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Real Estate > Loan Programs (pre-licensing) > Flashcards

Loan Programs (pre-licensing) Flashcards

1
Q

forward mortgage

A

A traditional mortgage, amortized over a certain period of time and paid off in
monthly payments in a specific term.
Typically just known as a mortgage.

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2
Q

reverse mortgage

A

Instead of paying towards a home monthly, the homeowner pulls money monthly from equity in a home. You must be 62 or older to do this.

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3
Q

purchase money mortgage

A

Also known as seller financing. When the buyer cannot qualify for their own loan, the seller would finance the loan. The buyer would then pay the seller on a monthly basis.

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4
Q

blanket loan

A

Typically only used by builders, to use a large chunk of land (i.e. when purchasing a
subdivision).

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5
Q

package loan

A

A loan that not only includes the real property purchased but also anything else on the property (such as appliances, furniture, and personal appliances).

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6
Q

shared appreciation

A

A mortgage is arranged as a form of equity release. The lender lends the borrower a capital sum in exchange for a share of the future increase in the growth of the property.

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7
Q

reverse annuity

A

Another term for a reverse mortgage.

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8
Q

bridge, gap, or swing loan

A

A shorter term loan, between 6 and 12 months. A buyer with substantial equity in an existing home can finance that home as a bridge loan and use that money to purchase a new home as a cash buyer. Typically done through a bank or credit union.

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9
Q

wraparound

A

A form of secondary financing for the purchase of real property. The seller extends to the buyer a junior, or second, mortgage which wraps around and exists in addition to any superior mortgages already existent on the property.

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10
Q

discount points

A

Fees paid directly to the lender at closing in exchange for a reduced interest rate. One point costs 1 percent of your mortgage
amount.

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11
Q

mortgagor

A

The borrower in a mortgage, typically a
homeowner.

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12
Q

mortgagee

A

The lender in a mortgage, typically a bank.

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13
Q

Alan is 75 and is retired. He owns his home free and clear. He is looking for additional revenue. A possible option might be:
A: A Forward Mortgage
B: A Second Mortgage
C: A Reverse Mortgage
D: A Balloon Payment

A

C: A Reverse Mortgage

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14
Q

Discount points are calculated based on:
A: A Percentage Of The Purchase Price
B: A Percentage Of The Origination Fee
C: A Percentage Of The Loan Amount
D: A Flat Fee

A

C: A Percentage Of The Loan Amount

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15
Q

A fee that is charged to the borrower in the event the borrower pays off the entire balance of the mortgage early is called a(n):
A: Origination Fee
B: Prepayment Penalty
C: Balloon Payment
D: Negative Amortization

A

B: Prepayment Penalty

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16
Q

The acronym “PITI” stands for:
A: Private Insurance Taxes Insurance
B: Private Integrated Tax Incentive
C: Principal Interest Transfer Insurance
D: Principal Interest Taxes Insurance

A

D: Principal Interest Taxes Insurance

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17
Q

A mortgage in second lien position can also be referred to as:
A: A Junior Lien
B: A Senior Lien
C: A Balloon Mortgage
D: A Reverse Mortgage

A

A: A Junior Lien

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18
Q

simple interest

A

A form of interest that is calculated on a
daily basis.

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19
Q

compound interest

A

A form of interest that is the addition of interest to the principal sum of the loan as a result of reinvesting the interest rather than paying it out.

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20
Q

amortization

A

Breaks down each payment into what is going towards interest and what goes towards principal.

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21
Q

real estate professionals and interest rates

A

Do not make blanket statements to a buyer about what is “always” the best type of loan to get. Each client has a different financial
picture. Do not quote interest rates!

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22
Q

prepayment penalty

A

An extra fee charged to a borrower when a
loan is paid off before the term of the loan.
Less common than it once was.

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23
Q

PITI

A

Stands for Principal, Interest, Taxes, Insurance. This gives the borrower a full picture of what their entire payment is going to be. The purpose is to ensure that buyers know what costs to expect. This does not include mortgage insurance, which is separate from
home insurance, or HOA fees.

24
Q

ARM

A

Adjustable Rate Mortgage. Within a set term, the interest and monthly payment are fixed. After that time, they can fluctuate. More risky than other mortgages.

25
Q

HELOC

A

Home Equity Line of Credit. Equity can be pulled from a home as a loan. It is typically
in a second lien position.

26
Q

second lien position

A

Also known as a junior lien, this is a loan you take out using your house as collateral while you still have another loan secured by your house. Home equity loans and home equity lines of credit (HELOCs) are common examples
of second mortgages.

27
Q

first lien position

A

Also known as a senior lien, this the
highest priority debt in the case of default. If a property or other type of collateral is used to back a debt, first lien debt holders are paid before all other debt holders.

28
Q

Unless a buyer is able to put at least 20% down, the buyer will have to pay:
A: Mortgage Interest
B: Mortgage Insurance
C: Closing Costs
D: Funding Fee

A

B: Mortgage Insurance

29
Q

The required down payment for an FHA loan is:
A: 0.025
B: 0.035
C: 0.045
D: 0.055

A

B: 0.035

30
Q

A great mortgage for a first time home buyer without a large down payment would be a:
A: Conventional Loan
B: Subprime Loan
C: FHA Loan
D: Hard Money Loan

A

C: FHA Loan

31
Q

conventional loan

A

The most common type of loan. Not insured by FHA or VA. Also known as a conforming loan, which means it conforms to Freddie Mac or Fannie Mae standards. Certain criteria must be met: credit score, debt to income ratio, loan to value ratio (down payment), work history, etc. Each county has its own loan limit (EX. $424,100 in Utah County).

32
Q

mortgage insurance

A

A type of insurance required of a buyer when a down payment of less than 20% is made.

33
Q

construction loan

A

A loan taken out when the buyer already owns the land and wants to build on it. The loan-to- value requirements are a bit more strict: a larger down payment of 25-30% is typically required. There needs to be a strong relationship between the bank and the builder.

34
Q

UFMIP

A

Up-Front Mortgage Insurance Premium. This is used on an FHA loan. This is a premium added on top of the loan amount but can be financed. The purpose is to insure FHA against defaults.

35
Q

FHA loan

A

A Federal Housing Administration loan. The property guidelines are more strict: actual
borrower s auchaications are ityre entent: credit scores, low down payments, debt-to- income ratio. These loans require at least 3.5%
down, and they are assumable.

36
Q

assumption

A

A loan (such as an FHA loan) that can be taken over by a home buyer at the same interest rate, if they qualify for it. This lower interest
rate can be marketable when selling a home.

37
Q

Victor Veteran served our country valiantly. He has full military benefits. He wants to purchase his first duplex. A great mortgage option for Victor might be a:
A: Conventional Loan
B: VA Loan
C: Subprime Loan
D: Prime Loan

A

B: VA Loan

38
Q

The required down payment for a VA loan is:
A: 0.025
B: 0.035
C: 0.045
D: There Is No Down Payment Requirement For VA Loans

A

D: There Is No Down Payment Requirement For VA Loans

39
Q

The documentation a veteran buyer will need to document the maximum amount of their loan guaranty is called the:
A: Certificate Of Reasonable Value
B: Closing Disclosure
C: Certificate Of Eligibility
D: Certificate Of VA Benefits

A

C: Certificate Of Eligibility

40
Q

funding fee

A

A term unique to VA loans. This is similar to an up-front mortgage premium and a cost
in addition to the loan. It can be financed. The purpose is to ensure the program’s
continuation.

41
Q

VA loan

A

A loan with no monthly mortgage insurance and no money down. The interest rate is also lower. Only qualified veterans can qualify for these. The debt- to-income ratio requirements are more lenient than a conventional loan.

A VA loan is insured by the US Department of Veteran’s Affairs. Some additional information must be collected when applying, such as the veteran’s Certificate of Eligibility. Any condos such a loan would be used for must be approved by the VA. Multi-family homes can qualify as long as the borrower lives in one of them.

42
Q

loans intended for residency

A

FHA and VA loans are intended for home ownership and primary residences rather than as vehicles for investment properties. The borrower must intend to live in the property for at least 12 months

43
Q

NOV

A

Notice of Value, an appraisal used for VA loans. The property must qualify to be eligible for a VA loan.

44
Q

______ is a mortgage loan offered to rural property owners
A: USDA Loan
B: Agricultural Loan
C: Conventional Loan
D: None Of The Above

A

A: USDA Loan

45
Q

USDA loan

A

A loan for a home that must be in a rural location, as determined by USDA. Each county has an income limit, such that a borrower must make less than the income limit to qualify, based on household size. This loan has no money down and a low interest rate, but a
guarantee fee is charged.

46
Q

guarantee fee

A

A payment that is part of a USDA loan,
similar to UFMIP or a funding fee.

47
Q

Steven has a loan. His payments are exactly the same every single month and his interest rate is fixed. Steven most likely has a(n):
A: Interest Only Loan
B: Adjustable Rate Loan
C: Fixed Rate Loan
D: Balloon Payment

A

C: Fixed Rate Loan

48
Q

Jake has borrowed money for the purchase of his home. He has signed a trust deed and note. Jake is known as the:
A: Trustee
B: Trustor
C: Beneficiary
D: Mortgagee

A

B: Trustor

49
Q

Ashley borrows money to purchase a home. Ashley can also be referred to as the:
A: Mortgagee
B: Mortgagor
C: Trustee
D: Beneficiary

A

B: Mortgagor

50
Q

Ashley borrows $200,000 from City Best Bank. The bank can also be referred to as the:
A: Mortgagee
B: Mortgagor
C: Trustee
D: Vendor

A

A: Mortgagee

51
Q

Jake has borrowed money for the purchase of his home. He has signed a trust deed and note. The lender from which he borrowed money can also be referred to as the:
A: Trustee
B: Trustor
C: Beneficiary
D: Mortgagee

A

C: Beneficiary

52
Q

The person whose responsibility it is to review the entire loan package and determine whether or not it conforms to lending guidelines is the:
A: Loan Originator
B: Real Estate Agent
C: Mortgage Loan Officer
D: Underwriter

A

D: Underwriter

53
Q

Buyer Bob anticipates he and his wife will be living in the new home they are purchasing for many years. He wants to permanently buy down his interest rate. Bob would accomplish this through:
A: Discount Points
B: Locking His Interest Rate
C: Paying A Loan Origination Fee
D: A 2-1 Buy Down

A

A: Discount Points

54
Q

An example of a mortgage that does not have fixed monthly payments for the life of the loan is a:
A: 2-1 Buydown
B: Adjustable Rate Mortgage (ARM)
C: Balloon Payment
D: All Of The Above

A

D: All Of The Above

55
Q

The clause that allows the lender to demand payment in full when the home is sold is called:
A: Subordination
B: Escalation
C: Acceleration
D: Hypothecation

A

C: Acceleration

56
Q

Matt is making Interest Only payments on his mortgage. Another name for this type of mortgage is:
A: 2-1 Buydown
B: Adjustable Rate Mortgage
C: Fixed Rate Loan
D: Straight Loan

A

D: Straight Loan

Real Estate (52 decks)

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