principles of real estate part 3
Related to real estate financing, how much is a point?
1% of loan value
Generally, what's the common range for loan origination fees?
1% to 3%
Sellers must provide homebuyers with _______ days to conduct a risk assessment for lead-based paint or lead-based paint hazards
10
an acre is how many square feet
43,560
how many feet are in a mile
5,280 feet
Private mortgage insurance may be required on conventional loans where the loan-to-value ratio is in excess of ______%.
80%
Margot is looking for a 10-year loan with regular affordable monthly payments. In eight years, she'll inherit a good chunk of money from her grandmother and be able to pay off the remaining loan amount. What kind of loan might be best for Margot
Balloon Loan
Tyler is a developer who renovates a long-abandoned warehouse in a low-income neighborhood into a community center, complete with space for after-school programs, a daycare, and a gym. Tyler is able to complete the renovation with a loan funded by a local bank. Which act requires financial institutions to make credit available for this type of development
Community reinvestment act
Bethany has agreed to purchase Derrick's property using a land contract. Who holds legal title to the property during the term of the loan
Derrick
The equity equation formula is:
Home's appraised value - loan debt = equity
In a mortgage, the property is used as collateral for the loan. The process of pledging something as collateral is referred to as ______
Hypothecation
area formula
Length x Width
The acronym PITI is a reference to what real estate-related concept
Mortgage payment
What does PITI stand for?
Principal, Interest, Taxes, Insurance
What's the purpose of the Home Mortgage Disclosure Act
Requires financial institutions to maintain, report, and publicly disclose information about their mortgages
What do property taxes in a mortgage payment pay for
The cost of public services as a percentage of the property value
What would happen if your client's rate lock expires three days prior to closing
The interest rate will revert to the current rates
What's the purpose of the fixed/adjustable rate note?
To convert the interest rate from fixed to adjustable
How long does the borrower have to pay private mortgage insurance
Until the borrower reaches a 22% equity position
Robin has great credit and was able to secure a loan for her ocean-side dream home. Her 30-year, fixed-rate loan is for an amount that's above conventional loan limits. What type of loan does Robin have?
a non-conforming loan
After getting into a fender bender, Parker had to buy a new car. To make the down payment on the car, he had to skip a couple of his mortgage payments. He received a notice from his lender indicating the remaining amount of his loan is due immediately and in full. What clause in his mortgage stipulates this?
acceleration
Which type of loan's interest rate fluctuates with the economic index to which it's tied
adjustable rate
The interest rate fluctuates based on the economic index to which it's tied.
adjustable rate morgage
Debt is paid off by making periodic payments toward both principal and interest.
amortized loan
Caroline's monthly mortgage payment includes principal, interest, taxes, and insurance. She has a 30-year mortgage at a consistent 3.75% interest. What type of loan does she have
budget mortgage
Which of the following is an action borrowers take to temporarily lower the interest rate on their mortgage loan?
buydown
National banks that offer consumer and business loans
commercial banks
Member-based cooperatives that provide credit for loans
credit unions
A trustee is holding title to Cassandra's house until the loan is paid in full. Which type of security instrument was used
deed of trust
Shirley's lender discharged the mortgage lien on Shirley's property after processing her final payment. Which clause requires the lender to take this action
defeasence
An upfront charge to make up for the difference between the rate the borrower is receiving and the rate the lender normally requires
discount point
Which type of point allows you to buy down your interest rate to lower your monthly payment?
discount point
Leonard is offered a loan at 5.75%. Because he plans to be in his home for several years, he chooses to pay points up front to have the rate reduced to 5.25%. What's this an example of?
discount points
Discolored soil, soft spots, or mounds on the land could be indicators of a(n) ______
former waste disposal sites
What hazard do mining activities, landfills, or agricultural pesticides contribute to
groundwater contamination
Money is loaned based on the owner's existing equity.
home equity
Companies that finance mortgage loans, but specialize in insurance products
insurance companies
Only ______ is paid until the end of a straight mortgage loan term, when the principal is repaid in full
interest
Groups that lend to those who want to avoid conventional financing
investment groups
The buyer has possession of the property, while the seller still holds the title.
land contract
the borrower holds the title & owns the house, but a promissory note signed by the borrower gives the lender the right to seize and sell the house should the borrower default
lien theory
loan origination fee equation
loan amount x loan original percentage
loan-to-value ratio equation
loan amount/home value x100
A calculation that describes the amount being borrowed compared to the value of a property is called ______ ratio.
loan to value ratio
In order to set an interest rate prior to closing, a borrower must _______ the interest rate.
lock
For 25 years, Isadora loved being her own boss, but now she's getting tired of the day in, day out tedium of running her business. She's ready to retire and move to a tropical island. She decides to sell her entire business in one fell swoop: the property together with all the equipment and furnishings. What type of loan would the buyer need to obtain
package
is essentially a promise from the borrower (the obligor) to repay a certain sum of money to another party (the lender or holder of the note, known as the obligee) under specified terms
promissory note
What type of arrangement allows the buyer to retain title to the property but places a security interest in the property on behalf of the seller?
purchase money mortgage
John recently bought a home on a few acres of land from the Rubinos. The EPA notified him that a hazardous materials site had been discovered on the outskirts of his property. After an investigation, the EPA determined that both John and the Rubinos are responsible for sharing the cost of the cleanup. What type of liability is this
retroactive
Associations that accept savings deposits and offer loans
savings and loan associations
Samuel and Yoshi have worked at the same firm for a few months and get along well. Samuel mentions he has a credit score in the low 800s. Yoshi, who's just starting out, persuades Samuel to sign for a loan to help Yoshi buy a property, since his credit isn't good enough. Yoshi promises to make the mortgage payments, but two months after the deal closes, Yoshi moves across the country. Samuel's now stuck with a $400,000 mortgage. What type of scheme is this?
straw buyer
The Clean Water Act regulates pollutants in U.S. waters and establishes quality standards for ______
surface waters
Only interest is paid until the end of the loan term, when the principal is repaid in full.
term or straight term
In a residential real estate sale involving a federally related loan, what entity is required to provide Real Estate Settlement Procedures Act disclosures to the consume
the consumers lender
When a seller and a licensee both know about an adverse material fact regarding the physical condition of a property, who bears liability for failure to disclose that fact
the seller and the licensee
the borrower receives the deed, but the lender keeps the title and owns the house until the borrower pays off the loan
title theory
Manuel is selling his home to Selena. He has an existing loan that he'll continue to make payments on, and he's extending credit to Selena for the balance of the purchase price. She will make monthly payments to him. What type of financing are the parties using in this transaction
wrap around loan
The seller continues to pay on first mortgage, while the buyer pays on this loan.
wrap-around