Real Estate Financing Flashcards
Considered by lenders
DTI
Credit Score
Credit Report
The difference between the amount owed on a property and its current market value
equity
mortgage loan will require two instruments
Financing instrument and security instrument
a contract with a lender that sets out the terms under which a borrower promises to repay a debt.
Promissory note
a negotiable instrument that can be transferred to a third party.
Promissory note
charge for the use of money
interest
charging an excessive rate of interest is called
usury
percentage of a loan amount and are charged by a lender to increase the lender’s yield on its investment
Discount points
A home mortgage loan is secured by the borrower’s real property in the process called
hypothecation
Mortgage borrower
mortgagor
Mortgage lender
morgagee
real estate purchased with the borrowed money is used as
security
transfers title from the trustor (property owner) to a trustee, who holds it on behalf of a beneficiary (lender).
deed of trust
requires the lender to execute a satisfaction (release or discharge) that is recorded to clear title.
defeasance clause
executed by the borrower is recorded in the county in which property is located
deed of trust
transfers legal title to the trustee but retains equitable title and has the right to possession and use of the mortgaged property.
trustor
Property owner
trustor
beneficiary
lender
requires the beneficiary to request the trustee to execute and deliver to the trustor a deed of reconveyance (release deed) to return legal title to the trustor.
defeasance clause
due date of the remaining principal balance and all overdue costs made sooner
accelerate
allows the beneficiary (lender) to ask the trustee to conduct the trustee’s sale without court action.
deed of trust with power of sale
enables a sale without court action.
mortgage with power of sale
may be required to create a reserve fund to ensure that future tax, property insurance, and other payments are made.
impound escrow account
imposes obligations on lenders and loan servicers to set aside escrow funds for flood insurance on new loans for property in flood-prone areas.
National Flood Insurance Reform Act of 1994
Priority of mortgages and other liens is
determined by the order in which they were recorded.
may be changed by subordination agreement
interest-only loan.
Straight loan
interest rate changes over the term of the loan according to an identified economic indicator
Adjustable rate mortgage
identified economic indicator
index
added to the index to determine the rate the borrower will pay
margin
sets the highest interest rate that can be charged at any point over the life of the loan.
rate cap
conversion option
allows ARM to be converted to a fixed-rate loan.
payments of principal are increased each month to pay off the loan more quickly.
Growing Rate Mortgage
typically is a final loan payment that is at least twice as much as any other payment.
balloon payment
can be used by someone age 62 or older to receive one or more payments that result in a claim by the lender on the equity in the mortgaged property when the homeowner moves from the property, dies, defaults on one of the loan terms, or sells the property.
Reverse Mortgage
the judge orders the property sold.
judicial foreclosure
The equity of redemption refers to the right of a mortgagor in law to redeem his or her property once the debt secured by the mortgage has been discharged.
equitable right of redemption
when allowed by state law, and if the sale proceeds are less than the amount owed, the mortgagee has a right to what
deficiency judgement
the lender agrees to accept less than the amount of the remaining indebtedness in order to allow the property to be sold.
Short Sale
required by a mortgage lender, will protect against loss due to natural disasters, accidents, theft, and fire.
Homeowners Insurance
database allows insurers to share information on a consumer’s claims history.
Comprehensive Loss Underwriting Exchange (CLUE)
Federal Emergency Management Agency (FEMA)
administers the National Flood Insurance Program
