Real Estate Financing

Question 1

Considered by lenders

Answer 1

DTI
Credit Score
Credit Report

Question 2

The difference between the amount owed on a property and its current market value

Answer 2

equity

Question 3

mortgage loan will require two instruments

Answer 3

Financing instrument and security instrument

Question 4

a contract with a lender that sets out the terms under which a borrower promises to repay a debt.

Answer 4

Promissory note

Question 5

a negotiable instrument that can be transferred to a third party.

Answer 5

Promissory note

Question 6

charge for the use of money

Answer 6

interest

Question 7

charging an excessive rate of interest is called

Answer 7

usury

Question 8

percentage of a loan amount and are charged by a lender to increase the lender’s yield on its investment

Answer 8

Discount points

Question 9

A home mortgage loan is secured by the borrower’s real property in the process called

Answer 9

hypothecation

Question 10

Mortgage borrower

Answer 10

mortgagor

Question 11

Mortgage lender

Answer 11

morgagee

Question 12

real estate purchased with the borrowed money is used as

Answer 12

security

Question 13

transfers title from the trustor (property owner) to a trustee, who holds it on behalf of a beneficiary (lender).

Answer 13

deed of trust

Question 14

requires the lender to execute a satisfaction (release or discharge) that is recorded to clear title.

Answer 14

defeasance clause

Question 15

executed by the borrower is recorded in the county in which property is located

Answer 15

deed of trust

Question 16

transfers legal title to the trustee but retains equitable title and has the right to possession and use of the mortgaged property.

Answer 16

trustor

Question 17

Property owner

Answer 17

trustor

Question 18

beneficiary

Answer 18

lender

Question 19

requires the beneficiary to request the trustee to execute and deliver to the trustor a deed of reconveyance (release deed) to return legal title to the trustor.

Answer 19

defeasance clause

Question 20

due date of the remaining principal balance and all overdue costs made sooner

Answer 20

accelerate

Question 21

allows the beneficiary (lender) to ask the trustee to conduct the trustee’s sale without court action.

Answer 21

deed of trust with power of sale

Question 22

enables a sale without court action.

Answer 22

mortgage with power of sale

Question 23

may be required to create a reserve fund to ensure that future tax, property insurance, and other payments are made.

Answer 23

impound escrow account

Question 24

imposes obligations on lenders and loan servicers to set aside escrow funds for flood insurance on new loans for property in flood-prone areas.

Answer 24

National Flood Insurance Reform Act of 1994

Question 25

Priority of mortgages and other liens is

Answer 25

determined by the order in which they were recorded. may be changed by subordination agreement

Question 26

interest-only loan.

Answer 26

Straight loan

Question 27

interest rate changes over the term of the loan according to an identified economic indicator

Answer 27

Adjustable rate mortgage

Question 28

identified economic indicator

Answer 28

index

Question 29

added to the index to determine the rate the borrower will pay

Answer 29

margin

Question 30

sets the highest interest rate that can be charged at any point over the life of the loan.

Answer 30

rate cap

Question 31

conversion option

Answer 31

allows ARM to be converted to a fixed-rate loan.

Question 32

payments of principal are increased each month to pay off the loan more quickly.

Answer 32

Growing Rate Mortgage

Question 33

typically is a final loan payment that is at least twice as much as any other payment.

Answer 33

balloon payment

Question 34

can be used by someone age 62 or older to receive one or more payments that result in a claim by the lender on the equity in the mortgaged property when the homeowner moves from the property, dies, defaults on one of the loan terms, or sells the property.

Answer 34

Reverse Mortgage

Question 35

the judge orders the property sold.

Answer 35

judicial foreclosure

Question 36

The equity of redemption refers to the right of a mortgagor in law to redeem his or her property once the debt secured by the mortgage has been discharged.

Answer 36

equitable right of redemption

Question 37

when allowed by state law, and if the sale proceeds are less than the amount owed, the mortgagee has a right to what

Answer 37

deficiency judgement

Question 38

the lender agrees to accept less than the amount of the remaining indebtedness in order to allow the property to be sold.

Answer 38

Short Sale

Question 39

required by a mortgage lender, will protect against loss due to natural disasters, accidents, theft, and fire.

Answer 39

Homeowners Insurance

Question 40

database allows insurers to share information on a consumer's claims history.

Answer 40

Comprehensive Loss Underwriting Exchange (CLUE)

Question 41

Federal Emergency Management Agency (FEMA)

Answer 41

administers the National Flood Insurance Program