Loan qualifying and markets – key terms

Question 1

The transfer of one person’s interests under a contract to another

Answer 1

Assignment

Question 2

A transaction in which the buyer is acquiring the property for personal or family purposes

Answer 2

Consumer credit transaction

Question 3

A numerical value assigned to different aspects of a borrowers credit history used by lenders to gauge credit worthiness and assess credit risk

Answer 3

Credit score

Question 4

A legal instrument used by a lender so that beyond a certain date, the borrower agrees that the loan balance is correct if no dispute is made, and thus there is no defense to challenge it

Answer 4

Estoppel certificate

Question 5

The Federal National Mortgage Association (FNMA), the nations largest investor in real estate mortgages

Answer 5

Fanny Mae

Question 6

Any type of debt instrument, such as a mortgage, that does not have a fixed rate of interest over the life of the instrument

Answer 6

Floating rate – also called adjustable rate or variable rate

Question 7

The Federal Home Loan Mortgage Corporation (FHLMC), a nonprofit, federally chartered institution that functions as buyer and seller of residential mortgages

Answer 7

Freddie Mac

Question 8

The Government National Mortgage Association (GNMA), a government entity operating under the Department of Housing and Urban Development (HUD) to promote investment by guaranteeing the payment of principal and interest on federally insured or guaranteed mortgages through its mortgage-backed securities program

Answer 8

Ginnie Mae

Question 9

The process of one borrower taking over another borrower’s existing loan

Answer 9

Loan assumption

Question 10

The ongoing process of collecting payments, keeping records, and handling defaults for loans

Answer 10

Loan servicing

Question 11

A transaction in which the buyer is acquiring the property for business purposes as opposed to personal or family purposes

Answer 11

Non-consumer credit transaction

Question 12

The release of liability of the original party to an agreement, for example, a borrower on a note (or a tenant on a lease)

Answer 12

Novation

Question 13

Financial institutions that make real estate loans that they keep and service in-house instead of selling them on the secondary markets

Answer 13

Portfolio lenders

Question 14

The process by which a lender determines that potential borrowers can be financed through the lender for a certain amount of money

Answer 14

Preapproval

Question 15

The process by which an agent or Linda reviews potential borrowers to determine if they are likely to get approved for a loan and for approximately what amount

Answer 15

Prequalification

Question 16

Lenders who originate loans directly to borrowers

Answer 16

Primary mortgage market

Question 17

Hey guarantee that the lender will deliver the negotiated interest-rate if a loan closes by specified date

Answer 17

Rate lock

Question 18

A document in which a lender verifies the balance in terms of a loan, used primarily when the loan is being assumed for the benefit of the buyer who is taking over the loan

Answer 18

Reduction certificate – also called letter of assumption

Question 19

Private investors and government agencies that buy and sell mortgages

Answer 19

Secondary mortgage market

Question 20

A single report that consolidates data from each of the three major consumer credit reporting agencies

Answer 20

Tri-Merged credit report

Question 21

A standardized form from Fannie Mae or Freddie Mac that lenders require potential borrowers to complete with pertinent information about the borrower and the property

Answer 21

Uniform residential loan application (URLA)

Question 22

The process of gathering loans together for sale to investors in the secondary market

Answer 22

Warehousing