Vocabulary:

Question 1

Income Approach:

Answer 1

appraisal method allowing investors to estimate the value of a property by taking the net operating income of the rent collected and dividing it by the capitalization rate.

Question 2

Judgement Lien:

Answer 2

created automatically in the country where the judgement was rendered and may be created in other countries by recording an abstract judgement.

Question 3

Abstract Judgement:

Answer 3

a written summary of a judgment which states how much money the losing defendant owes to the person who won the lawsuit.

Question 4

Mortgage Points:

Answer 4

a fee equal to one percent of the loan amount.

1. discount points.
2. origination points.

Question 5

Market Analysis:

Answer 5

Examination of prices of similar properties sold recently in that particular area. This helps to determine a listing and offering price.

Question 6

Replacement Cost:

Answer 6

A replacement cost is the cost to replace an asset of a company at the same or equal value, found by depreciation to expense the cost of the asset over its useful life.

Question 7

Unilateral Contract:

Answer 7

legal enforceable promise, where one party pays the other party to perform a certain duty.

Question 8

Partition Suit:

Answer 8

A partition of real property by court order or otherwise, to divide up a concurrent (adjoining) estate into separate portions representing the proportionate interests of the owners of property.

Question 9

Straight Note:

Answer 9

A Promissory Note in which a borrower repays the principal in one lump sum, at maturity, while interest is paid in installments or at maturity.

Question 10

Leverage:

Answer 10

Purchasing real estate using a small amount of your own money and a large proportion of borrowed funds.

Question 11

Hypothecate:

Answer 11

Provide title to a property as security for a loan without giving up possession.

Question 12

Promissory Note:

Answer 12

The basic instrument used to evidence the obligation or debt.

Question 13

Principal:

Answer 13

Dollar amount of the loan.

Question 14

Interest:

Answer 14

Rent charged for the use of money

Question 15

Types of Promissory Notes:

Answer 15

Straight Note (interest only), Installment Note with a Balloon Payment, and Fully Amortized Installment Note (level payment - most common)

Question 16

Installment Note with a Balloon A Payment (partially amortized note)

Answer 16

A Promissory note with periodic payments of principal and interest and a large payment at the end (maturity date or due date).

Question 17

Fully Amortized Installment Note (level payment)

Answer 17

A promissory note for which both the principal and interest are paid in equal installments until the debt is paid in full.

Question 18

Equal Monthly Payments:

Answer 18

Monthly payment amount, including principal and interest, is constant, but as the loan is paid off, the amount of the payment attributed to interest Decreases and the amount attributed to principal Increases.

Question 19

Acceleration Clause:

Answer 19

Upon the occurence of a specific event, the lender has the right to demand immediate payment of the entire note. (always found in a trust deed)

Question 20

Alienation Clause:

Answer 20

A form of the acceleration clause, stating that the entire loan becomes due and payable when the property is sold, assigned, transferred, or otherwise alienated.

Question 21

Subordination Clause:

Answer 21

Part of a trust deed or mortgage that allows for a future change in the priority of financial liens.

Question 22

Effective Interest Rate:

Answer 22

Rate the borrower is actually paying (including interest, points, and loan fees)

Question 23

Formula For Calculating Interest:

Answer 23

Principle x Rate x Time

Question 24

Fixed Interest Rate: (Fully Amortized)

Answer 24

Payments are the same each month for the life of the loan.

Question 25

Negative Amortization:

Answer 25

The interest rate charges are higher than the monthly payment.

Question 26

Adjustable Rate Mortgage “ARM” (or Trust Deed)

Answer 26

Loan in which the interest rate fluctuates periodically, based on a specific index, which make the payment amount also change.

Question 27

Graduated payment mortgage (Trust Deed)

Answer 27

A type of fixed interest rate loan for which the monthly payment starts out lower and then gradually increases.

Question 28

Points:

Answer 28

An origination fee of 1% of the amount borrowed, charged by the lender.

Question 29

Equitable Title:

Answer 29

held by the trustor while he/she is repaying a trust deed and note (true ownership).

Question 30

Legal Title:

Answer 30

“Bare or Naked Legal Title” held by trustee until the terms of a trust deed and note have been fulfilled.

Question 31

Vendor, Vendee:

Answer 31

Owner selling; Buyer using a land contract

Question 32

Truth in Lending Act:

Answer 32

Know as Regulation Z, was enacted to protect the consumer by requiring that the lender (creditor) tell the borrower how much he or she is paying for credit. (enforced by the Federal Trade Commission FTC)