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Flashcards in Real Estate Finance Deck (222)
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1

Pre-Qualification

The first step in determining “how much house” the buyer can afford and which type of loan might be best; the buyer supplies information about their financial situation to the lender, who then provides a general estimate

2

Pre-Approval

Official process of being approved by a lender to borrow a specific amount at an interest rate within a small range; a mortgage application, credit report, and supporting financial documentation are required

3

Mortgage broker

Someone who brings together a borrower and a lender in order to create a mortgage

4

Mortgage banker

An entity or person who provides mortgage financing by using their own funds

5

Correspondent lender

A lender who offers loans using their own money at their own risk, generally on a smaller scale than mortgage brokers and bankers

6

Loan processing

When the lender collects information and an application from the buyer that will help determine the loan type and amount they will qualify for

7

Underwriting

The process of deciding the level of risk a lender would take on by offering a loan to a certain borrower for a specific property

8

Funding

The transferring of funds by the lender to a title company or escrow company so that they may be disbursed

9

Servicing

The ongoing collection of monthly payments and maintenance of records by a loan servicer

10

Employment opportunity is the biggest factor for

residential real estate demand.

11

A housing bubble is created when property values

increase too quickly.

12

Leverage

The use of a relatively small amount of money in order to get a much bigger loan for purchasing real estate

13

Cost approach

Method of estimating the value of a property by determining how much it would cost to completely replace it and then subtracting from that value to account for depreciation

14

Income approach

Method of estimating the value of a property based on the amount of income it could produce for its owner

15

Conforming loan

A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market

16

Non-conforming loans

A loan that does not meet the guidelines to be sold on the secondary market

17

Mortgage Insurance Premium (MIP):

Required insurance to protect the lender in the event of borrower default on an FHA loan

18

Private Mortgage Insurance (PMI):

Insurance that protects the lender in the event of borrower default on a conventional loan

19

In hypothecation, the borrower maintains their

ownership of the asset and has free reign to use and enjoy it.

20

The secondary market is made up of:

Fannie Mae
Freddie Mac
Ginnie Mae
Federal Home Loan Bank
Private investors
Life insurance companies

21

A home mortgage gets passed on to a servicer for ongoing management. What exactly does that servicer do?

Collects the homeowner’s payments every month

Maintains the escrow account (if the borrower has to or chooses to have one) for annual expenses, like taxes and home insurance

Contacts the borrower about late payments or defaults

Answers questions the borrower may have about the loan

22

Mortgage servicing companies can even buy home insurance on the borrower’s behalf if they fail to attain or maintain coverage. This is called

force placed insurance, and it’s not ideal for the customer

23

FHA insurance requires an

upfront fee (called the Up-front Mortgage Insurance Premium, or UFMIP) in addition to a monthly fee.

24

The Texas Real Estate Commission (TREC) provides an addendum for the parties to negotiate seller

financing (the Seller Financing Addendum).

25

TREC provides an addendum to help the buyer and seller negotiate the terms of an

assumption (the Loan Assumption Addendum).

26

Private investors (lenders) may have higher interest rates or unusual terms compared to banks. This type of lending is called

"hard money" lending.

27

Types of credit lines include, but are not limited to:

Balloon Loans: Usually last for 3 to 15 years and are indexed against a Treasury index

Real Estate Loans: Secured by other real estate you own. Usually you can borrow up to 75% against the value of the property for a term of between 10 and 20 years

Short Term Loans: Secured loans for a term of one year or less

Asset Based Loans: Secured by your professional or perhaps your personal assets

Term Loans: Usually made by traditional lenders and secured for a fixed term that is at least partially determined by the investor’s income statements and projections

Equipment Loans: Secured by business equipment and against which you can usually borrow 60-80% of the value of the equipment for the projected life of the equipment

28

The purpose of the SAFE Act is to protect consumers across the country from

fraud by defining minimum licensing and registration standards for mortgage loan originators.

29

Expansion

The economic phase in which market activity really picks up (businesses start hiring again, people are investing in real estate)

30

Hyper supply

The economic phase in which supply catches up with (and then surpasses) demand; the first warning sign is an increase in vacant or unsold property