Unit 8: Financing Real Estate Flashcards
A $450,000 house can be purchased with a $90,000 down payment using the principle of:
Leveraging
The Fed CAN increase or decrease the amount of money in circulation by:
- Establishing the discount rate
- Raising or lowering reserve requirements
- Buying or selling government securities
Federal savings and loan activities are overseen by:
The Office of the Comptroller of the Currency
California usury laws apply primarily to:
Private Lenders
Real estate is hypothecated by use of:
A security instrument
To be a negotiable instrument, a promissory note must be:
A promise to pay money to the bearer
A holder in due course must take a negotiable instrument:
without notice of any defense against its enforcement.
In a mortgage, the lender is
the mortgagee
The highest bidder at a judicial foreclosure receives
A certificate of sale
In a deed of trust, the borrower is:
The trustor
In a deed of trust, the lender is:
The beneficiary
The first step in bringing about a trustee’s sale is to prepare:
A declaration of default
There is no right of redemption following:
A trustee’s sale
An ARM is:
A mortgage in which the interest rate changes periodically based on an index.
MOST adjustable-rate loans are:
Assumable
Interest rate and payment can change every three to five years in:
A renegotiable-rate mortgage
TRID applies to
Construction-only loans
RESPA covers
The Closing Disclosure form.
David Yoo bought Whiteacre and is making the former owner’s original loan payments. If David defaults, the seller will be obligated on the loan.
David bought the property subject to the loan
A lender that discriminates against a loan applicant because of race has violated:
The Equal Credit Opportunity Act
3 Ways the Federal Reserve Influences Monetary policy
- Raising (slowing) or lowering (stimulating) reserve requirements (cash-on-hand).
- Raising (slowing) or lowering (stimulating) the discount rate (interest rates)
- Buying (stimulating) and Selling (slowing) Government Securities
Federal Funds Rate
A rate that banks charge each other for borrowing funds they maintain with the Fed.
Prime Rate
The rate that banks charge their most favorably rated commercial borrowers.
Promissory Note
The borrower’s promise to pay the amount borrowed.
Security Instrument
is used to identify the real estate that serves as an assurance that the loan will be repaid (Identifies collateral).
Amortized Loan
Installments include both interest and principal
Straight Note
Interest-only loan with the principal due in a lump sum at the end of the loan.
Negative Amortization
Payment is so low that it doesn’t cover the interest owed, causing the balance to rise over time.
Acceleration clause
A clause in a loan that allows the lender to call your loan due if you do something wrong like not making payments on time, or property is used illegally.
Alienation clause
Due on sale
Subordination Clause
Allows a future loan to have priority over an existing loan.
Lean Priority
The order in which creditors are paid upon default
Prepayment Penalty Clause
If you pay off the loan early, you pay a penalty.
Lock-in Clause
Prohibits an early payment
Blanket Loan
A loan that covers multiple parcels of real estate
Release Clause
A clause that allows a partial reconveyance in a blanket loan.
Construction Loan
Short-term basis loan, only during the period of the construction. (interim loan)
Take out loan
Long-term financing of the construction loan after the project is complete.
Standby fee
Paid to have the privilege of the take-out loan parked for you while waiting for the construction to be complete.
Deed of Trust (or trust deed)
an instrument by which real property is hypothecated to secure payment of a debt or an obligation.
3 Parties of the deed of Trust
- Trustor
- Trustee
- Beneficiary
Trustor
Owner and Borrower
Trustee
Holds title to the property while you’re making payments (third party)
Beneficiary
The lender
Notice of default
The first step in the foreclosure process. Then the borrower is given a 90 day reinstatement period. The borrower has a chance to catch up.
Notice of sale
The second step in the foreclosure process. After the 90 day reinstatement period. 20 days later is the foreclosure sale.
RESPA
Regulates residential 1-4 unit properties. Prohibits kickbacks. It requires a good faith loan estimate within 3 business days.
