Mortgage Products - Chapter 2 Flashcards
(44 cards)
What is a fixed rate mortgage?
It is a mortgage with a fixed interest rate over the entire term of the loan.
When can a payment on a fixed rate mortgage change?
If taxes/insurance increase (if the borrower is escrowing) or mortgage insurance is removed.
What is a non-traditional mortgage?
Anything other than a 30 year fixed rate mortgage
What is an adjustable rate mortgage?
Also referred to as a variable rate mortgage. Mortgage loan where the interest rate periodically adjusts.
What are the two parts that make up the rate on an ARM?
The index and the margin
What are the three types of interest rate caps on an ARM?
First adjustment cap, subsequent adjustment cap, lifetime adjustment cap.
3/1, 5/1, 7/1, 10/1 are all types of what ARM?
Hybrid Arm - fixed for a portion, adjust every year after the fixed portion.
What is an interest only ARM?
A payment plan that allows the borrower to only pay the interest on their loan for a specified number of years.
Interest Only, minimum payment (that may be less than the interest due), and a combined PMT are all examples of what kind of ARM?
Payment Option ARM
What is the difference between a construction loan and a construction permanent loan?
A construction loan is a loan with higher interest rates used to construct the property. These are usually refinanced at the end of construction. Most of the time they are interest only loans. A construction permanent loan is where the borrower obtains one loan. These are typically interest only during construction and then fully amortizing after completion of construction.
What is a bridge loan secured to and when is it paid off?
A bridge loan is secured to the borrower’s current primary house and is used to fund the purchase of a new house. it is paid off when the current primary residence sells.
What is a graduated payment mortgage?
A negative am product where the payment gradually increases over a specified time frame. Typically smaller payments up front.
What is a HELOC?
Home Equity Line of Credit - allows the borrower to take multiple advances of the loan proceeds up to an amount that represents a specified percentage of the borrower’s equity in the property.
True/False - A balloon mortgage requires a larger than usual one time payment at the end of the term.
True
What is the DTI limitation for manually underwritten Conventional Loans?
28/36 - but can go up to 45% if borrower meets certain circumstances
What is the difference between chapter 7 and chapter 13 BK?
Chapter 7 is complete liquidation and chapter 13 provides for the debtor to pay back their lenders through a payment plan.
When is private mortgage insurance required?
When the LTV is over 80%
What does the Homeowner’s Protection Act of 1999 do?
- automatically cancel mortgage insurance if balance drops to 78%
- borrower can cancel MI if borrower has at least 20% (this is at the option of the lender)
What is the DTI limitation for FHA loans?
31/43
What is the UFMIP for FHA loans?
1.75%
What are some factors that determine the MIP on an FHA loan?
Loan term, LTV, loan amount.
What are some basics of a HECM?
- borrower must be 62
- principal residence
- negative amortization
- no escrows for taxes and insurance
How is a HECM different from a traditional mortgage?
Traditional mortgage you are building equity and lowering debt. HECM, you are losing equity and gaining debt.
True/False - surviving heirs will never have to pay more than 85% of the appraised value to cover the repayment of a HECM?
FALSE - they will not have to pay more than 95% of the appraised value. The remaining balances is covered by the mortgage insurance.
