Real Estate Finance Vocab #4

Ways that FHA improved the mortgage market

-Set construction standards for homes purchased with FHA loans -The introduction of the long-term amortized loan -requires appraisers to be state licensed or certified to evaluate property for FHA-insured loans

Schedule A of ALTA Title commitment

-commitment date -policies to be issued -interest in the land(fee simple, leasehold ect.) -current owners -legal description

2-1 Buydown

2% interest rate reduction year one and 1% year two; interest rate returns in full year three. (interest rate increases 1% each year for the first two years.

3-2-1 buydown

3% interest rate reduction year one, 2% year two, and 1% year three; interest rate returns in full year four. (the interest rate increases 1% for the first three years.)

Which percentage reflects the top debt-to-income ratio limit for qualified mortgages?

43%

6 months, 12 months

A CRV has a shelf life of _______________ for resale properties and ______________ for new construction.

mortgagees

A REMIC is a partnership between ___________________. In this kind of partnership, each participant chips in an equal amount toward the funding of a large real estate project.

VA Funding Fee

A fee paid to the VA at closing to guarantee the loan. Some disabled veterans and surviving spouses are exempt from paying the fee.

Buydown

A financing technique in which he buyer obtains a lower interest rate by buying down the interest rate at the time the loan is made.

purchase money

A form of seller financing in which a loan is given to the buyer from the seller; the buyer puts the money toward the purchase price in the form of a down payment.

Straight Mortgage

A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date.

draw period

A period during which the borrower can use a line of credit. Followed by a repayment period.

Carry back loan

A seller-financed loan; option a buyer may use when there's insufficient cash for a down or finance the full purchase.

Torrens System

A title search method that goes back as far as the previous title search.

How much should the emergency fund hold, according to the recommendation for creating a responsible financial plan for personal finances?

At least six months

Mortgage or deed of trust (A lender would not approve a contract for deed, because the seller holds legal title in a contract for deed, making foreclosure difficult.)

Babs is buying Kirk's property. Babs needs help with the down payment, and Kirk offers to supplement Babs' bank loan with a second loan, allowing her to meet her lender's down payment requirements. Which finance instrument(s) may be used for the agreement between Babs and Kirk?

Yes, but only the miles driven for business.

Can you deduct mileage from a car you use for both personal and business purposes.

Cash-Out Refinance

Chuck needs to make a few repairs and upgrades to his home, but he needs some cash to do it. He decides to tap into the equity in his home, which he purchased using a VA home loan. What VA program can Chuck use to do this?

800+

Consumers in the _______ range have a well above-average credit score. They tend to qualify for better interest rates than those in the "acceptable" category.

740-799

Consumers in the _______ range have an above-average credit score. They tend to qualify for better interest rates than those in the "acceptable" category.

Rate, index, and margin

Directly affects and Adjustable rate mortgage (ARM)

No

Does an attorney's opinion provide a guarantee of title?

Schedule B-2 of ALTA Title commitment

Exceptions and/or exclusions things the policy will not insure

assumption of FHA loans

FHA loans may be assumed, but a creditworthiness review is required if the loan were originated after 1986, and the new borrower must occupy the property. Investors aren't allowed to assume FHA loans; the property must be owner-occupied

Benefit of a Seller Buydown

Help borrower meet lender qualification standards by lowering the initial monthly mortgage payments.

62

Homeowners over the age of ______ are eligible for the HECM program

half up front, half when the work is done

How and when does a contractor performing work associated with a 203(k) loan receive funds from the lender?

File for Chapter 7 or 11 bankruptcy

How do you temporarily stall a foreclosure?

Benefit of HECM

If more equity is paid out than remains, the homeowner doesn't have to make up the difference.

5%

In the residential mortgage market, charging borrowers more than ______ over market rate for interest is considered a predatory lending practice.

VA Rehab Mortgage

Is the same as the VA home improvement loan, VA renovation loan. Just a different name.

Lifting clause

It allows a borrower to refinance a first mortgage without affecting its lien position even when a junior mortgage is in place.

Blanket lien

It gives lenders the ability to recover losses due to a foreclosure sale from any current or future property the borrower owns.

10

It's possible for the adjustment period on an adjustable rate mortgage (ARM) to have ranges, such as three or ______ years apart.

Federal Trust Land

Land held by the government in which tribes acquires legal title under specific statutory authority.(Indian Reservation) land for Native Americans.

Mortgage Note

Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time. The agreement is secured by a mortgage or deed of trust or other security instrument.

First in time rule

Liens are paid based on date of filing.

Note with deed of trust (Lisa won't be able to use a contract for deed, and although the mortgage (with note) is an option, if Darwin's lender uses a deed of trust that means it is typical for the state, and would be Lisa's most likely choice.)

Lisa, a seller, is providing Darwin, a buyer, with a seller second on the purchase of her property. Darwin's conventional lender uses a note with deed of trust to secure the first loan. What instrument is Lisa most likely to use for her second loan with Darwin?

the time the work began

Mechanics liens are based on the ___________, not the time of filing.

203b

Most widely used FHA loan program 1 to 4 family residence

78%

PMI ends once the loan-to-value ratio reaches __________ of the original value. Under the Homeowners Protection Act of 1998, once the LTV ratio reaches ____________ of the original (not current) value of the property, PMI premium payments must stop automatically.

Factors considered when calculating Credit score

Payment history, age of account, credit usage, types of accounts, credit score

foreclosure by entry an possession

Petition to enter, repossession, notice of eviction the lender may ask the court for permission to physically take possession of the property after default has occurred and foreclosure is imminent. If court permission is obtained, the mortgagee can take the property peacefully and in the presence of a witness.

Rules regarding lien priority

Property tax liens take priority, with all others following a "first in time" rule.

Schedule B-1 of ALTA Title commitment

Requirements Breakdown of steps to meet requirements

Standards for FHA 203k

That the work meet FHA's basic energy efficiency and structural standards

An estimate of the energy savings that would result

The EEM program insured by the FHA requires an energy consultant to provide the lender with a report listing recommended modifications for energy efficiency, an estimate of the cost for each recommendation, and ______.

The Department of Housing and Urban Development

The FHA is part of ___________

Limits for conforming loans

The Federal Housing Finance Agency established percentage targets and ______ for loans made to low- to moderate-income borrowers.

1 quarter

The VA guarantees one quarter of the loan amount

Mortgage Note

The ______ is where the borrower finds details about how, when, and by how much the interest rate will change in an adjustable rate mortgage (ARM).

Real Estate Settlement Procedures Act (RESPA)

The _________________________ has special provisions for borrowers who have fallen victim to predatory lending practices, including those who are victims of over-charging.

end-of-year loan balance, plus the balance after the next 11 payments

The annual MIP is recalculated each year using ______.

Moratorium (forbearance)

The lender agrees to temporarily suspend payments in an effort to help the borrower avoid default and foreclosure

Foreclosure by Advertisement

The lender notifies the borrower who has defaulted on the mortgage of the impending foreclosure, and that the property will be sold at public auction. The notification is published in a local newspaper for several weeks after the notice is filed with the local county recorder.

Adjustment period

The number of initial years in which an ARM remains fixed before the interest rate is allowed to be adjusted.

Equitable right of redemption

The right of a debtor to redeem property from foreclosure proceedings prior to sale. (must be paid in full)

Statutory right of redemption

The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges. (must be paid in full)

6%

The seller may Contribute up to _______of the sales price (or appraisal, if that's lower) to the buyer's closing costs when a buyer obtains an FHA loan.

The borrower

The signature lines on the multi-state Fannie Mae promissory note are set up for ______ to sign.

cost of public services as percentage of the property value

What do property taxes in a mortgage payment pay for?

Requirements that must be met before a title policy will be issued

What information does Schedule B-1 of an ALTA title commitment provide?

36%

What is the minimum percentage of total debt ratio they must have to be eligible a conventional loan?

Rolling over funds from one IRA into another

What type of investment strategy is most similar to a 1031 tax-deferred exchange?

The draw period varies (The draw period for HELOCs varies and is established at the loan's outset.) (outset: beginning or end of something.)

What's true about the draw period on a home equity line of credit (HELOC)?

law enforcement officers, K-12 teachers, firefighters, and EMTs

Which of the following individuals would qualify to purchase a home under the Good Neighbor Program?

Child Support

Which of these items is a liability on a residential loan application? A. Automobile B. Cash C. Child Support D. Real Estate

The Buyer

Who is responsible for paying for the title search?

$200,000, less 50%, plus $100

Your client, Ray, wants to purchase a home listed for $200,000. The home is in a revitalization area, and Ray can purchase it under the Good Neighbor Program. How much will he have to pay for the home?

Encumbrance

a burden or impediment. A defect on a title that can be monetary or physical

IRS Form 4506-T

allows lenders to access your financial records from the past few years to verify your income with the IRS.

Arm's Length Transaction

any deal, contract or agreement between parties who have no significant relationship with each other.

Growing Equity Mortgage

fixed-rate mortgage with payments that increase over a specific period. Extra funds are applied to the principal so that the loan is paid off more quickly

A separate bank account in the corporation's name

is a requirement if you set up a corporation in order to perform real estate services

Recasting

is when the outstanding loan balance is reconfigured. It is a form of loan modification.

Static interest rate

refers to an interest rate that remains constant over a specified period of time.

Piggy back loans

second mortgage paired with an underlying 1st mortgage to keep 1st loan below 80% LTV, thus avoiding required mortgage insurance.

quantitative easing

the introduction of new money into the money supply by a central bank.

Foreclosure by Writ of Entry

the mortgagee asks the court for a writ of entry action. This means the borrower is given a final deadline when delinquent payments are due, and after that time, the mortgagee becomes the full legal owner of the property.