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Test Prep > General Mortgage Knowledge > Flashcards

General Mortgage Knowledge Flashcards

1
Q

Loan to Value

A

Purchase price or Appraised value, whichever is less, divided into the loan amount

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2
Q

Combined Loan-to-Value (CLTV)

A

1st mortgage, plus the amount drawn from the HELOC, divided by the value

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3
Q

Total Loan-To-Value (TLTV)

A

1st mortgage, plus the total of the HELOC or 2nd mortgage, divided by the value

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4
Q

Table funding

A

Any loan that is funded by a wholesale lender for a mortgage broker (brokers cannot underwrite or fund loans).

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5
Q

Mortgage Banker

A

Any company that can underwrite or fund loans. Mortgage Brokers cannot fund or underwrite loans.

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6
Q

Yield Spread Premium

A

Money paid from the wholesaler to the broker for charging a higher interest right to the borrower.

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7
Q

Extended lock agreement

A

Cannot be issued by a broker and must contain four items: Program, interest rate, cost, and expiration date.

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8
Q

Delinquent loan

A

Any loan over 30 days due.

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9
Q

Discount Point

A

1% of the loan amount and can only used for reduction of interest rate

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10
Q

Premium pricing

A

Used to help the borrower pay their closing costs. The premium results from the interest rate being increased.

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11
Q

Cash Out Refinance

A

Taking equity from the loan.

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12
Q

Rate and Term Refinance

A

The extension of the term or reduction
of interest rate to reduce the payments.

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13
Q

Right of Rescission

A

-Three business days, not including the
day the documents are signed
-Two copies of the Rescission form
must be given to all borrowers
and owners of the property.
-If a mistake is made on the Right of Rescission, the rescission period extends to three years.

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14
Q

Escrow Accounts

A

Accounts that are paid into by the borrower for taxes, insurances, and possibly HOA/POA fees. This money belongs to the borrower, not the mortgage company.

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15
Q

Repurchase

A

An investor requiring the originating lender to buy the loan back because of fraud, unacceptable underwriting, or appraisal.

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16
Q

Liens

A

1st mortgage, 2nd mortgage, IRS tax Lien, judgments, mechanics liens.

17
Q

Early Payment Default

A

The borrower does not make the 1st, 2nd, or possibly the third payment. This is most likely fraud.

18
Q

Federal Mortgage Loan

A

-Any loan originated and closed under Fannie Mae, Freddie Mac, FHA , VA, or USDA requirements.
-Any loan that can be sold to
Fannie Mae of Freddie Mac:
▪ Maximum LTV – 97% ▪ Any loan above 80% must have PMI and escrows

19
Q

Non-Conforming Loan

A

Any loan that cannot be sold to Fannie Mae or Freddie Mac. Also, Jumbo or any loans that are using non verified income.

20
Q

Nontraditional Loan

A

Any loan that is not a 30-year fixed.

21
Q

USDA-United States Department of
Agriculture

A

▪ In areas of less than 35,000 people
▪ 100% financing. Income limitations to be eligible
▪ 29/41 Underwriting Ratios
▪ Guarantee Fee– Government mortgage insurance is required for the life of the loan.
▪ USDA must underwrite and fund all loans.

22
Q

Federal Housing Administration (FHA)

A

▪ Maximum LTV is 96.5%
▪ 31% for housing/43% overall underwriting ratios
▪ MIP is required for the life of the loan if over 90% LTV.
▪ Seller concessions is limited to 6%.
▪ All borrowers must be run through CAIVRS.
▪ Occupancy needs to occur in within 60 days and be maintained for a year.
▪ Upfront MIP (Mortgage Insurance Premium) is 1.75%, which may be loaded into the loan.
▪ The MIP renewal is 0.0085 (.85%) of the loan amount / by 12= The monthly MIP premium to be added to the P&I payment.

23
Q

VA Loans

A

▪ Down payment is determined by obtaining the DD214 from the veteran, which tells you they have benefits.
▪ Certificate of Entitlement or Eligibility (COE) is issued
▪ Maximum Loan-to-Value is 100%.
▪ The maximum guarantee authorized by the VA is 25 percent of the loan amount, up to $113,275. The maximum VA home loan is Fannie or Freddie loan limits.
▪ Overall ratio is 41%

24
Q

Program - 5/1

A

Rate fixed for 5 years and then adjusts every year thereafter.

25
Q

Caps – 2/5

A

2% is the limit the interest rate can go up or go down on each adjustment. 5% is the lifetime cap.

26
Q

The lifetime cap

A

The highest the rate can go over the life of the loan. If the starting rate was 4% and the lifetime cap is 5%, the highest the rate can go over the life of the loan is 9%.

27
Q

Margin

A

The only number on an ARM Loan that cannot change. It is also the floor, meaning the interest rate cannot go below the margin.

28
Q

Fully-Indexed Rate

A

▪ Addition of the Index and the Margin.
▪ The borrower is underwritten at the higher of the starting interest rate, or the Fully-Indexed Rate.

29
Q

Negative Amortization

A

The mortgage balance goes up every month, because the interest is not paid (no mortgage payments are required) and the borrowers are paid each month.

30
Q

Non-Recourse Mortgage

A

If the mortgage balance is higher than the value at the end of the loan, FHA absorbs the loss.

31
Q

Home Equity Line of Credit (HELOC)

A

▪ Term is usually 8 to 10 years
▪ Floating Interest Rate, usually based on Prime Rate.
▪ No principal payment required unless the borrower chooses to pay, but the balance will be due at the end of the loan.
Example– Value of property is $200,000. The first mortgage is $100,000. The HELOC lender will go to 80% LTV, or $160,000.
▪ The HELOC amount would be
$60,000. $160,000 - $100,000.

32
Q

2nd Mortgage

A

All the proceeds are paid out at the closing. They will start monthly P&I payments, usually within 45 days. The term is 15 years and can be an ARM or fixed-rate mortgage.

33
Q

Subordination Agreement

A

▪ If a borrower has a first mortgage, as well as a second mortgage with another lender.
▪ If the borrower wants to refinance the first mortgage, they have to obtain a signed Subordination Agreement from the second mortgage lender, which says the second mortgage lender will stay in 2nd position while the 1st is
refinanced

34
Q

Construction Loans (2-types)

A

▪ Construction Loan with a Permanent Take Out
▪ Construction Perm
-The consumer will close on a construction permanent loan.

-The consumer obtains a construction loan from a lender. The construction
lender will request a Permanent Take
Out before making the construction
loan.
-if the borrower meets the requirements of the commitment letter, your company will pay off the construction loan and the borrower starts making payments on the permanent loan.
▪ One set of closing costs.
▪ Borrower has the home built and
will pay interest on the draws to
pay the contractor, as bills are
presented.
lender will calculate the P&I payment based on the amount of the loan and the remaining term of the loan

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