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42 Cards in this Set
- Front
- Back
What considerations are involved when one is deciding to buy or rent property |
1. How long a person wants to live in a particular area 2. A person's financial situation 3. Housing affordability 4. Current mortgage interest rates 5. Tax consequences of owning vs. renting 6. What might happen to home prices and tax laws in the future |
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What are the biggest factors when deciding whether to own or rent? |
Mortgage terms and payment plans |
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What are the basic cost of ownership called? |
Principal Interest Taxes Insurance |
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What is DTI? |
Debt to Income |
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The difference between the market value of the property and the amount still owed on its is the homeowner's ________ in the property |
Equity |
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What are the tax deductions homeowners may deduct from their gross income? |
1. Mortgage interest payments on first and second home 2. Real estate taxes 3. Certain loan origination fees 4. Loan discount points 5. Loan prepayment penalties |
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True or False A couple that files a joint tax return can sell a principal residence, up to $250,000 in profit to be excluded form capital gains tax. |
False note: a couple can do a $500,000 in profit and a person filing single can receive up to $250,000 |
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True or False A first-time homebuyer may make a penalty-free withdrawal from a tax-deferred individual retirement account for the down payment on a home |
True |
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A ______ is a borrower's personal promise to repay a debt according to the agreed terms |
Promissory note |
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A _____ is a _______ similar to a check or bank draft |
note, negotiable instrument |
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_____ is a charge for the use of money, expressed as a percentage of the remaining balance of the loan |
Interest |
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Charging interest in excess of the maximum rate allowed by law is called _____ |
Usury |
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What is the fee called that is charged by most lenders to cover the expenses involved in generating the loan |
Loan origination fee |
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What are discount points for? |
They are used to increase the lender's yield (rate of return) on its investment |
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What does the number of points charged depend on? |
1. The difference between the loan's stated interest rate and the yield required by the lender 2. How long the lender expects it will take the borrower to pay off the loan |
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How much does one discount point equal? |
1% of the loan amount |
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If a borrower repays the loan before the end of the term they may be expected to pay a ______ |
Prepayment penalty |
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True of False Lenders may not charge prepayment penalties on mortgage loans insured or guaranteed by the federal government |
True |
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What are the two parts of a mortgage loans? |
1. The debt itself 2. Security of the debt |
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True or False A basic principle of property law is that no one can convey more than he actually owns |
True |
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When the debtor retains the right of possession and control of the secured property, while the creditor receives an equitable right in the property is called what? |
Hypothecation |
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A ______ is a lien on the real property of a debtor |
Mortgage |
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The borrower, or _______, receives a loan
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Mortgagor |
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The mortgagor in return gives a promissory note and mortgage to the lender, called the _________ |
Mortgagee |
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What type of lien is a mortgage? |
A voluntary, specific lien |
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An acceleration clause is used to assist a lender with what? |
Foreclosure |
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A satisfaction of mortgage is when? |
The note has been fully paid |
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What is an impound or escrow account used for? |
A reserved fund to meet future real estate taxes and property insurance premiums |
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What type of loan essentially divides the loan into two amounts to be paid off separately? |
Straight loan |
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A(n) ________ partially pays off both principal and interest |
Amortized loan |
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What is the payment period usually for an amortized loan |
10 - 30 years |
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What kind of mortgage rate begins at one rate of interest, then fluctuates up or down during the loan term?
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Adjustable-rate mortgage |
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When does the amount of the loan actually increase instead of decreasing? |
Negative amotization |
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When the total payment increases and the loan is paid off more quickly is called what? |
Growing-equity mortgage or a rapid-payoff mortgage |
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______ is a final payment that is at least twice the amount of any other payment |
Balloon payment |
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When is a balloon payment necessary?
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When payments on a loan are not enough to fully pay off the principal of the loan by the time the final payment is due |
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True or False
A reverse mortgage allows a homeowner aged 55 and older to borrow money against the equity built up in the home |
False note: the homeowner must be 62 or older |
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The most popular reverse mortgages are insured by? |
FHA |
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_______ is a legal procedure in which property pledged as security for a debt is sold to satisfy the debt |
Foreclosure |
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What are the three general types of foreclosure proceedings? |
1. Judicial Foreclosure - allows property to be sold by court order 2. Nonjudicial Foreclosure - used when the security instrument contains power-of-sale clause 3. Strict Foreclosure - once the proper papers have been prepared and recorded, the court establishes a deadline for the balance of the defaulted debt to be paid in full |
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Most states give defaulting borrowers a chance to redeem their property through the ________ |
Equitable right of redemption |
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_______ in which the sale price is less than the remaining indebtedness |
Short Sale |