Flashcards in Chapter 14 - Financing 1: Conventional, FHA, and VA Loans Deck (26):
Adjustable-rate mortgages (ARM)
Shift the risk and reward of changing interest rates from the lender to the borrower, with corresponding changes in the monthly payments who stand to benefit if interest rates drop during the period of the loan.
Fore either a FHA or VA mortgage loan, a clause is added that if the appraisal comes in less than the agreed upon sale price, the buyer is not obligated to complete the purchase.
Table that shows the payment of principal, interest and remaining balance.
Most frequently used mortgage plan. It requires the mortgagor to pay a constant amount, usually each month
Of a mortgage, able to be transferred to another owner of the property.
Involve half payments every two weeks instead of monthly. Twenty six half payments, the equivilent of 13 monthly payments a year. Can reduce time on a fixed-rate loan from30 years to to 22 or 23 years.
Brokers price opinion (BPO)
Licensee's written estimate of market value, used by lenders and mortgage companies where they believe the expense and delay on appraisal is not needed.
Includes a PITI type loan.
With some mortgage plans, lending institutions are willing to lower the interest rate in return for an extra payment of points. This arrangement is know as a buydown.
Limit on increase or single adjustment.
Sometimes referred to as a lifetime cap) is a maximum interest rate.
Certificate of reasonable value
A VA appraisal. As with FHA, the contract must contain a clause stating that if the appraisal comes in lower than the purchase price, the veteran can get out of the contract at no penalty - or at the veterans option, make up the difference.
Federal Housing Administation
Insures low-down-payment loans.
Most widely used FHA mortgage and includes certain requirements. An upfront MIP either added to the loan or paid in cash at 1.75%, down payment can be a gift (not a loan). for FHA loans placed between January 1, 2001 and June 2, 2013, mortgage insurance premium can be dropped when equity reaches 78% of the original appraisal at the time of purchase, but only after the first five years of the loan.
The index rate on an adjustable rate loan - may go up or down, following the trend for interest rates across the country.The lender must use a national indicator of current rates. The most widely used is the one-year US Treasury bills.
A charge for the use of someone else's money.
Loan-to-value (LTV) ratio
The mortgage loan in relation to the value of a home. Increased from 40% in 1920 to as much as 95% or 100% today.
Borrower pays a specific percentage above the index on a mortgage.
When the monthly payment isn't enough to cober the interest due, the shortfall is added to cover the interestr due. As a result the debt increases.
New Jersey Housing and Mortgage Finance Agency (NJHMFA)
Offers below-market interest loans, with low or no down payment, to qualified buyers who purchase homes in urban target areas, located in mainly inner cities. Outside the target areas loans may be offered to first-time buyers. Loans are possible on one-four family dwellings and are not available to investors. The maximum allowable family income ranges depending on the size of the family and the county in which the property is located.
Principal interest taxes and insurance.
With some mortgage plans, lending institutions are willing to lower interest rates in return for extra payment of pints. the arrangement is know as a budown.
Private mortgage insurance (PMI)
With any down payment below 20%, a conventional loan must be accompanied by private mortgage insurance. The borrower pays a monthly premium for insurance that protects the lender in case of loss at a foreclosure.
?Calls for periodic payments of interest only. Such plan are generally used for home improvement loans and second mortgages rather than first mortgage loans.
See New Jersey Home Mortgage Finance Agency (NJHMFA) for qualified buyers who purchase home in urban areas.