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27 Cards in this Set
- Front
- Back
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FULLY AMORTIZED LOAN |
A loan that requires regular installment payments of both principal and interest, with the installment payments paying off the full amount of the principal and all of the interest by the end of the repayment period |
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PARTIALLY AMORTIZED LOAN |
A loan where the installment payments will cover only part of the principal, so that a balloon payment of the remaining principal balance is required at the end of the repayment period |
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INTEREST-ONLY LOAN |
A loan that allows the borrower to pay only the interest accruing during the initial years of the loan term; at the end of the interest-only period, the borrower begins making amortized principal and interest payments that will pay off the loan by the end of the term. Also, a loan that requires interest payments but no repayment of principal during its term |
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LOAN-TO-VALUE RATIO |
The relationship between the loan amount and either the sales price or the appraised value of the property (whichever is less), expressed as a percentage |
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SECONDARY FINANCING |
Money borrowed to pay part of the required downpayment or closing for a first loan, when the second is secured by the same property that secures the first loan |
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ORIGINATION FEE |
A fee a lender charges a borrower upon making a new loan, intended to cover the administrative costs of making the loan |
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DISCOUNT POINTS |
A percentage of the principal amount of a loan, collected by the lender at the time a loan is originated, to give the lender an additional yield |
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ADJUSTABLE-RATE MORTGAGE |
A loan in which the interest rate is periodically increased or decreased to reflect changes in the cost of money |
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NOTE RATE |
The interest rate stated in a promissory note |
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INDEX |
A published statistical report that indicates changes in the cost of money; used as the basis for interest rate adjustments in an ARM |
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MARGIN |
In an adjustable-rate mortgage, the difference between the index rate and the interest rate charged to the borrower |
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NEGATIVE AMORTIZATION |
The addition of unpaid interest to the principal balance of a loan, thereby increasing the amount owed |
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CONVERSION OPTION |
A provision in many adjustable-rate mortgages that gives the borrower the option of converting to a fixed interest rate at certain times during the first years of the loan term; if the borrower chooses to do this, the loan will remain at that fixed rate for the remainder of the term |
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CONVENTIONAL LAON |
An institutional loan that is not insured or guaranteed by a government agency |
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PRIVATE MORTGAGE INSURANCE |
Insurance provided by private companies to conventional lenders for loans with loan-to-value ratios over 80% |
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RESERVES |
Cash or other liquid assets that a borrower will have left over after closing (after making the downpayment and paying the closing costs) and could use to pay the mortgage in the event of a financial emergency |
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GIFT FUNDS |
Money that a relative (or other third party) gives to a buyer who otherwise would not have enough cash to close the transaction |
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BUYDOWN |
The payment of discount points to a lender to reduce (buy down) the interest rate charged to the borrower; especially when a seller pays discount points to help the buy/borrower qualify for financing |
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FHA-INSURED LOAN |
A loan made by an institutional lender and insured by the Federal Housing Administration, so that the FHA will reimburse the lender for losses that result if the borrower defaults |
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MORTGAGE INSURANCE PREMIUM (MIP) |
Most often used to refer to the fee charged for FHA insurance coverage. The initial FHA prmium is referred to as the UFMIP (upfront MIP). |
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VA-GUARANTEED LOAN |
A home loan made by an institutional lender to an eligible veteran, where the Department of Veterans Affairs will reimburse the lender for losses if the veteran borrower defaults |
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VA GUARANTY AMOUNT |
The portion of a VA loan guaranteed by the Department of Veteran Affairs; the maximum amount that the VA will pay the lender for a loss resulting from the borrower's default |
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CAL-VET LAON |
A loan made through the California Veterans Farm and Home Purchase Program |
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RURAL DEVELOPMENT (RD) LOAN |
A loan made or guaranteed by the federal Rural Housing Service, available to low-income borrowers in rural areas |
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SELLER FINANCING |
When a seller extends credit to a buyer to finance the purchase of the property, as opposed to having the buyer obtain a loan from a third party, such as an institutional lender |
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PURCHASE MONEY LOAN |
When a seller extends credit to a buyer to finance the purchase of the property, accepting a deed of trust or mortgage instead of cash |
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WRAPAROUND LOAN |
A purchase money loan arrangement in which the seller uses part of the buyer's payments to make the payments on an existing loan (called the underlying loan). The buyer takes title subject to the underlying loan, but does not assume it |
