Unit 12: Real estate financiing Flashcards
The borrower grants legal title to a trustee
title theory
the borrower holds both legal and equitable title. the lender has a specific lien on the property
lien theory
a ____ _____ is a legal instrument that provides evidence of the debt. secured by te mortgage or deed of trust
promissory note
a _____ ____ is held by lender until loan is fully repaid, not recorded
promissory note
Key elements of a promissory note
personal promise of borrower to repay a fixed amount, terms of repayment, signature of borrower, lender does not sign
___ ____ states that if a borrower defaults, lender can demand immediate payment of entire balance
acceleration clause
___ ____ alone does not create a lien on the property.
promissory note
___ of ___ is a three party instrument. different than a mortgage because it has 3 parties
mortgage (or deed) of trust
in a deed of trust, the borrower is the ___ or ___, they give the deed of trust to the _____, who gives benefit to the _____ or beneficiary, who give money to the borrower
trustor, grantor, trustee, lender
6 reasons for loan acceleration or foreclosure
nonpayment of principal and interest, nonpayment of taxes, removal of improvement without lenders permission, insurance coverage lapse, waste (would include deferred maintenance that lowers value below what is owed), alienation without consent (if there is a due-on-sale clause
Also called a mortgage ratio. determines the amount that can be borrowed and if private mortgage insurance will be needed. Maximum percentage of value of the lender wil loan to the borrows. ___ - ___ -___ ratio (LTV)
loan to value
___-_-____ ratio is determined by the sales price or appraised value, whichever is lower
loan-to-value
market value today - total debt today = _____
equity
____ is used when you borrow money to finance a purchase. The higher the TV (the mor money borrowed) the higher this is
leverage
disadvantage of high leverage is the greater risk of ____
default
lower equity = ____ risk
higher
higher the down payment, lower the loan, and lower the ____
risk
one ___ point = 1% of the loan amount
discount
lender charges points to increase yield on a loan. May be used to (lower/raise) the loan interest rate
lower
You can purchase points to lower the interest rate of the loan. this will save the borrower money
note
discount points are paid by the buyer or seller at closing
note
____ ____ fee: a charge by the lender to process and issue a loan
loan origination
____: charging an interest rate in excess of what is permitted by law.
usery
_____ a clause in a subordinate mortgage/deed of trust that allows a subsequent mortgage to take priority
subordination
If a previous first mortgage of trust is refinanced, the second mortgage of trust continues in its second position.
note
Foreclosure is governed by (state/federal) laws
state
