Quiz #5

VA Loan

A mortgage loan program established by the United States Department of Veterans Affairs to help veterans and their families obtain home financing

Conventional Insured Loan

Conventional loans also can be insured, with a private mortgage insurance policy. Some conventional lenders require insurance, especially if the down payment is below 20 percent, and may allow the insurance premium to be rolled into the loan amount. An insured conventional loan is much like an FHA loan, except the insurer is private rather than government.

What is a nonconforming loan?

a loan that fails to meet bank criteria for funding. Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it.

What is a conforming loan?

a mortgage loan that conforms to GSE (Fannie Mae and Freddie Mac) guidelines

Obligation to income

all the fixed obligations that a borrower is supposed to meet regularly on a monthly basis

How do FHA loans benefit the lender?

it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations

What are agency loans?

mortgage bonds issued by Fannie Mae, Freddie Mac, or Ginnie Mae -- the government-supported agencies that guarantee mortgages. The mortgages represented by these securities are guaranteed by the issuing agency that the principal amount of the loan will be repaid.

FHA Loan

mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.

Conventional Loan

no government insurance and so typically has a higher interest rate but offers more flexibility in terms, such as length of the loan and interest options. A conventional loan usually requires higher down payments, often up to 20 percent of the loan. Conventional loans are processed more quickly because they require less paperwork and do not need approval of government agencies.

Payment to income

one way lenders (including mortgage lenders) measure an individual's ability to manage monthly payment and repay debts. DTI is calculated by dividing total recurring monthly debt by gross monthly income,

How do VA loans benefit the lender?

the federal government backs all VA Loans and assumes the risk on behalf of the borrower that is typically covered by the PMI.