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Real Estate P&P > Real Estate Financing > Flashcards

Real Estate Financing Flashcards

1
Q

PITI

A

principal, interest, taxes, insurance

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2
Q

DTI

A

debt to income ratio

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3
Q

LTV

A

loan to value ratio; the amount of the loan as a percentage of the purchase price of the property

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4
Q

Promissory Note

A

financing instrument; a borrower’s personal promise to repay a debt according to the agreed terms

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5
Q

Negotiable Instrument

A

the payee who holds the note may transfer the right to receive payment to a third party

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6
Q

Payor

A

buyer

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7
Q

Payee

A

lender

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8
Q

Interest

A

a charge for the use of money

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9
Q

Arrears

A

payments made at the end of a period

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10
Q

Usury

A

charging interest in excess of the maximum rate allowed by law

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11
Q

State Usury Laws

A

do not apply to federally related residential first mortgage loans as of March 31, 1980

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12
Q

Loan Origination Fee

A

charged by most lender to cover the expenses involved in generating the loan

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13
Q

Discount Points

A

used to increase the lender’s yield / rate of return on its investment; one discount point equals 1% of the loan amount (not purchase price)

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14
Q

Prepayment Penalty

A

a payment against the unearned portion of the interest for any payments made ahead of schedule

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15
Q

Financing Instrument

A

creates the debt

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16
Q

Security Instrument

A

specifies the property that the debtor will use as collateral for the debt

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17
Q

Hypothecation

A

the debtor retains the right of possession and control of the secured property, while the creditor receives an equitable right in the property

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18
Q

Mortgage

A

a lien on the real property of a debtor

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19
Q

Mortgagor

A

the borrow who receives a loan and in return gives a promissory note and mortgage to a lender

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20
Q

Mortgagee

A

the lender of the loan

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21
Q

Satisfaction of Mortgage

A

the document that verifies that the loan is paid in full; filed in the public record as evidence of the removal of the security interest

22
Q

Lien Theory

A

the mortgagor retains both legal and equitable title to property that serves as security for a debt; the mortgagee has a lien on the property

23
Q

Deed of Trust

A

conveys bare legal title (w/o right of possession) from the borrower/trustor to a third party / trustee

24
Q

Title Theory

A

the borrower is the trustor who conveys legal title to the trustee but retains equitable title and the right of possession; legal title is returned only when the debt is paid in full

25
Q

Acceleration Clause

A

if the borrower defaults the lender has the right to accelerate the maturity of the debt; the entire principle balance is due and payable immediately

26
Q

Defeasance Clause

A

the lender is required to execute a satisfaction of mortgage; returns to the buyer all interest in the real estate originally conveyed to the lender

27
Q

Assumption of Mortgage

A

the buyer assumes the mortgage or deed of trust and agrees to pay the debt

28
Q

Alienation Clause

A

resale clause; provides that when the property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at an interest rate acceptable to the lender

29
Q

Priority of Liens

A

determined in the order by which they were recorded

30
Q

Straight Loan

A

interest-only loan; borrower makes periodic payments of interest only, followed by the payment of the principal in full at the end of the term

31
Q

Amortized Loan

A

pays interest as well as a portion of the principal owed

32
Q

Adjustable Rate Mortgage (ARM)

A

begins at one rate of interest, then fluctuates up or down during the loan term based on a specified economic indicator

33
Q

Margin

A

the interest rate is the index rate plus a premium; the premium represents the lender’s cost of doing business

34
Q

Negative Amortization

A

the amount of the loan increasing instead of decreasing; can happen when property values do not increase as anticipated or the borrower can no longer afford to make mortgage payments

35
Q

Growing-Equity Mortgage

A

rapid-payoff mortgage; uses a fixed interest rate but payments of principal are increased according to an index or schedule - used when a borrower’s income is expected to grow to keep pace with increasing loan payments

36
Q

Balloon Payment

A

a final payment that is at least twice the amount of any other payment

37
Q

Reverse Morgage

A

allows a homeowner age 62 or older to borrow money against the equity built up in the home

38
Q

Foreclosure

A

a legal procedure in which property pledged as security for a debt is sold to satisfy the debt when a borrower defaults on any required payment or fails to fulfill any of the other obligations set forth in the mortgage or deed of trust

39
Q

REO

A

real estate owned; lender portfolio of property

40
Q

Judicial Foreclosure

A

allows the property to be sold by court order after the morgagee has given sufficient public notice

41
Q

Nonjudicial Foreclosure

A

used when the security instrument contains a power of sale clause; no court action is required

42
Q

Strict Foreclosure

A

notice is given to delinquent borrower; court establishes a deadline for the balance to be paid in full if it’s not paid by that date court awards full legal title to the lender; no sale takes place

43
Q

Deed in Lieu of Foreclosure

A

carried out by mutual agreement rather than lawsuit; eliminate equity but not junior liens

44
Q

Equitable Redemption

A

after default but before the foreclosure sale pay off to the lender

45
Q

Statutory Right of Redemption

A

a period in which defaulted borrowers can redeem their real estate after sale

46
Q

Deficiency Judgement

A

if the foreclosure sale does not produce enough to pay the loan balance in full the morgagee may be entitled to a personal judgment against the borrower for the unpaid balance

47
Q

Short Sale

A

a sale in which the sales price is less than the remaining indebtedness

48
Q

Forebearance

A

a postponement of obligations under a mortgage loan but not forgiveness of the debt

49
Q

Basic Form Homeowners Insurance

A

fire and lightening, glass breakage, windstorm, explosion, riot, damage by aircraft of vehicle, smoke damage, vandalism and theft

50
Q

Broad Form Homeowners Insurance

A

falling objects, ice damange, collapse, burst HVAC and pipe, freezing of plumbing and HVAC, electrical damage

Real Estate P&P (21 decks)

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