Principles: Chapter 8 • Part I: Real Estate Lenders

Front 1

__ banks operate under a license or charter from the state or federal government. As far as real estate loans are concerned, there is __ difference between a state and a national bank.

Back 1

Commercial; little

Front 2

A credit union is a mutual, voluntary-membership, cooperative organization
of people who agree to __ their money together to provide money for __ to each other.

Back 2

save; loans

Front 3

Institutional lenders such as commercial banks, savings banks,
and life __ companies accept deposits from the general public and are highly __ by state and federal agencies.

Back 3

insurance; regulated

Front 4

Noninstitutional lenders do not accept __ from the general
public and are not as strictly regulated as institutional lenders.
Major noninstitutional lenders include mortgage companies, private parties, real estate investment trusts, credit unions, and pension __.

Back 4

deposits; funds

Front 5

The term of a private loan is usually short and often calls for a __ payment. Three to __ years are the most common maturities.

Back 5

balloon; six

Front 6

Most private loans are on single-family homes and __ because this type of property is most familiar to the typical private investor and
because the size of the loan is usually small.

Back 6

condos

Front 7

Most private lenders operate in the __ trust deed market.

Back 7

second

Front 8

Life insurance companies are another important source for real
estate financing, particularly for large commercial and industrial
properties such as shopping centers, office __, and warehouses.

Back 8

buildings

Front 9

Life Ins Companies: Loan-to-value ratios are usually on the conservative side, generally in the 60 to __ percent range for conventional financing, commonly
with 30-year terms.

Back 9

75

Front 10

A mortgage company could be a mortgage __ , a mortgage __,
or both.

Back 10

banker; broker

Front 11

Mortgage bankers lend their own money and then either resell the loan to another lender or keep the loan for an __.

Back 11

investment

Front 12

Mortgage brokers do not lend their own money; rather, they find a lender and a borrower and get a fee for __ them together.

Back 12

bringing

Front 13

What is private mortgage insurance (PMI)? It is insurance that is used to guarantee lenders the payment of the upper portion of a conventional loan if a borrower defaults and a deficiency occurs at the __ sale.

Back 13

foreclosure

Front 14

Lenders who normally want buyer-borrowers to put at least 20 percent cash down will allow qualified buyer-borrowers to put less down if they purchase private mortgage insurance for a minimum of __ months.

Back 14

24

Front 15

For example, if a condo sold for
$380,000 and the loan was 90 percent, the loan would be
$380,000 x 90% = $342,000. The private mortgage insurance coverage to the __ would be 20% x $342,000 loan = $68,400.

Back 15

lender

Front 16

Just as mutual funds invest in a diversified portfolio of corporate stocks and bonds, __ invest in a diversified portfolio of real estate and mortgage investments.

Back 16

REITs

Front 17

The real estate __ trust (REIT) is a creature of the federal tax law.

Back 17

investment

Front 18

A savings bank is a financial institution that accepts savings from
the public and invests these savings mainly in real estate trust deeds
and __.

Back 18

mortgages

Front 19

Many banks require private mortgage
insurance (PMI) on loans whose loan-to-value ratio is in excess of __ percent.

Back 19

80

Front 20

A 4:1 multiplier simply means that the monthly income of the borrower should be approximately four times the monthly __ payment.

Back 20

housing

Front 21

A 4:1 multiplier:
if the monthly housing payment (principal + interest + monthly taxes + private mortgage insurance [if any]) will be $1,000, then four times this amount ($1,000 x 4), or $4,000, should be the borrower’s __ monthly income.

Back 21

gross

Front 22

Multiplier ratios:
Gross income must include all stable income of the borrower and co-borrowers, such as a spouse’s income, __ payments, and welfare payments as well as regular wages.

Back 22

alimony

Front 23

Ratios:
Acceptable income includes wages, commissions, alimony, child support, pensions, Social Security benefits, positive cash flow from __, and self-employment income.

Back 23

rentals

Front 24

Ratios:
The buyer's short-term debts may be ignored, but long-term debts are __.

Back 24

counted

Front 25

Ratios Summary:

Monthly __ payment
------------------------------------ = 25-30%
Gross Monthly Income

Back 25

housing

Front 26

Ratios Summary:

Monthly (housing + LT debt)
---------------------------------------- = 33-38%
__ Monthly Income

Back 26

Gross

Front 27

People can spend or save (invest) their after-tax income and profits.
When people decide to spend excessively, this reduces the supply of savings available for __.

Back 27

loans

Front 28

Too much spending -> no money for loans -> drives up interest rates -> more difficult for people to __ for real estate loans -> slows down the real estate market.

Back 28

qualify

Front 29

A recent law requires PMI insurers to cancel the PMI coverage once a loan amount is reduced to __ percent or less of the value of the home.

Back 29

80

Front 30

Real estate lenders can be divided into three categories:
(1) __ lenders,
(2) noninstitutional lenders, and
(3) __ backed programs.

Back 30

institutional

government

Front 31

The main government-backed programs include FHA, __, and Cal-Vet.

Back 31

VA

Front 32

Private mortgage insurance (PMI) usually covers what percent of the loan?

Back 32

20-25%

Front 33

A person who purchases a note for value at good faith without prior notice of a default or defect is a:

Back 33

holder in due course.

Front 34

On seller-carry loans for 1 to 4 residential units, a seller financial __ statement is required.

Back 34

disclosure