Texas Principles 2 CH 3
ARM 3/1 example
- 3 refers to years where interest is constant. - 1 refers to how many times the interest rate adjusts each year going forward
Which of the followed is asked on a residential loan application...?
1. Employment History 2. Current monthly housing expenses 3. List of assets and liabilities
3 basic types of loans
1. Fixed-rate mortgage 2. Interest only mortgage 3. Adjustable rate mortgage
A term loan is typically used for which of the following...?
1. Second Mortgages 2. Home improvement loans 3. Investor loans
The Federal Reserve regulates the flow of money and interest rates indirectly by controlling which of the following requirements for its member banks...?
1. credit requirements 2. reserve requirements 3. minimum loan requirements
The Federal Reserve System is divided into how many geographical districts....?
12
XYZ Bank is willing to offer a 80% LTV loan on a property. If the property was appraised at $160,000, and the contract price is $180,000, what will be the loan amount offered by XYZ Bank...?
128,000
Mortgage Broker
A broker who arranges a mortgage loan between a lender and a borrower for a fee.
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.
Sale and Leaseback
A financial arrangement where at the time of sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser. The seller receives cash while the buyer is assured a tenant and a fixed return on buyer's investment.
Wrap Around Mortgage
A financing device whereby a lender assumes payments on existing trust deeds of a borrower and takes from the borrower a junior trust deed with a face value in an amount equal to the amount outstanding on the old trust deed and the additional amount of money borrowed.
Primary Residence
A lender will most likely provide a higher LTV for which of the following property types...?
Home Equity Loan
A loan against the equity in a home.
Construction Loan
A loan made to finance the actual construction or improvement on land. Funds are usually dispersed in increments as the construction progresses.
VA loan
A loan made to qualified veterans for the purchase of real property wherein the Department of Veteran's Affairs guarantees the lender payment of the mortgage.
Balloon Mortgage
A mortgage in which the scheduled payment will not amortize the loan over the mortgage term; therefore, for the debt to be fully satisfied, a final payment called a balloon payment, larger than the uniform payments, is required.
Adjustable rate mortgage
A mortgage loan which bears interest at a rate subject to change during the term of the loan
Adjustable Rate Mortgage (ARM)
A mortgage loan which bears interest at a rate subject to change during the term of the loan, predetermined or otherwise.
Conventional Loan
A mortgage securing a loan made by investors without governmental underwriting is referred to as a/an...?
Conventional Loan
A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.
Term Mortgage
A mortgage that requires the mortgagor to pay interest only during the mortgage term, with the principal due at the end of the term is referred to as what type of mortgage...?
Term Mortgage
A mortgage that requires the mortgagor to pay interest only during the mortgage term, with the principal due at the end of the term.
Freddie Mac
A nickname for the Federal Home Loan Mortgage Corporation (FHLMC), a corporation wholly owned by the Federal Home Loan Bank System that purchases FHA, VA, and Conventional mortgages.
Ginnie Mae
A nickname for the Government National Mortgage Association (GNMA), a U.S. government agency that purchases FHA and VA mortgages.
Creditor
A person to whom a debt is owed.
Mortgage Banker
A person whose principal business in the originating, financing, closing, selling and servicing of loans secured by the real property for institutional lenders on a contractual basis.
Second Mortgages, home improvement loans, investor loans
A term loan is typically used for which of the following...?
Bond
A written notice of an obligation given by a corporation or government entity is known as a...?
A written notice of an obligation given by a corporation or government entity is known as a...?
Bond
A loan made to finance the actual construction or improvement on land is referred to as a...?
Construction Loan
The minimum interest rate set by the Federal Reserve for lending to other banks is known as the...?
Discount rate
Which of the following is a privately owned corporation that purchases FHA, VA, and conventional mortgages...?
Fannie Mae
Negative amortization may occur in which of the following types of loans...?
Flexible Payment loan
In this type of loan, a borrower initially pays a reduced interest rate, which gradually increases to the market rate after a period of time...?
Flexible payment loan
Most deed of trust loans are...?
Fully amortized
Subsidy Buydown
Funds provided usually by the builder or seller to temporarily reduce the borrower's monthly principal and interest payment.
A loan against the equity in a home is known as a...?
Home equity loan
Balloon Mortgage
In this type of mortgage, the scheduled payment will not amortize the loan over the mortgage term...?
The financing charge that a lender requires is referred to as the...?
Loan origination fee
Private Mortgage Insurance
Mortgage guaranty insurance available to conventional lenders on the first, high risk portion of a loan
Private Mortgage Insurance (PMI)
Mortgage guaranty insurance available to conventional lenders on the first, high risk portion of a loan is referred to as...?
Fully amortized
Most deed of trust loans are...?
Flexible payment loan
Negative amortization may occur in which of the following types of loans...?
Negative Amortization
Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.
Secondary Mortgage Market
Once a bank make a loan to a borrower, the bank may sell that loan in which of the following markets...?
PITI
Principal, Interest, Taxes, Insurance
Mortgage guaranty insurance available to conventional lenders on the first, high risk portion of a loan is referred to as...?
Private Mortgage insurance
The primary function of a .......... is to promote thrift and home ownership?
S&L
A financial arrangement where at the time of sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser is known as...?
Sale and leaseback
Uniform Residential Loan Application
The Fannie Mae form 1003 is also known as the...?
12
The Federal Reserve System is divided into how many geographical districts....?
Reserve Requirements
The Federal Reserve regulates the flow of money and interest rates indirectly by controlling which of the following requirements for its member banks...?
Primary Mortgage Market
The activity of lenders' making mortgage loans to individual borrowers.
Discount Points
The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate. The amount is equal to the difference between the principal balance on the note and the lesser amount which a purchaser of the note would pay the original lender for it under market conditions. A point equals one percent of the loan.
Secondary Mortgage Market
The buying and selling of existing deeds of trust and promissory notes
Federal Reserve System
The federal banking system of the United States under the control of central board of governors (Federal Reserve System) involving a central bank in each of twelve geographical districts with broad powers in controlling credit and the amount of money in circulation.
Loan Origination Fee
The financing charge that a lender requires is referred to as the...?
Yield
The interest earned by a bank on the money it has loaned is referred to as...?
Yield
The interest earned by a bank on the money it has loaned.
Discount Rate
The minimum interest rate set by the Federal Reserve for lending to other banks is known as the...?
Discount Rate
The minimum interest rate set by the Federal Reserve for lending to other banks.
Truth in Lending
The name given to the federal statutes and regulations (Regulation Z) which are designed primarily to insure that prospective borrowers and purchasers on credit receive credit cost information before entering into a transaction.
S&L
The primary function of a .......... is to promote thrift and home ownership?
Loan to value ratio
The relationship between the amount borrowed and the appraised value of the property. (Purchase price 100,000-Loan 80,000-LTV 80%)
Loan to Value Ratio
The relationship between the amount of a mortgage loan and the lender's opinion of the value of property pledged to secure payment of the loan is known as the...?
Loan-to-Value Ratio
The relationship between the amount of a mortgage loan and the lender's opinion of the value of property pledged to secure payment of the loan.
Annual Percentage Rate (APR)
The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the Federal Truth in Lending Act.
Fannie Mae
The shortened name for the Federal National Mortgage Association (FNMA), a privately owned corporation that purchases FHA, VA, and conventional mortgages.
The Fannie Mae form 1003 is also known as the...?
Uniform Residential Loan Application
A balloon payment
What is required to fully satisfy a balloon mortgage...?
Balloon Mortgage
Which of the following is the riskiest loan for a residential borrower...?
Farmer Mac
Which of the following purchases newly originated and seasoned agricultural loans from lenders...?
Homebuyers who only intend to live in the property for a few years
Which of the following will most likely benefit from a balloon mortgage...?
Bond
Written notice of an obligation given by a corporation or government entity. A surety instrument.
128,000 (80% of the lower)
XYZ Bank is willing to offer a 80% LTV loan on a property. If the property was appraised at $160,000, and the contract price is $180,000, what will be the loan amount offered by XYZ Bank...?
The interest earned by a bank on the money it has loaned is referred to as...?
Yield
fixed rate mortgage
a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan - most common for purchase of a house -principal payment increases each month over term of loan
Interest-only mortgage
a straight, non-amortizing loan in which the lender receives only interest during the term of the loan and then principal is repaid in lump sum at maturity
A person to whom a debt is owed is known as a...?
creditor
VA loans are
guaranted
Loan Origination Fees
he financing charge that a lender requires.
FHA loans are
insured
Advantages to Interest-only Mortgages
lower monthly mortgage payments compared to a fixed-rate mortgage
Disadvantages to Interest-only mortgages
the borrower is responsible for paying full loan amount at maturity (higher risk of default)