Unit 16 - Real Estate Financing: Practice Flashcards
The real estate financing market has these basic components
Government Influences
Primary Mortgage market
Secondary mortgage market
The federal reserve
Maintains sound credit conditions
Helps inflation and deflation
Creates a favorable economy
The fed requires
That each member bank keep a certain level of assets on hand
Define Primary Rate
The short term interest rate charged to a banks largest, most credit worthy customers
Define a Primary Mortgage Market
Made up of the lenders that originate mortgage loans
Income on a loan is realized from
Finance charges
Recurring income
Servicing loans involves
Collecting payments
Accounting
Bookkeeping
Processing payments
Some of the major lenders in the primary market include
Thrifts Savings associations Commercial banks Insurance companies Credit unions
Define the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008
Requires that each individual state must license and register mortgage loan originators (MLO’s)
Define the Secondary Mortgage Market
Where various agencies purchase existing mortgage from banks and savings associations
Define Fanie Mae
A government sponsored enterprise that provides a secondary for morgage loans
Define Ginnie Mae
Administers special assistant programs and guarantees mortgage backed securities using FHA & VA collateral
Define Freddie Mac
A government sponsored enterprise that provides secondary market primarily for conventional loans
Define a Straight Loan
A nonamortized loan that essentially divides that loan into two amounts to be paid off separately
Define Amortized Loan
A loan in which the payment partially pays off both principle and interest
Define a Fully Amlrtized Loan
A loan in which the mortgagor pays a constant amount usually monthly
Define an Adjustable Rate Mortgage
A mortgage that generally originate at one rate of interest then fluctuate up or down during the loan term
What are the common components of an adjustable rate mortgage
An index Rate caps Payment cap Adjustment period Conversion option
Define a Balloon Payment
When the final payment in a loan is larger than the others
Define a Growing Equity Mortgage
A mortgage that uses a fixed interest rate, but payments of principle are increased according to an index
Define a Reverse Mortgage
A mortgage that allows people age 62 or older to borrow money against equity they’ve built in their home
Define a Non Recourse Loan
A loan is one in which the borrow is not held personally responsible for the loan
Mortgage loans are classified based on their
Loan to value ratio
Define a Loan To Value Ratio (LVT)
The ratio of debt to value of the property
Define a Conventional Loan
A loan in which the LTV ratios are the lowest
The key element in qualifying for a conventional loan is the borrowers
Creditworthiness
One way a borrower can obtain a mortgage loan with a lower down payment is by obtaining
Private Mortgage Insurance (PMI)
Define Private Mortgage Insurance
An insurance policy that provides the lender funds in the event the borrow defaults on the loan
Define an FHA loan
Refers to a loan that is insured by the Federal Housing Administration
FHA loans charge the borrow
Mortgage Insurance Premiums (MIP)
Define a VA Loan
A loan guaranteed by the Department of Veteran Affairs
For the property being purchased, the VA issues a
Certificate of Reasonable Value (CRV)
Define Purchase Money Mortgage
A note and mortgage created at the time of purchase when the seller agrees to finance or part of the purchase price
Define Package Loans
A loan that includes real and personal property
Define Blanket Loans
A loan that covers more that one parcel or lot, usually used to finance subdivisions
Define Wraparound Loans
A loan thag enables a borrower with an existing mortgage to obtain financing from an additional lender
Define an Open End Loan
A loan that secures a note executed by the borrower to the lender
Define a Construction Loan
A loan made to finance the construction of improvements on real estate
Define a Sale-Leaseback Arrangement
An arrangement used to finance large commercial properties
Define a buy down
A way to temporarily lower the initial interest rate on a mortgage
Define a Home Equity Loan
A loan that provides a source of funds using the equity built up in a home
Define the Truth in Lending Act
Also referred as Regularion Z, requires that credit institutions inform borrows of all finance charges and interest rate before the loan is completed
Define the Equal Credit Opportunity Act
An act that prohibits lenders from discriminating against applicants based on color, race, religion, sex and national origin
Define the Real Estate Procedures Act (RESPA)
An act that applies to any residential real estate transaction involving a new first mortgage loan
