Mortgages

Question 1

Partially Amortized with a Balloon

Answer 1

payments will not retire principal balance over life of the loan, thus requiring a lump-sum payment, or “balloon”payment at end of term

Question 2

Interest-Only Loans

Answer 2

loans where payments are interest only, and the principal balance is retired in full at maturity using a balloon payment

Question 3

Biweekly Mortgage

Answer 3

loan payments are every-two weeks, a device that reduces total interest paid, but also shortens risk period for the lender

Question 4

Package Mortgage

Answer 4

mortgage loans which also finance articles of personal property as part of the purchase transaction

Question 5

Purchase Money Mortgage

Answer 5

a seller-financed loan to the buyer of portions of the purchase price using the property as collateral; usually accompanied by a senior underlying first mortgage

Question 6

Reverse Annuity Mortgage

Answer 6

a loan aimed at senior citizens who have paid off their houses but cannot afford to stay there or need extra money for home repair

Question 7

Graduated Payment Mortgages

Answer 7

allows for smaller initial monthly payments which gradually increase. The interest rate remains fixed as does the loan term

Question 8

Buydown Loan

Answer 8

Prepay interest on the loan

Lowers the interest payment & payments

Question 9

Conventional Mortgages

Answer 9

• Originated by banks and private financial institutions
• No government-related insurance or guarantees as with FHA or VA
• Typically require 20% down payments; smaller down payments may require PMI
• Assumptions require approval

Question 10

Government Loan Programs

Answer 10

FHA - federally insured loan programs

VA - federally guaranteed loan programs