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Patrick CFP > Laws > Flashcards

Laws Flashcards

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CFP® flashcards
1
Q

FDIC Insurance

A

$250,000 per person, per ownership category

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1
Q

Purpose of Chapter 7 Bankruptcy

A

Liquidation

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2
Q

Purpose of Chapter 13 Bankruptcy

A

Repayment

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3
Q

Purpose of Chapter 11 Bankruptcy

A

Reorganization

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4
Q

Who can file ch 7?

A

Individuals and businesses

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5
Q

Who can file ch 13?

A

Individuals only

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6
Q

Who can file ch 11?

A

Businesses and rarely individuals

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7
Q

Who is eligible for ch 7?

A

Those with income below a certain threshold

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8
Q

Who is eligible for ch 13?

A

those with debt below a certain threshold

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9
Q

Who is eligible for ch 11?

A

No debt or income requirements

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10
Q

What happens to debt in a ch 7 bankruptcy?

A

Unsecured debt is eliminated

Secured debt - assets are sold off

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11
Q

What happens to debt in a ch 13 bankruptcy?

A

It is paid back over time through the repayment plan

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12
Q

What happens to debt in a ch 11 bankruptcy?

A

It is restructured and paid back over time

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13
Q

Which bankruptcies can stop a foreclosure?

A

13 & 11. Ch. 7 can delay it.

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14
Q

How long does a ch 7 bankruptcy take?

A

4-6 months

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15
Q

How long does a ch 13 bankruptcy take?

A

3-5 years

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16
Q

How long does a ch 11 bankruptcy take?

A

6 months to 2 years

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17
Q

How long does a ch 7 bankruptcy stay on a credit report?

A

10 years

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18
Q

How long does a ch 13 bankruptcy stay on a credit report?

A

7 years

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19
Q

How long does a ch 11 bankruptcy stay on a credit report?

A

10 years

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20
Q

Consumer Credit Protection Act

A

Right to know costs and terms of credit

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21
Q

Equal Credit Opportunity Act

A

Right to fair opportunity to obtain credit

22
Q

Fair Credit Reporting Act

A

Right to know what’s in your credit file

23
Q

Fair Credit Billing Act

A

Right to have billing mistakes solved

24
Q

Fair Debt Collection Practices Act

A

Right to be protected from collection agencies

25
Q

FICO score categories

A
  1. Payment history
  2. Amounts owed
  3. Length of credit history
  4. New Credit
  5. Credit mix
26
Q

Portion of FICO score attributed to Payment History

A

35%

27
Q

Portion of FICO score attributed to Amounts Owed

A

30%

28
Q

Portion of FICO score attributed to length of credit history

A

15%

29
Q

Portion of FICO score attributed to new credit

A

10%

30
Q

Portion of FICO score attributed to credit mix

A

10%

31
Q

Poor credit score

A

<580

32
Q

Fair credit score

A

580-669

33
Q

Good credit score

A

670-739

34
Q

Very good credit score

A

740-799

35
Q

Exceptional credit score

A

800+

36
Q

Origination points

A

Points are a % of the amount borrowed, which are added to the mortgage to lower the interest rate or improve terms

37
Q

When rates are low, what rate is advisable?

A

Fixed rate

38
Q

When rates are high/expected to go down or the homeowner is not planning on keeping the house long-term, what rate is advisable

A

variable rate

39
Q

Conventional mortgage

A

home loan below $766,500

40
Q

Jumbo mortgage

A

home loan above $766,500 that commands a higher interest rate

41
Q

PMI

A

private mortgage insurance for borrowers who put down less than 20% of the value of a home

42
Q

How do you eliminate PMI?

A

Satisfy 2 requirements:
1. 20% equity
2. 2 years of on-time payments

43
Q

Balloon mortgage

A

home loan in which a large portion of the borrowed principal is repaid in a single payment at the end of the loan period

44
Q

FHA

A

Federal Housing Administration

45
Q

VA

A

Veterans Administration

46
Q

USDA

A

United States Department of Agriculture

47
Q

PMI for gov’t mortgages programs

A

VA & USDA - none
FHA - 11 years or loan duration

48
Q

Down payment for gov’t mortgage programs

A

VA & USDA: 0%
FHA: 3.5-20%

49
Q

Identify which loan type can only issue fixed rate mortgages

A

USDA

50
Q

Identify the fees for gov’t mortgage programs.

A

VA: 2.3-3.6%, which is waived for disabled vets
FHA: none
USDA: 1% fee upfront, then an annual fee of 0.35%)

51
Q

Housing Cost Ratio

A

PITI / Gross Income < 28%

52
Q

Total Debt Ratio

A

(PITI + Other Debt) / Gross Income < 36%

53
Q

Debt Ratio

A

Debt / Gross Income < 20%

Patrick CFP (15 decks)

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