Lending - Session 13

Front 1

Package loan

Back 1

this loan includes both real property and personal property

Front 2

open end loan

Back 2

this loan allows the borrower additional funds at a later date

Front 3

HELOC

Back 3

This loan is based on the equity in the home

Front 4

Construction loan

Back 4

This is a temporary loan used when building a home

Front 5

GPM

Back 5

This loan is a possible choice for a borrower who knows that their income will increase significantly in the next few years

Front 6

ARM

Back 6

This loan has an index, a margin and a cap; the interest rate will adjust over the term of the loan

Front 7

Budget loan

Back 7

Payments on this loan include principal, interest, taxes and insurance

Front 8

Amortized loan

Back 8

This loan is paid off in equal payments over the life of the loan and will result in a zero balance at the maturity date

Front 9

Straight loan

Back 9

The borrower is the exact amount borrowed on the maturity date on this loan; aka interest only loan

Front 10

Balloon payment loan

Back 10

The borrower is making monthly payments on this loan, but the payments aren't sufficient to bring the balance to zero at maturity date

Front 11

Blanket loan

Back 11

This loan is typically used by subdividers because it covers more than one lot

Front 12

Reverse mortgage

Back 12

The bank makes annuity payments to elderly borrowers based on the equity in the home

Front 13

Take out loan

Back 13

This is a permanent loan that will pay off a construction loan and possibly a lot loan

Front 14

Purchase money mortgage

Back 14

Homeowner provides part of the financing to prospective buyers to make the property more attractive

Front 15

Wraparound loan

Back 15

An existing loan on the property is assumed by the lender, who then gives the borrower a new, larger loan

Front 16

Alienation Clause

Back 16

A mortgage Clause that permits the lender to call the outstanding balance due and payable should the property be sold by the borrower

Front 17

MIP

Back 17

Partially paid up front by the buyer and then monthly monthly; is required on all FHA Loans

Front 18

Discount points

Back 18

Money Paid to the lender prior to closing to reduce the interest rate on a loan

Front 19

Default

Back 19

The borrower does not live up to the terms of the contract

Front 20

Origination fee

Back 20

Charged by the lender for creating the loan

Front 21

Usury

Back 21

Charging a rate of interest in excess of the rate Allowed by law

Front 22

in Arizona this legal rate is:

Back 22

Whatever is reasonable

Front 23

Equity

Back 23

The difference between the market value of a home and the outstanding loans

Front 24

How is interest paid?

Back 24

Arrears

Front 25

When a borrower is making their October 1st mortgage payment, it covers the use of the money for what month?

Back 25

September

Front 26

Personal property also serves as as:

Back 26

Collateral for the loan

Front 27

Blanket mortgage loans usually have a:

Back 27

Partial release Clause, allowing the developer to pay a certain amount to release some of the Lots with the mortgage continuing on the remaining Lots

Front 28

Construction loan is also known as:

Back 28

interim loan

Front 29

The buyer makes the payments but is not personally responsible for the loan :

Back 29

"Subject to"

Front 30

The buyer becomes primarily liable for the loan:

Back 30

"Assumption"

Front 31

Alienation clause

Back 31

The Clause that requires the borrower to pay off the loan when title transfers

Front 32

Substitution of obligations or parties is referred to as:

Back 32

Novations

Front 33

This is the loan that most borrowers have because it helps them budget for those bills that come once or twice a year

Back 33

Budget loan

Front 34

At the end of a balloon payment loan, there is still a:

Back 34

Principal balance to be paid off

Front 35

Three components of an adjustable rate mortgage (ARM)

Back 35

Index: interest rate changes are tied to an index. Popular indexes are treasury bill index and cost of funds index

Margin: this is a rate added to the index rate

Cap: places limits on rate changes

Front 36

In an amortized loan the principal balance will be ___________at maturity date

Back 36

zero

Front 37

At the end of an interest only loan (aka straight loan, term loan)

Back 37

The full balance is paid in a lump sum AKA balloon payment

Front 38

Helps lenders prevent or control future assumptions of a mortgage loan by a new borrower requires the borrower to pay off the loan immediately

Back 38

Alienation clause

Front 39

Takes place when a buyer is declared in default; enables the lender to require the entire debt to be repaid immediately

Back 39

Acceleration clause

Front 40

When is an alienation clause due?

Back 40

When sold

Front 41

If a seller wants to be completely free of the original mortgage loan a ____________ must be executed

Back 41

Novation agreement

Front 42

Pre-qualification letter

Back 42

Given to the potential buyer from the lender. Includes the price range of homes they can afford afford; First Step before showing property

Front 43

When is the only time it is not considered discriminatory to refuse to show houses to a client?

Back 43

When the buyer is not pre-qualified for that specific price range

Front 44

Loans must be made equally based on:

Back 44

Credit worthiness

Front 45

Age is a part of _______:

Age is NOT a part of ________:

Back 45

-ECOA

-Federal Fair Housing laws

Front 46

Difference between pre-qualification and loan commitment is

Back 46

Pre-qualification: this is when you know the credit score, but have no proof. Can do this over phone.

Loan commitment: this is done once the buyer shows facts to the lender. This is a written notice of agreement to lend under specific terms and the loan estimate within 3 days of application

Front 47

What two ratios are important to A lender when pre-qualifying a borrower?

Back 47

Income ratio and debt ratio

Front 48

For what reason can an agent refuse to show certain homes to a client?

Back 48

The client cannot qualify or afford it

Front 49

What Act was passed to prevent discrimination in Lending?

Back 49

ECOA - Equal Credit Opportunity Act

Front 50

What is one of the protected classes which is covered in the ECOA but not the FFHA?

Back 50

Age, marital status, public assistance

Front 51

Loans must be based entirely on what?

Back 51

Credit worthiness

Front 52

Arizona is a _______ theory state

Back 52

Lein theory - 3 ppl involved (beneficiary, trustee, truster)

Front 53

Title Theory

Back 53

Two people involved - Mortgager (borrower) and mortgagee (lender)

Front 54

Statutory Redemption period

Back 54

6 months

Front 55

Arizona Redemption period

Back 55

90 days

Front 56

Principal

Back 56

The amount borrowed it is the original loan

Front 57

Principal balance

Back 57

What the unpaid principal is called at any point during the life of a mortgage

Front 58

Interest/ interest rate

Back 58

Interest is the charge for use of the lenders money

Front 59

Mortgage interest is commonly paid in:

Back 59

Arrears

Front 60

Arrears

Back 60

At the end of payment period. March 1st payment - use of money 4 month of February