Types of Mortgages and Sources of Financing Flashcards

1
Q

Adjustable Rate Mortgage (ARM)

A

A mortgage that can be adjusted periodically by the lender.

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2
Q

Amortized Mortgage

A

A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity.

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3
Q

Balloon Payment

A

A single, large payment made to pay off the debt in full.

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4
Q

Biweekly Mortgage

A

Mortgage Payments are due every 2 weeks.

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5
Q

Conforming Loan

A

A conventional loan that meets the requirements of Freddie Mac and Fannie Mae.

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6
Q

Disintermediation

A

The process of removing the middleman or intermediary from future transactions.

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7
Q

Home Equity Loan

A

A loan which is based on the equity in the borrower’s home.

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8
Q

Index

A

The rate to which the interest rate on an adjustable rate mortgage is tied.

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9
Q

Intermediation

A

The process whereby financial intermediaries channel funds from people who have surplus capital to those who require liquid funds.

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10
Q

Level Payment Plan

A

Calculating the total cost of a service over a period of time such as a year then averaging the payments to an amount per month that will cover the total annual bill. Most often used for utility payments.

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11
Q

Lifetime Cap

A

Tells a borrower the maximum interest rate they could pay during the life of a loan, usually an adjustable rate mortgage.

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12
Q

Margin

A

Used in an adjustable rate mortgage as part of the calculation of the interest rate

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13
Q

MIP (Mortgage Insurance Premium)

A

The amount paid by a mortgagor for mortgage insurance on an FHA-insured loan.

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14
Q

Mortgage Broker

A

A broker who arranges a mortgage loan between a lender and a borrower for a fee.

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15
Q

Mortgage Fraud

A

Defined by the FBI as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.”

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16
Q

Mortgage Loan Originator (MLO)

A

A mortgage loan originator needs to be licensed and their role is to work with a borrower to complete a mortgage transaction.

17
Q

Negative Amortization

A

This is where monthly mortgage payments are less than required to pay both interest and principal and the resulting unpaid balance is added to the loan balance.

18
Q

Nonconforming Loans

A

Loans that fail to meet bank criteria for funding either because the loan amount is higher than the conforming loan limit (for mortgage loans) or there is a lack of sufficient credit or the proposed use of the funds is unorthodox.

19
Q

Package Mortgage

A

A loan covering both real and personal property.

20
Q

Partially Amortized / Balloon Mortgage

A

A special type of liability or obligation involving partial amortization during the loan term and a balloon payment on the loan maturity date.

21
Q

Payment Cap

A

A consumer safeguard that limits the amount by which the monthly payment on an adjustable rate mortgage can change.

22
Q

Periodic Cap

A

Refers to the maximum interest rate adjustment permitted during a given period of an adjustable rate loan or mortgage.

23
Q

Purchase Money Mortgage

A

Also known as seller or owner financing. This is money loaned to the borrower by the seller of a home as part of the purchase transaction usually in situations where the buyer cannot qualify for a mortgage through traditional lending channels.

24
Q

Reverse Annuity Mortgage

A

Allows borrowers to cash in some of their home’s equity, without having to sell or move out and is secured against the value of their home.

25
Q

Teaser Rate

A

A low, adjustable introductory interest rate used to attract potential customers.

26
Q

UFMIP

A

Up Front Mortgage Insurance Premium, which is required for most FHA single family mortgage insurance programs.