Loan
115
A table or chart that shows the periodic payments, interest and principal requirements, and unpaid loan balance for each period of the life of a loan.
Amortization Schedule
