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Real Estate Licensing Exams > Mortgages and FInance > Flashcards

Mortgages and FInance Flashcards

1
Q

What is the pledge of property as security for a debt called?

A

A mortgage loan

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2
Q

What two contracts does a mortgage loan combine?

A

A note (the debt) and the mortgage (which pledges property to secure the debt)

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3
Q

The _______ gives the mortgage to the _______.

A

Borrower; lender

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4
Q

Who is the mortgagor? Who is the mortgagee?

A

Mortgagor is the borrower; Mortgagee is the lender

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5
Q

Who receives the mortgage?

A

The lender

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6
Q

In what states do the lenders hold title to the property?

A

Title theory states

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7
Q

In what states do the lenders have a lien on the property?

A

Lien theory states

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8
Q

In what mortgage loans doe the interest rates change at regular intervals?

A

Adjustable rate

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9
Q

The total interest rate is the sum of the ____ rate plus a _____.

A

Index; margin

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10
Q

The maximum change allowed in interest rate in an adjustable rate mortgage loan is called what?

A

Caps

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11
Q

True or false? Adjustable rate loans can provide interest rate caps annually and include life-of-loan limits.

A

True

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12
Q

True or False: In a biweekly mortgage loan, the total annual payment amount is similar to 12 monthly payments.

A

False. It’s similar to 13 monthly payments

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13
Q

In a biweekly mortgage loan, how often are payments made?

A

Every 2 weeks

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14
Q

True or False: A biweekly mortgage loan amortizes quicker than a monthly payment loan.

A

True.

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15
Q

What is a blanket mortgage loan?

A

Includes more than one parcel of real estate

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16
Q

What is a budget loan?

A

Payments include principal and interest, property taxes, and insurance (PITI)

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17
Q

What serves as collateral in a chattel mortgage?

A

Personal property (not real estate)

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18
Q

Loan specifications that would allow purchase by FNMA are what type of loan?

A

Conforming

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19
Q

What is a construction loan? How are interest rates for this type of loan?

A

Use of money is to build. Interest rates are high. They are high risk because of the uncertainty of completion of construction and sale or occupancy of the property.

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20
Q

True or False: Conventional loans are FHA insured, but no VA guaranteed.

A

False: they are not FHA insured.

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21
Q

In a conventional loan, when loan-to-value ratio exceeds ____%, private mortgage insurance (PMI) may be required by the lender.

A

80%

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22
Q

FHA loans are insured by who?

A

Federal Housing Authority, part of the US Department of Housing and Urban Development

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23
Q

Describe a flexible payment loan.

A

Interest rate changes bring about a change in the remaining term, instead of changing the payment amount.

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24
Q

What is a bridge loan?

A

Used to cover the difference in funds realized from the sale of an existing home and the funds needed to buy a new home. Or, used to cover a deficit during the period between construction loan and a permanent loan.

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25
Q

What is a gap loan?

A

Used to purchase a house while waiting for the sale of a former house. Or, used to fund the shortfall between construction loan and a permanent loan amount.

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26
Q

Explain graduated payment.

A

Payments are low in early years and increase to a level amount sufficient to pay interest fully and to amortize principal over the remaining term.

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27
Q

What type of loan is a junior mortgage, limited by the amount of equity in a home?

A

Home equity loan

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28
Q

What is a loan from a seller who doesn’t transfer title until final payment is received?

A

Land contract/contract for deed

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29
Q

In what type of loan can more principal be borrowed at a later date within the loan agreement?

A

open or open end

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30
Q

What is package loan?

A

Collateral pledged includes real estate and personal property, such as furniture/appliances

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31
Q

A loan from the seller to the buyer, where seller provides title at closing, is called what?

A

Purchase-money mortgage

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32
Q

What is a reverse annuity?

A

Lender pays the borrower a lump sump and/or monthly amount. Borrower must be over age 62 and have substantial equity in house.

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33
Q

What is a swing loan?

A

Interim loan to fill a temporary need for funds to buy another property.

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34
Q

Explain VA guaranteed.

A

Lender is guaranteed against loss, up to a preset amount, by the US Department of Veterans Affairs

35
Q

What is the term for a second mortgage that overstates its balance by including an existing first mortgage?

A

Wraparound loan

36
Q

What is the term for when payments exceed interest, with the difference reducing principal?

A

Amortizing

37
Q

True or false: Assumption does not relieve the original borrower, who is the property seller, of any obligations.

A

True

38
Q

True or false: Under assumption, a purchaser agrees to become liable to repay the existing loan owed by a seller of a property.

A

True

39
Q

What is the large final payment on a loan called?

A

Balloon payment

40
Q

What form is provided by a mortgage lender to a borrower that describes the financial terms of a loan?

A

Closing disclosure

41
Q

Borrowers can compare what document to the closing disclosure to assure they get the promised loan?

A

Loan Estimate

42
Q

What US government agency administers TRID (TILA-RESPA Integrated Disclosure)?

A

Consumer Financial Protection Bureau (CFPB)

43
Q

For most income-producing properties, a debt coverage ratio of at least ____ times is sought by a prudent lender.

A

1.2

44
Q

What term describes the comparison of net operating income from the property to required debt service?

A

Debt coverage ratio

45
Q

Following a foreclosure sale, this is the unpaid amount due from the borrower when the foreclosure sale does not bring enough money to fully repay the mortgage balance plus expenses of foreclosure.

A

Deficiency judgement

46
Q

What is a FICO score?

A

A credit score used by mortgage lenders to evaluate applicants, ranging from 300 to 850. A score above 680 qualifies for a prime loan.

47
Q

What is a first mortgage?

A

The one recorded first against the property, recorded at the county courthouse.

48
Q

An involuntary sale by a lender after certain borrower default is known as ____.

A

Foreclosure

49
Q

True or false: A jumbo loan is for an amount that exceeds FNMA guidelines.

A

True

50
Q

What is a junior mortgage?

A

Any mortgage lower in priority to the first mortgage.

51
Q

A loan estimate must be provided by a mortagage lender to a proposed borrower within _____ (timeframe) of loan application, and that details loan terms.

A

Three days. This allows borrowers to comparison shop for loans.

52
Q

What is loan to value ratio?

A

Percentage ratio of the mortgage principal compared to the property value.

53
Q

what is negative amortization?

A

Monthly payment is less than interest . Principal balance increases.

54
Q

Describe novation

A

A three-party agreement where one party is substituted for another

55
Q

What is the term for creation of a mortgage loan?

A

Origination

56
Q

A mortgage that is not scheduled to be repaid within the next 10 years is known as ____.

A

Permanent mortgage

57
Q

What is prepayment privilege?

A

The right to pay off the mortgage prior to maturity.

58
Q

What is prepayment penalty?

A

Mortgage may provide a penalty if it is paid off before maturity.

59
Q

True or False: FHA and VA loans have a prepayment penalty.

A

False; they can be aid off early.

60
Q

Primary mortgage market refers to…?

A

Participants who originate mortgage loans (mortgage bankers, brokers, lending institutions).

61
Q

Order of payment to satisfy mortgages and other liens in the event of a foreclosure sale is known as…?

A

Priority

62
Q

What is private mortgage insurance?

A

PMI insures partial repayment to lenders of defaulted conventional mortgages.

63
Q

Explain refinancing.

A

Repayment of a mortgage loan by substituting another mortgage loan. It is often desired to reduce the interest rate or to extract cash by increasing the principal.

64
Q

This is recorded at the county courthouse after the first mortgage.

A

Second mortgage

65
Q

True or False: A first mortgage is above a second mortgage in priority of claim.

A

True

66
Q

The secondary mortgage market refers to…?

A

The purchase of existing mortgages. Fannie Mae and Freddie Mac are the largest loan purchasers.

67
Q

Upon a defaulted mortgage, the lender may agree to a sale at a price that is less than the full amount owed to avoid the foreclosure process. This is called what?

A

A short sale

68
Q

What terms refers to: Agreement by a purchaser to become liable to make payments on the existing loan of a property that he purchased, but not become liable for the entire principal balance.

A

Subject to

69
Q

Agreement in a loan that the loan will not move up in priority, even after a mortgage having higher priority is paid off is known as _____.

A

Subordination

70
Q

What does subprime refer to?

A

Loan that is underwritten with less than prime qualities, such as a low borrower FICO score. Borrowers with a low FICO score, often below 620, may still be eligible for a loan, likely required to be a subprime loan.

71
Q

What is the term?

A

Period of time until loan maturity. The term may represent the full amortization time or be earlier with a balloon mortgage.

72
Q

What is TRID (TILA-RESPA Integrated Disclosure)?

A

Federal regulations based on the Truth in Lending Act and Real Estate Settlement Procedures Act, covering the required Loan Estimate and Closing Disclosures forms for mortgages

73
Q

What is a mortgage banker?

A

A company that originates, services, and sells mortgage loans.

74
Q

What is a mortgage broker?

A

A company the originate and sells mortgage loans.

75
Q

True or False: Department of Veterans Affairs is an agency that guarantees loans made to eligible veterans up to a certain amount. Down payments may be zero.

A

True

76
Q

A government agency that subsidizes mortgages to serve low and moderate-income homebuyers is known as a _____.

A

Government National Mortgage Association (GINNIE MAE or GNMA)

77
Q

What is a federal national mortgage association?

A

A government-sponsored enterprise that buys mortgage loans on the secondary mortgage market.

78
Q

True or False: The Federal National Mortgage Association (FNMA or FANNIE MAE) originates mortgage loans.

A

False

79
Q

What is FHA?

A

Federal Housing Administration. Branch of HUD that insures qualified mortgages.

80
Q

True or False: Down payments on an FHA loan may be as small as 8%

A

False- as small as 3%

81
Q

True or False: Federal Home Loan Mortgage Corporation (FREDDIE MAC or FHLMC) performs the same functions as FNMA.

A

True

82
Q

True or False: Commercial banks originate mortgages and construction loans in addition to business and consumer loans.

A

True.

83
Q

Savings and loan associations accept deposits and originate mortgages and what other type of loan?

A

Construction loans.

Real Estate Licensing Exams (12 decks)

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