Finance 3

_______payment assisstance are to help stimulate the economy and make loans available to most people. -In a seller assisted down payment program, the seller made a substantial payment to the program and the program made the down payment for the borrower. -This led to inflated prices, massive foreclosure and helped fuel the financial market crisis in 2008. The came to an end 10/1/2000 with legislation.

Down

________money loan is a loan from the seller to the buyer of real property to finance all or part of the purchase price of the property. -No money changes hands since the buyer gives the seller a promissory note and a mortgage (or other security instrument) for the amount of the loan. This is referred to as "taking back" a mortgage or "carry back financing" -This is used when the seller finances part of the purchase price in the form of a second mortgage, but it can be used with loans of first priority, or lower priority as well.

Purchase

____rate loans The rate of interest may change over the term of the loan. -The rate is keyed to an index such as the price of US Treasurey bills. As the price of the index changes, the interest rate on the loan changes at preset intervals. -the index must be readily verifiable by the borrower but not under the control of the lender .-the interest rate on the loan is equal to the index plus a "margin" whcih is a fixed number of percentage points (usually 1%-3%) -For example, if the treasury bill index were 7%, and the margin were 2%, the interest rate on the loan would be 9%.

adjustable

Negative __________means: -The scheduled loan payment is not large enough to cover al the interest due -The unpaid interest each month is added to the principal balance -The result is that the principal balance increases each month, rather than decreasing as in a regular amortized loan -as the amount of the scheduled payment encreases each year, the amount of negative amortization decreases until it reaches zero. -the principal balance then begins to decrease with each payment

amortization

Over the _______ period (the term:) -the amount going to interest decreases -the amount going to principal increases By the end of the term, the entire principal is repaid in full.

amortization

An _______loan is when the both the principal and interest are paid during the term of the loan. -Payments are for the same total amount throughout the term of the loan. -part of each payment covers the interest due for the previous installment period (ususally a month), and the remaining amount goes toward the repayment of the principal )(debt reduction)

amortized

Reverse_______loan allows a homeowner to borrow against the equity in his/her home. -The borrower receives monthly payments from the lender and a gradual debt builds up against the property. -The debt must be repaid to the lender on a specified date or when a specified event occurs, such as the sale of the home or the death of the borrower. -These loans are often used by retirees who have built up equity in their homes but need additional income to meet living expenses. Some see this as a method of spending the kids' inheritance.

annuity

_________loan is when more than one party is used as security for a single loan. Will usually contain a partial release clause. This lets single properties to be relaeased from the mortgage as the principal balance is reduced.

blanket

A ______loan is an amortized loan that also includes in each payment an amount to cover the taxes and insurance on the property. -Each payment includes the amount for principal and interest plus 1/12 of the estimated annual taxes and insurance cost. -Known as a PITI loan, which stands for : Principal, Interest, Taxes, and Insurance -ALL FHA and VA loans are budget loans -Lenders who loan more than 80% of the value on a conventional loan often require a budget payment

budget

A ________loan is a mortgage in which the seller (often a builder) prepays an amount of money in order to reduce the interest that the buyer pays in the first few years of the loan (usually 1-3 years)

buydown

lender funded _______is when the the lender charges an overall interest rate that is slightly higher than the standard rate but allows the buyer to pay a lower rate during the first few years of the loan.

buydown

_______loans are short term loans made to the owner or builder for contructing a building. -the lender advances money from the loan as construction takes place. This paid off whne permanent financing is obtained ont he property...viewed as risky for the lender..so they carry a higher interest rate than the permanent financing

construction

Open ______loan is when the borrower can obtain additional money during the term of the loan. "home equity loan" A line of credit is offered at the the demand of the borrower. When the loan is repaid all or in part, the remaining credit line can be reborrowed.

end

Shared_______loan the buyer receives favorable loan terms from the lender...also known as shared appreciation loan. -in exchange, the lender receives a portion of the appreciation from the property, usually when the property is sold.

equity

_______is the difference between the market value of a property and the principal balance on any loans against it; At the time of purchase, equity is equal to the down payment.

equity

One type of _______payment loan is a graduated Payment Mortgage (GPM), which is an FHA, Title II, Section 245 loan, commonly referred to as a Section 245 loan. THey are amortized loans under which the payments: -are set low initially -gradually increase over the first 5 or 10 years of the loan -In the early years of the loan, the repayment schedule may result in negative amortization.

graduated

The _______is the money paid for the privilege of using the linder's principal.

interest

Sale and ________loans is when the property owner sells the property to the investor. The investor then leases the property back to the original owner -often used by owner of commercial property who wants to free up capital to use for other purpose

leaseback

The ______cap is the maximum amount the interest rate can increase over the life of the loan (usually about 5-6%...They may also have a payment cap which limits the amount of the increase in the monthly payment...can sometimes result in a negative amortization as in a graduated payment mortgage.

lifetime

A ________loan is a loan which also includes a provision for an installment payment on some article(s) of personal property. -A package loan is secured by both real and personal property. A example would be a condominium in a resort area which is secured by the condo(real) and furnishings(personal) -This gives the borrower the advantage of financing those items at the lower rate of interest by including them in a "package" witht he home loan.

package

A ______ amortized loan is similar to the fully amortized loan with one exception: -At the end of the term, there is still a balance due on the principal amount. The remaining principal balance is paid in one lump sum at the end of the term. -The partially amortized loan is often referred to as a "ballon" loan mortgage. This lump sum payment is commonly called a 'balloon payment'

partially

-The ______ interest rate cap is the maximum amount the interest rate can increase in one adjustment period.

periodic

The ________is the amount of money borrowed

principal

The ______balance is the amount of the principal remaining to be repaid at a given point and time.

principal

with Adjustable _____loans, adjustments to the interest rate usually have certain limitations: -They are made at the end of each adjustment period, usually 1-3 years in length. -Most have a limit or cap on the interest rate increases.

rate

The ______is period of time over which the loan is repaid

term

With a ______loan payments are made during the term of the loan cover interest only. -The principal is apid in full at the end of the term of the loan, which is known as a balloon payment. Terms loans are also know as straight loans

term

A _______mortgage can be used with an assumable existing loan.

wraparound

A ______loan can only be used when there is no alienation (due on sale) clause on an existing loan. -the seller usually makes the loan for he buyer with their equity. -A new loan, larger than the existing loan is created but the existing loan also stays in effect. This new loan "wraps around" and is "inclusive of" the existing loan. The buyer's loan requires payments on a amount greater than the original principal on the old loan. -Out of this payment, the seller continues to make the payments on the original loan, and "pockets" any difference.

wraparound