Mortgages/Real Estate Financing

Question 1

adjustable rate mortgage

Answer 1

a mortgage loan in which the interest rate can change throughout the life of the loan

Question 2

alienation clause

Answer 2

a clause in the mortgage loan that requires the loan to be paid off upon sale of the property

Question 3

amortized loan

Answer 3

a type of mortgage loan in which the entire balance of the loan is paid off by the end of the term (period) of the loan.

Amortization simply refers to the amount of principal and interest paid each month over the course of your loan term. Near the beginning of a loan, the vast majority of your payment goes toward interest. … Each time the principal and interest adjust, the loan is re-amortized to be paid off at the end of the term.

Question 4

annual cap

Answer 4

in an adjustable rate loan, the maximum amount the interest rate can be adjusted upward in any given year

Question 5

annual percentage rate (APR)

Answer 5

the real interest rate one is paying on a loan, taking into account the interest rate charged for periodic payments as well as prepaid interest (points)

Question 6

balloon payment

Answer 6

the amount remaining to be paid in a single payment at the end of a partially amortized loan

Question 7

blanket mortgage

Answer 7

a mortgage loan used to cover more than one piece of property. This is sometimes used to buy multiple lots in a subdivision.

Question 8

buydown

Answer 8

pre-paid interest that is paid at the beginning of a mortgage loan in order to lower the interest rate on the periodic payments

Question 9

collateral

Answer 9

something of value that is used as security for a loan

Question 10

Community Reinvestment Act

Answer 10

a federal law requiring banks to reinvest in their service area by making mortgage and other types of loans available

Question 11

conforming loans

Answer 11

a type of mortgage loan that meets the requirements necessary for the loan to be sold on the secondary mortgage market

Question 12

construction loan

Answer 12

a loan made to a builder to finance a construction project whereby the funds are released periodically during the life of the project

Question 13

conventional loans

Answer 13

mortgage loans that meet criteria set by the lender but which also often meet the criteria set by Fannie Mae in the secondary mortgage market

Question 14

debt service

Answer 14

the mortgage payment

Question 15

default

Answer 15

a situation where a borrower doesn’t pay off the debt

Question 16

deficiency judgment

Answer 16

a judgment rendered against a property owner after a successful lawsuit on the part of the lender, requiring payment of the difference between the mortgage loan amount and the proceeds of a foreclosure sale

Question 17

discount rate

Answer 17

the interest rate set by the Federal Reserve that member banks charge each other for loans

Question 18

down payment

Answer 18

a significant sum of money that may be the total cash part of the real estate purchase. The remainder of the purchase price would be satisfied with a mortgage loan.

Question 19

equitable redemption

Answer 19

the right to pay the debt and recover the property after foreclosure but before the sale

Question 20

equitable right of redemption

Answer 20

as it relates to a tax sale for nonpayment of taxes or a foreclosure sale for nonpayment of a mortgage loan debt, the right to redeem a property by paying the taxes and penalties or the loan debt before the sale of the property

Question 21

equity buildup

Answer 21

the reduction of the mortgage loan debt by paying off the loan through the income of the property investment