Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financing Fundamentals > Vocab-Loan Repayment/Loan Types & Clauses > Flashcards

Vocab-Loan Repayment/Loan Types & Clauses Flashcards

1
Q

Equity:
The difference between the property value and the lien amounts

A

The difference between the property value and the lien amounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Promissory Note:
A personal promise from a borrower to repay the debt to the lender. The note serves as evidence of the debt and states the terms of the loan loan amount, interest rate, payment schedule.

  • does NOT describe the collateral and is usually NOT recorded
A
  • evidence of the debt
  • states terms of the loan-loan amt, interest rate, payment schedule
  • does NOT describe collateral & NOT recorded
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Promissory Note:
A personal promise from a borrower to repay the debt to the lender. The note serves as evidence of the debt and states the terms of the loan loan amount, interest rate, payment schedule.

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Finance Instruments:
* promissory note
* mortgage (Trust Deed)

A
  • Promissory Note
  • Mortgage/Trust Deed
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Mortgage aka Trust Deed

A

What is another name for mortgage?
Trust Deed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

The interest on a loan may be tax deductible T/F?

A

True: Financing motivation for borrowers
* tax advantages

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Trust Deed:

  • Names the property as collateral for the debt.
  • Includes provisions for the lender to foreclose if borrower defauls
  • Includes legal description of the property
  • recorded by the lender to establish priority of the lien
A
  • names property as collateral
  • includes provisions for lender in case borrower default
  • includes legal description of the property
  • recorded by the lender to establish priority of the lien
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Interest Rates:
1. Contract Rate/Note Rate
* aka Face Rate or Nominal Rate
2. Legal Rate
3. Usury

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Contract Rate/Note Rate:

The rate specified in the promissory note
* aka Face Rate or Nominal Rate

A

The rate specified in the promissory note
aka Note Rate, Face Rate, Nominal Rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Legal Rate:
AZ legal rate for judgement is 1% over the prime rate on the day the judgement is entered or 10% whichever is less

In Arizona, this rate would apply when no specific rate appears in an agreement. It is also the rate that would apply to judgements unless the court stipulated a different rate.

A
  • applies when no specific rate in an agreement
  • applies to judgements unless court stipulates a different rate
  • 1% over the prime rate on date of judgement entered or 10% **whichever is less
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Usury:
Charging more than the rate set by the law is usury.
Arizona does NOT set a max on contract rates of interest on real estate loans

A
  • charging more than rate set by law
  • AZ doesn’t set a max on contract rates of interest on RE loans
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Three types of Interest Rates are?

A
  1. Contract Rate/Note Rate/Face Rate/Nominal Rate
  2. Legal Rate
  3. Usury
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the legal rate (%) in AZ?

A

1% over the prime rate on date judgement was entered or 10%, whichever is less

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Payment Plans:
1. Amortized (Fullly Amortized
2. Balloon Payment
3. Budget Loan (PITI loan)
4. Straight Loan/Term Loan
5. Negative Amortization

A
  1. Amortized/Fully Amortized (P&I)
  2. Balloon Payment
  3. Straight Loan/Term Loan
  4. Negative Amortization
  5. Budget Loan (PITI loan)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Amortized or Fully Amortized:
Equal periodic payments of P&I

A

THINK:

Amortized/Fully Amortized = P&I payment plan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Balloon Payement:

Last payment is larger than the monthly payments. Loan is partially amortized or interest only with the last payment being a balloon payment

A

THINK:
Balloon Payment=
* last payment larger than monthly payments
* partially amortized

17
Q

Budget Loan:
Payments over PITI.
**taxes and insurance go into an escrow account/impound acct/reserve acct
*Lender pays (on behalf of the borrower) taxes and insurance from the escrow account when due.

A

THINK:
* Budget Loan = PITI
* Lender pays Taxes & Insurance
* Taxes & Insurance go into an escrow account and paid by lender on behalf of borrower when due

18
Q

Interest is ALWAYS PAID IN ARREARS

A

INTEREST IS ALWAYS PAID IN???

19
Q

Straight Loan/Term Loan:
* usually Constuction Loans and HELOCs are commonly paid interest only
Borrower pays** interest only ** during the term of the loan with Principal due at maturity (balloon payment).

A

Borrower pays INTEREST ONLY
ex. Contruction Loans and HELOCs
* principal due at maturity of loan

20
Q

Negative Amortization:
Monthly payments are less than the interest due. examples:
* Home Equity Loans
* Graduated Payments loans

A
21
Q

STRAIGHT LOAN=INTEREST ONLY PAYMENTS

A

example: Contruction loans

22
Q

Promissory Note:
1. states who the lender & borrower are
2. The amount of the debt
3. The interest rate
4. The pattern of payments (monthly, quarterly etc)
Does NOT describe the collateral and is NOT recorded

A
  • names lender and borrower
  • the amount of the debt
  • the interest rate
  • pattern of payments
    THINK:
    ***Promissory note is a FINCANCE INSTRUMENT = borrower
  • a loan is a Security Instrument = lender**
23
Q

Loan Types: 14
1. FHA loan
2. VA loan
3. Conventional loan
4. Purchase Money loan or Carryback Financing
5. Wraparound loan
6. Adjustable Rate Mortgage (ARM)
7. Blanket loan
8. Package loan
9. Open-End loan
10. Construction loan
11. Take-Out loan
12. Gap loan/Swing Loan/Brigle loan
13. Reverse Annuity (RAM)
14. Nonrecourse loan

A
24
Q

FHA loan:
* Insured by Federal Housing Administration
* Regulated by HUD
* FHA does NOT lend money
* loan is paid PITI and do NOT have prepayment penalties

A

Think HUD loan
* FHA or HUD are NOT lenders
* FHA approved lender originates the loan
* Borrower pays MIP and UPMIP:

  1. Mortgage Insurance Premium-borrower pays monthly
  2. Upfront Mortgage Insurance Premium-borrower pays up front at close of escrow
25
Q

VA loan:
* VA guarantees the lender against loss on loans to eligible veterans and spouses of veterans
* Loan originated by VA approved lender
* VA funding fee NOT MIP
* NO DOWN PAYMENT/ 100% financing
* VA loans paid PITI with no prepayment penalties
* Assumable

A
  • No down payment-100% LTV
  • Paid PITI
  • Loan for owner occipied 1-4 family dwellings
  • VA appraisal required (Cert of Reasonalbe Value or CRV
  • Certificate of Eligibility req’d
26
Q

Conventional loan:
made solely based on the value of the property and the borrower’s ability to repay. No government insurance or guarantee.

A

Types of Conventional Loans:

  1. Uninsured Conv loans
    *require a min 20% down payment (80% LTV ratio)
    *down payment maybe borrowed
  2. Insured Conv loans which the lender is insured against loss in the event of foreclosure
    *PMI- Lenders require PMI on the loan amount greater than 80% LTV ratio
  3. a)Conforming loans: meet all Fannie Mae and Freddie Mac underwriting guidelines
    (b)Nonconforming
    loans: Jumbo Loans
    * Do not meet Fannie Mae and Freddie Mac guidelines
    *Exceeds the max dollar limits set by Fannie Mae or Freddie Mac. Jumbo loans usually have less favorable terms
  4. Subprime Loan:
    * Offered at a higher interest rate and less favorable terms to borrowers who are less qualified than “prime borrowers”
  5. Private Investor/Hard Money Loan:
    *loans placed at high interest rates for hard to finance borrowers or properties
27
Q

Loan Clauses:

  • Acceleration Clause

*Alienation Clause (Due on Sale Clause/Non-Assumption Clause)

*Prepayment Clause (Yield Maintenance Clause)

*Defeasance Clause

*Release Clause

*Subordination Clause

*Non-Disturbance Clause

*Carve-Out Clause (Personal Guarantee)

A
  • Acceleration: Allows the lender to declare loan balance immediately due and payable if borrower defaults
  • Alienation (Due on Sale/Non-Assumption): Allows lender to declare entire debt due and payable if the property is sold. May not be assumed. **alienate means to sell, transfer or assign.
  • Prepayment (Yield Maintenance): Lender can charge a prepayment penalty if loan is paid off early. Used by lenders o maintain their yield on a loan
  • Defeasance: States mortgage is null and void when the borrower pays off the note
    defeats the loan

Financing Fundamentals (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions