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Types of Mortgages & Sources of Finance


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Amortized Mortgage
Financing Technique in which the debt is gradually and systematically killed or extinguished
Annual Percentage Rate
Includes the interest rate and other loan costs and represents the true yearly cost of
Conforming loans
Loans that meet Fannie Mae guidelines regarding size and type of loan.
Disintermediatioon
The removal of intermediaries; buyers bypass the middlemen.
Good-Faith Estimate
Closing (settlement) costs lists the charges the buyer is likely to pay at closing.
Intermediation
Financial institutions serve as intermediaries between depositors and borrowers.
Level-payment plan
Mortgage in which the monthly payments are a fixed amount but the amount applied to interest
Monetary Policy
Actions undertaken by the Fed to influence the availability and cost of money and credit.
Mortgage broker
A person or business entity who conducts loan originator activities through one or more licensed
Mortgage lenders
Business entities that originate, sell, and service mortgage loans. They are not depository
Mortgage loan originators (MLO)
Persons who solicit mortgage loans, accept mortgage loan applications, negotiate the
Nonconventional mortgage loans
Loans insured or guaranteed by federal government (FHA and VA)
Which mortgage allows a persona to buy a home with no money down?
VA
A developer would MOST LIKELY obtain which type of mortgage on a new subdivision?
Blanket mortgage
The amount of a loan expressed as a percentage of the value of the real estate offered as security is:
Loan to
Lender generally charges discount points on an FHA loan to:
Provide greater interest yield to the investor.
MAN HAD A LOAN FOR $60.000,- and he had to pay 2.5 point. How much would he have to pay in cas
$1500
In making a home mortgage loan, a lender would consider all EXCEPT:
Financial need of the borrower,
not fully amortized is called
balloon mortgage
The basic difference between and FHA and VA loan is:
FHA insures loans, VA guarantees them
For a veteran to obtain VA loan, the VA must issue a certificate of:
Eligibility
approval. Could he immediately get another VA loan?
NO. He is still liable for the loan.
An FHA mortgage is obtained through:
Any qualified lending institution
The primary distinction(s) between the primary and secondary mortgage market is:
the secondary market is
What kind of a loan would be fully paid over the life of the loan?
fully amortized
balance of the loan. How much was the prepayment penalty?
$206.20
housing free from discrimination
HUD's
The VA benefit from Department of veterans' affairs for a veteran approved home loan guarantees that:
the loan, or
homeownership
Federal National Mortgage Association
lenders can then use the proceeds to make new mortgage loans available.
Government national Mortgage Association
affordable rental housing
Freddie Mac
debt, and credit history are considerations for creditworthiness
The Equal Credit Opportunity Act (ECOA)
Nonconventional loans
typically require a smaller down payment compared with conventional loans, because with
Interest rate
Private lenders make conventional mortgage loans. Interest rates for conventional mortgages reflect
Assumption
Fixed-rate conventional mortgages typically contain a due-on-sale clause, meaning that they are not
Pre payment
Fixed-rate conventional mortgages contain a prepayment clause that allows borrowers to prepay the
Down Payment and Loan-to-Value Ratio
Borrowers are sometimes approved for conventional mortgages with less than
Total obligations ratio (TOR)
is a measure of a borrower's total monthly installment debt divided by monthly gross
Conventional mortgage loans
typically feature either a 30-year term or a 15-year term.
Amortizing a Level-Payment Plan Mortgage
To calculate how much money is to be regarded as interest and how
Amortizing a Mortgage
Step 1: principal balance × annual interest ÷ 12 = first month's interest
Margin (or spread)
is the percentage added to the index.
Calculated Interest Rate
The calculated interest rate is arrived at by adding the index to the lender's
Adjustment Period
The interest rate on an ARM adjusts periodically based on the adjustment period established
Periodic rate cap
limits the amount the rate may increase at any one time.
A payment cap
limits the amount the monthly payments can increase during any year.
Teaser Rate
Sometimes, a lender will offer borrowers an initial below-market interest rate or teaser. The low
Partially amortized mortgage
the buyer makes regular payments smaller than what is required to completely pay off
Purchase money mortgage (PMM)
is a mortgage given as part of the buyer's consideration for the purchase of real
Land Development Loans
Developers commonly purchase land for development by securing seller financing. The
Purpose of the FHA
The National Housing Act of 1934 created the Federal Housing Administration (FHA). A major
Loan Insurance
FHA loans are a type of nonconventional loan because they are insured by the FHA up to certain
Lending Source
FHA loans are made by FHA-approved lenders. The FHA does not make loans to borrowers. The FHA does
Minimum cash investment
A benefit of FHA-insured loans is that the down payment is much smaller than the amount
Up-front mortgage insurance premium (UFMIP)
Borrowers are charged a one-time mortgage insurance fee at closing.
Housing expense ratio (HER)
is calculated by taking monthly housing expenses for principal, interest, property
Buyer qualification
which has to do with what the buyer wants and can afford.
Loan underwriting
Loan underwriting borrower qualification and property qualification
Truth in Lending Act (TILA)
is Title 1 of the Consumer Credit Protection Act.
Annual percentage rate (APR)
Total yearly cost of credit.
Good Faith Estimate (GFE)
A preliminary accounting of expected closing costs. RESPA requires lenders to give
Servicing disclosure statement
A disclosure statement given to borrowers that discloses whether the lender intends
Settlement Statement
shows all the charges imposed on the borrower and the seller and any credits due the
The Federal Home Loan Bank System (FHLBS)
was created to provide the same regulatory and administrative
Office of Thrift Supervision (OTS)
A branch of the U.S. Treasury Department that replaced the Federal Home Loan
The Federal Deposit Insurance Corporation (FDIC)
insures deposits in banks and savings associations.
Primary market
A source for the purchase of a mortgage loan by a borrower.
Secure and Fair Enforcement of Mortgage Licensing Act (SAFE Act)
The SAFE Act sets a minimum standard for
Mortgage loan originator (MLO)
One who finds a lender for a potential borrower, and vice versa.
Mortgage lender
A business entity that originates, sells, and then services mortgage loans. Mortgage lenders are not
Commercial banks (CBs)
are the primary reservoirs of commercial credit in this country and the largest group of
Savings associations (SAs)
formerly called savings and loan associations (S&Ls), are also called thrifts and
Mutual savings banks (MSBs)
are state chartered and are similar to SAs. They are mutually owned (no
Life insurance companies (LICs)
are regulated by the laws of the states in which they operate. LICs are not thrift
The Rural Housing Service (formerly called the Farmers Home Administration)
is an agency of the U.S. Department