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Flashcards in Housing Deck (12):
1

What is a front-end ratio?

Mortgage payment/monthly gross income. To assess the borrower's ability to pay the mortgage. Expenditures should not exceed 25-29% of gross annual income.
Lenders use the front-end ratio in conjunction with the back-end ratio to approve mortgages.

2

What is a back-end ratio? And what is another name for it?

Also debt-to-income ratio. Total amount of monthly debt repayments/monthly gross income x 100. A ratio of 36% or lower is desirable. Lenders use the front-end ratio in conjunction with the back-end ratio to approve mortgages.

3

What is loan to value ratio?

Loan amount/value of the home. If your loan to value ratio is less than 80% you must purchase Private Mortgage Insurance.

4

What is earnest money?

Funds given to the seller as a deposit to hold the property until a purchase contract can be negotiated.

5

What does a Uniform Settlement Statement Contain?

Lists all cost associated with closing on a real estate purchase.

6

What is recasting?

temporary mortgage relief which involves excusing your present obligation to catch up on missed payments and instead delaying them until the end of the loan.

7

What is a good-faith estimate?

All of the costs associated with the loan are listed. This includes APR, fees, closing costs, etc.

8

Gradually paying off a mortgage loan through a series of periodic payments is?

Amortization

9

Which ratio is a rule of thumb lenders use for determining housing affordability that compares the total expenditures for housing (PITI) with the gross income of the applicant?

Front-end-Ratio = Monthly Mortgage Payment (+PITI)/Monthly Gross Income

10

If a home costs $240,000 and you are putting $36,000 down, how is the loan to value ratio calculated?

Loan amount/Value of the home. $240,000-36,000/240,000 = 85%

11

What should homebuyers include in a contract in order to protect themselves from the possibility of being turned down for a mortgage?

A contingency clause

12

Voluntarily turning a home over to the lender instead of foreclosing is?

Deed in Lieu