Other Financing Options for Obtaining a Conventional Loan

Question 1

What 2 options do people have if they do not qualify for a standard fixed-rate mortgage?

Answer 1

Graduated Payment Mortgage and Pledged Account Mortgage

Question 2

What does GPM stand for?

Answer 2

Graduated Payment Mortgage

Question 3

What does PAM stand for?

Answer 3

Pledged Account Mortgage

Question 4

What happens to the monthly payment for principal and interest in a GPM?

Answer 4

They gradually increase by a certain % each year for a certain number of years and then it levels off for the remaining term of the mortgage

Question 5

What is the relation b/t GPM and PAM?

Answer 5

PAM is a type of graduated-payment mortgage

Question 6

What is the relationship b/t the borrower and lender in a PAM agreement?

Answer 6

The borrower/owner contributes a sum of money into an account that is pledged to the lender. Once the account is empty after being drawn on for 3-5 years for mortgage payments, the borrower makes the full mortgage payment

Question 7

What is a Buydown?

Answer 7

A variation of the the PAM

Question 8

What happens in a Buydown?

Answer 8

The lump-sum payment made to the lender at closing serves to reduce the interest rate on the loan for the first few years. At the end of that time, the rate rises

Question 9

What is an Open-end loan?

Answer 9

An expandable loan which gives borrowers a limit up to which they may borrow

Question 10

What does a Blanket mortgage loan do?

Answer 10

Covers more than one piece of property

Question 11

Who uses a Blanket mortgage loan the most?

Answer 11

Land developers commonly use these when they buy a plot of land and divide it into many separate lots

Question 12

What does a Wraparound mortgage do?

Answer 12

Allows a borrower to get a 2nd loan from a 2nd lender without paying off the first loan for a bigger loan with a higher interest rate. It’s a combo of the first loan and the second loan put together

Question 13

What is a Bridge loan?

Answer 13

A short-term loan that covers the period b/t end of one loan and beginning of another

Question 14

What is a Purchase money mortgage?

Answer 14

A technique where the buyer borrows from the seller and also the lender

Question 15

When does a Purchase money mortgage happen?

Answer 15

When a buyer cannot qualify for a bank loan for the full amount, so the seller “takes back” a portion of the purchase price as a 2nd mortgage

Question 16

Home equity loans occur when _

Answer 16

when owners borrow against the equity they have built up in their home. Homeowners can use a home equity loan for purchasing high dollar items, consolidating other loans or debt, medical expenses, college tuition, or making home improvements

Question 17

A package mortgage is one that includes _

Answer 17

includes all the personal property and appliances that are installed on the property. This type of loan has been used extensively in the sale of furnished condominiums.

Question 18

A reverse annuity mortgage is different from the others in that it _

Answer 18

allows older property owners to receive regular monthly payments from the equity in their paid-off property without having to sell. The borrower pays a fixed rate of interest and then repays the loan either when the home sells or from the borrower’s estate upon his or her death.

Question 19

A shared equity mortgage is a form of participation mortgage in which the lender _

Answer 19

shares in the appreciation of a mortgaged property if and when the property sells. The borrower agrees to the lender’s participation in the income, inducing the lender to make the loan. This is more common with commercial properties, but can also be done with residential mortgages.

Question 20

The sales and leaseback arrangements is used by commercial enterprises to _

Answer 20

free up money that has been tied up in real estate to use as working capital in the business. The owner of the real estate sells the property and then leases it back from the buyer. The buyer becomes the owner and the former owner becomes the tenant.