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10 Cards in this Set
- Front
- Back
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When a potential buyer approaches a lender prior to looking for a house in order to obtain a promise of a loan up to a certain amount, this is known as: |
A buyer who would like to be preapproved will go directly to a lender and submit a loan application. Prequalification, by contrast, can be performed by a real estate agent and is merely a determination of an appropriate price range |
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A buyer may find it useful to have a preapproval letter because it: |
Preapproval makes a buyer's offer more attractive because the seller can be confident that the buyer will qualify for financing |
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If a loan applicant's primary source of income is self-employment, the lender will consider this stable monthly income if the loan applicant: |
A lender will count the income of a self-employed loan applicant who has been in business for a short time, but only if the applicant has a history of employment in the same field and can document a reasonable chance for success with pro forma financial statements and market feasibility studies |
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Which of the following would a lender consider an acceptable secondary income source? |
Income from sources besides employment must still be reliable and durable. Rental income is acceptable if the loan applicant can prove that rental payments are made regularly, but the lender will usually consider only a certain percentage because vacancies and rent collection problems are unpredictable |
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In contrast to a debt to income ratio, a housing expense to income ratio: |
A housing expense to income ratio measures the adequacy of the loan applicant's income using only the monthly mortgage payment (principal, interest, taxes, and insurance). A debt to income ratio also takes payments on other debts into account |
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Which of the following is true about how a lender evaluates net worth? |
Above-average net worth can mean the difference between approval and rejection if the loan applicant's income is marginal |
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Howe would a lender calculate the net equity in real estate the loan applicant owns? |
Net equity is the amount of money the loan applicant can expect to receive fro the sale of the property. This is often the primary source of cash that will be used to buy the new property |
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Which of the following would be most likely to have a negative effect on an individual's credit rating? |
A pattern of increasing liabilities followed by debt consolidation suggests that the individual tends to live beyond his means |
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The APR for a real estate loan: |
The annual percentage rate (APR) helps loan applicants compare the overall cost of different loans. A loan's APR expresses the relationship between the total finance charge and the total amount financed |
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Fee packing, loan flipping, and balloon payment abuses are all examples of: |
These are all examples of predatory lending practices |
