Basics II Flashcards
(45 cards)
What is a loan product?
An option of loan that has different terms, rates, and pricing
Fixed Rate Mortgage
Entire loan amortized over a certain amount of years
Balloon Mortgage
Outstanding principal is due at the end of a fixed time; i.e. 7/23 mortgage
Adjustable Rate Mortgage
Rates are adjusted at specific periods (Caps) in the mortgage; fluctuating interest rates
What are the 3 types of caps?
Initial Cap- limits how far up or down interest moves up for first adjustment
Period Cap- limits how far up or down interest moves per each adjustment
Lifetime Cap- Limits how far up or down interest moves per life of loan
What does it mean to have a 1 Year ARM with 2/6 caps?
Rate changes each year by 2% up or down; rate cannot go higher than 6%
What benchmark is the ARM tied to?
Index determined by Treasury Note; when index increases, rate increases
What is the Margin?
Fixed % (usually 2-3%) added onto the index of an ARM
What is the Fully Indexed Rate?
Index + Margin; this is the % the rate fluctuates on ARM
What is negative amortization?
Monthly payments don’t cover interest because of ARM rate adjustments; unpaid interest is added to principal
What is a Blend mortgage (Term or Hybrid ARM)?
ARM that has a fixed rate for a certain amount of time (3, 5, 7, 10 years), after which converts to annual adjustments via caps
Who are acceptable borrowers? Unacceptable?
Acceptable: Natural person (US Citizen), legal age
Unacceptable: Life estates, partnerships, corporations, land trusts, real estate syndicates, non-profits, diplomatic status
What is a non-occupant coborrower?
Does not intend to occupy property; must contribute 5% when LTV is <90%
What types of non-US Citizens can have a mortgage?
Permanent resident aliens and non-permanent resident aliens
Foreign nationals not eligible under agency guidelines
What docs are required from a Permanent resident alien?
Alien Registration card/Green Card; i-90 applied for green card; Conditional Alien Registration Receipt Card and Petition to remove conditions; Current Passport
What docs are required from a non-perm resident alien?
Temporary resident card I-688; Arrival Departure Record (I-94); Employment authorization card (I-688A); FHA requires SSNs
What is an arms length transaction?
all parties involved are not related to each other
Identify a first time homebuyer
Little to no experience; excited and nervous; highly trusting
Identify a move up homebuyer
Currently or previously owned home; wants specific neighborhood or school district; familiar with process
Identify a relocation homebuyer
moving for work; leaving friends and sad; stressed and anxious
Identify an affluent homebuyer
Financially savvy, high net worth individuals, can be demanding but smart
Identify an empty nest homebuyer
Wants to downsize; retirement age with a reduction in income
Identify an investor homebuyer
Purchase houses for rental or flipping; cashflow is primary concern; demanding and impatient; needs to close quickly
What does the underwriter do?
Evaluates risks of loan and borrower and makes a lending decision
