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14 Cards in this Set
- Front
- Back
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What is a Fixed Mortgage?
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1. Loan where interest rate is fixed for a specific time. 2. Interest rate cannot be raised if payment is missed. No Default Rate.
3. Actions of Fed Reserve does not affect rate. 4. Only thing that can change are borr's reserve amounts. |
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What is an Adjustable Mortgage?
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Mortgage where interest rate varies.
1. Requires add'l disclosures 2. Borr'r must be given CHARM booklet - Consumer Handbook on Adj Mortg. |
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What are terms on an ARM?
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Index—Determined by loan program—variable factor of the loan—lender does NOT control
• Margin—set by lender in loan parameters—used to calculate note rate—does not change over the life of the loan • Fully indexed rate—index plus margin • Start rate—initial interest rate—usually below the fully indexed rate |
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What kinds of caps, or limits do ARMs have?
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ARMs have periodic and lifetime caps/limits.
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Explain a 2/6 cap.
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2/6 Cap
1.Periodic cap is two percent. 2. Lifetime cap is six percent. Each adjustment is capped at two percent from the current rate. 3. Loan cannot adjust more than six percent from original start rate. |
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Explain a 1/5 cap.
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1/5 Cap
1. The periodic cap is one percent. 2. Lifetime cap is five percent. |
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Explain a 5/2/5 cap.
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5/2/5 Cap
1. Initial adjustment cap is five percent. 2. The subsequent periodic cap is two percent. 3. The lifetime cap is five percent. |
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What is a Balloon Mortgage?
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1. Balloons carry fixed rate lower than 30 year fixed rates for a set period of time.
2. Once fixed period lapses, entire balance of loan becomes due & payable. |
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What does 180/360 & 2/28 mean in Balloon terms?
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180/360:
Balloons in 15 years, fixed interest rate, amortized over 30 years 2/28: Balloons in 2 years, fixed interest rate, amortized over 30 years |
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What is a HECM?
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1. A reverse equity mortgage
2. Requires substantial equity 3. For borr'rs 62 and older 4. Loan due at time of sale of property or borr'rs death |
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What is a Construction Loan?
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Temporary loarn used for construction of a property. Once construction finished, a permanent long term loan is used to pay off construction loan.
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What is Bridge Financing?
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Temporary loans that bridge gap between sales price of a new home & new mortgage, in the event the buyer's home has not yet sold.
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What is Service Release Premium (SRP)?
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The amount a servicer pays to the lender in order to acquire the servicing rights of loan.
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What is the Yield Spread Premium (YSP)?
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1. Amount paid to a lender or a broker for closing a loan at an interest rate above the par rate.
2. Par is the rate at which the lender neither pays nor charges for the interest rate. 3. Yield spread must be disclosed on the Good Faith Estimate and the HUD-1 settlement statement. |
