NonTraditional Mortgage Loan Products Flashcards
Safe Act defines a non-traditional mortgage as anything other than
a 30-year fixed rate mortgage
Conforming/Conventional Mortgage Meet standards set by
Fannie Mae and Freddie Mac
Conforming/Conventional Mortgages can be sold in which market?
• May be sold in the secondary market
What is a Non-conforming Mortgage?
Do not meet the standards of Fannie/Freddie
& Cannot be sold on the secondary market
What is another term for non-conforming mortgage?
jumbo loan
What is The primary market?
The primary market is where we as people get loans.
What is the secondary market?
The secondary market is where lenders sell loans to one another.
What doe subprime loans allow more of?
Subprime Loans allow more risk than allowed in the conforming market
What is Secondary financing?
the buyer borrows money from another source other than the primary lender to pay part of the purchase price or closing costs. Traditionally, a secondary lender might require 5% down payment
What are the Types of Promissory Notes?
Types of Promissory Notes
1. Straight Note/Interest Only Note: calls for payments of interest only during term of note 2. Partially Amortizing Installment Note/Installment Note with Balloon-calls for periodic payments of principal/interest during loan term with balloon payment at end of term to pay balance due 3. Neg Amortization note - monthly payment is not sufficient to cover the accrued interest from previous month 4. Fully amortizing installment note - calls for regular payment of principal/interest, calculated to pay off entire balance by end of loan term (self-liquidating loan).
What is an Alienation Clause?
gives the lender certain stated rights when there is a transfer of ownership in property aka due on sale clause
What is an Acceleration clause?
gives the lender the right to declare the entire loan balance due immediately because of the borrower default or violation of other contract provisions
What is a buydown plan?
Discount points paid to buy down the interest rate and/or lower monthly mortgage payments. May be paid by the borrower, seller, builder, etc. Permanent buy downs reduce payments for the life of the loan. Temporary buy downs reduce payments for a specific period of time
What is a reverse mortgage?
- allows qualified borrower 62+ to convert equity in home without selling or making payments.
- balance of loan rises as equity shrinks (rising debt, falling equity)
- generally due when the last surviving borrower dies, sells the home, ceases to live at home for 12 consecutive months, non-payment of taxes and insurance.
How much is a discount point?
1% of the loan amount
