General Mortgage Knowledge Flashcards
What is a Bridge loan?
A bridge loan “bridges” the gap between the old and the new home if the house isn’t sold. It provides for a down payment on the new home.
What is a balloon mortgage?
small periodic payments are made based on regular amortization until the completion of the term, at which time the balance is due as a single lump-sum payment
Due on Sale Clause…
Gives the lender the right to demand full payment of the property if the home is sold. Also known as Alienation clause
Another word for a borrower
Mortgagor
Maximum debt ratios (DTI) for a conforming loan
28/36
Can be higher but is technically 28/36
Who administers FHA?
A.) FDA
B.) CFPB
C.) HUD
D.) FDIC
C. Department of Housing & Urban Development (HUD)
but it is backed by GNMA
GNMA stands for…?
Government National Mortgage Association (Insures FHA)
Par rate is best described as…
Par rate is the basic rate the borrower can receive from the lender. There is no premium received nor a discount paid for this rate.
A Jumbo loan does not follow which of the following conf. loan limits
A. FHA
B. HUD
C. FNMA
C. Frannie Mae (FNMA) and Freddie Mac (FHLMC)
In the event of a default, which debt is normally paid first from the proceeds of the foreclosure sale?
A. First lien
B. Real estate taxes & associated costs of sale
C. First recorded lien
Real Estate taxes and associated costs of sale
The defeasance clause ensures that…
the clause is used to defeat or cancel a certain right upon the occurrence of a specific event. For example, upon final payment, the mortgage is thereby satisfied or cancelled or void, and the title is re-vested to the mortgagor.
T/F: A teaser rate is the same as a prime rate
FALSE
A teaser rate is an introductory rate the lender approves on a mortgage loan. This is a short-term rate and can adjust according to the terms and conditions outlined in the note.
What is a prime rate?
The short-term interest rate a bank charges its most creditworthy customers.
Servicing a mortgage loan does not involve which of the following?
A. Underwriting a loan
B. Collecting monthly payments
C. Managing escrow accounts
D. Sending yearly statement
A.) UW a loan
The servicing of a mortgage loan involves collecting the monthly payments, managing the escrow accounts, and sending yearly statements
T/F: Mortgage brokers cannot service loans.
TRUE
Mortgage BANKERS service mortgage loans.
(The company who underwrites, funds, services, buys, or sells mortgage loans)
In a refinance transaction closing, hypothecation occurs. This is described as..
Using something as collateral but keeping possession of it. You do this when you buy a house
Index + margin is the formula used to calculate a(n)
A. Fixed rate
B. Adjustable rate
C. Teaser rate
D. Prime rate
B. Adjustable rate
The rate that is used to amortize the mortgage loan and determine the monthly loan payments is known as the…
1.Indexed rate
2. APR
3. Note rate
- Note rate
The note rate is used to amortize the loan and determine the monthly payments. This rate is disclosed on the note in the closing documents.
The portion of the ARM that cannot change and is used to compute the interest rate on a variable rate mortgage is known as the…
Margin
this is added to the index to determine ARM
The interest rates charged for FHA and VA loans are established by
1. FHA/VA
2. HUD
3. The market
4. Frannie Mae
- The market
Interest rates depend on supply and demand for money in the market.
The promises between the borrower and the lender outlined in the mortgage document are known as
1. Vows
2. Covenants
3.Commitments
- Covenants
The right held by a utility, through a grant or court order, to cross the property of an owner is known as
1. Easement
2. Encroachment
3.Encumbrance
- Easement- permission to cross the land of property owner
The right of the government to acquire private property for public use by condemnation and just compensation is
1. Easement
2. Eminent domain
3. Right of way
- Eminent domain
What clause gives a lender the right to charge the borrower a penalty for paying off the loan early?
1. Acceleration clause
2. Prepayment clause
3. Alienation clause
4. Defeasance clause
- Prepayment clause
A prepayment clause in a contract gives the lender the right to charge the borrower a penalty for paying off the loan early and essentially depriving the lender of further interest income
What calculation is used to determine a point?
A. 1% of loan amount
B. 1% of PP
C. 1% of APR
A.) 1% of loan amount
What is the clause that allows the lender to sell the property in the event of default to pay the debt the borrower owes without going through the courts?
Power of Sale clause
The total amount needed to complete the purchase of a home is known as the
1. Purchase price
2. Asking price
3. Loan amount
4. Acquisition cost
4.) Acquisition cost
The acquisition cost is the purchase price plus all closing costs and pre-paids. This is the total amount needed to complete the purchase
Usury law prevents lenders from…
charging more than the maximum interest rate
T/F: A blanket mortgage covers more than one parcel or lot and is often used for subdivision developments.
TRUE
What do you call a deed that carries guarantees of clear title and the grantor’s right to convey?
1. Warranty deed
2.Grantor’s deed
3. Real property deed
1.) Warranty deed
Warranty deeds have guarantees obligating the grantor (seller) to defend the grantee(buyer) from claims against the title. They give the grantee (buyer) the best possible protection
Total cost of financing a loan in percentage terms is the
1. Loan-to-Value
2. Annual Percentage Rate
3. Debt Ratio
4. Note rate
- Annual percentage value (APR)
What is the minimum down payment for a conforming purchase loan?
A. 3.5%
B. 5%
C. 3%
C. 3%
Most conventional loans require a 5% down payment; however, FNMA and Freddie Mac offer a 3% down payment option.
Which is NOT a type of mortgage?
1.) Construction
2.) Bi-weekly
3.) Reverse
4.) Bi-monthly
4.) Bi-monthly
The portion of principal and interest due on a loan that is written off when deemed to be uncollectible is known as
A. Charge-off
B. Loss leader
C. Deficit funds
A. Charge off
T/F: A nontraditional loan is anything other than a 30-year or less fixed rate loan.
TRUE
T/F: A fully amortized loan would require a balloon payment.
FALSE
It would NOT require a balloon payment
Where do the funds for FHA loans come from?
A. HUD
B. Approved lenders
C.Federal Housing Administration
B. Approved lenders
FHA insures loans made by approved lenders