Section 10: Lending and Loans

Question 1

LENDING AND LOANS:
Financing Markets:
* There are a number of sources to borrow money from including both Private and
Commercial Lenders for those in need of _______ for Real Estate.
* Financing sources (primary and secondary mortgage markets, seller financing etc).

Answer 1

Financing

Question 2

LENDING AND LOANS:
Financing Markets:
* _______:
o Commercial banks, mutual savings banks, life insurance companies, savings
and loans, credit unions, mortgage banks.

Answer 2

Primary Mortgage Market

Question 3

LENDING AND LOANS:
Financing Markets:
* Primary Mortgage Market:
o Loan origination is marketed directly to _______ NOT brokers or middlemen.
o These lenders create the loans and, in some cases, will keep and service them.

Answer 3

Buyers

Question 4

LENDING AND LOANS:
Financing Markets:
* Primary Mortgage Market:
o IMPORTANT: Most Lenders will ‘BUNDLE’ multiple loans into packages and sell them to investors. This is called a _______.

Answer 4

Mortgage-Backed Securities (MBS)

Question 5

LENDING AND LOANS:
Financing Markets:
* Primary Mortgage Market:
 These SINGLE loans are CREATED in the _______.
 BUNDLED loans are SOLD on the _______.

Answer 5

Primary Mortgage Market

Secondary Mortgage Market

Question 6

LENDING AND LOANS:
Financing Markets:
_______:
* There is a large network of investors who purchases existing mortgages and
trust deeds on the Open Market and could be other banks, private investors or
groups.

Answer 6

Secondary Mortgage Market

Question 7

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* Lenders from the primary Market package loans together as a _______.
* IMPORTANT: This provides liquidity of assets back to primary lenders so they can issue NEW loans by freeing up capital that was held up in the original loans.

Answer 7

Mortgage Backed
Security (MBS)

Question 8

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* _______, Fannie Mae, Freddie Mac, Life insurance companies, investment firms, pension funds are the biggest BUYERS of BUNDLED mortgages.

Answer 8

Ginnie Mae

Question 9

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* Ginnie Mae, _______, Freddie Mac, Life insurance companies, investment firms, pension funds are the biggest BUYERS of BUNDLED mortgages.

Answer 9

Fannie Mae

Question 10

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* Ginnie Mae, Fannie Mae, _______, Life insurance companies, investment firms, pension funds are the biggest BUYERS of BUNDLED mortgages.

Answer 10

Freddie Mac

Question 11

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* Ginnie Mae, Fannie Mae, Freddie Mac, _______, investment firms, pension funds are the biggest BUYERS of BUNDLED mortgages.

Answer 11

Life Insurance Companies

Question 12

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* Ginnie Mae, Fannie Mae, Freddie Mac, Life insurance companies, _______, pension funds are the biggest BUYERS of BUNDLED mortgages.

Answer 12

Investment Firms

Question 13

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* Ginnie Mae, Fannie Mae, Freddie Mac, Life insurance companies, investment firms, _______ are the biggest BUYERS of BUNDLED mortgages.

Answer 13

Pension Funds

Question 14

LENDING AND LOANS:
Financing Markets:
Secondary Mortgage Market:
* _______:
A clause found in a lenders servicing agreement that would prevent a new lender from changing terms of the loan without the direct approval of the borrower (Protects the borrower).

Answer 14

Estoppel Certificate

Question 15

LENDING AND LOANS:
Financing Markets:
Who BUYS All Of The Mortgages?
* Mortgage Backed
Security (MBS) are sold on the secondary market mainly to the _______ entities.

Answer 15

Government Backed

Question 16

LENDING AND LOANS:
Financing Markets:
Who BUYS All Of The Mortgages?
o IMPORTANT: Since the mortgage meltdown, _______ now are biggest buyers (90%).

Answer 16

Federal Reserve Entities

Question 17

LENDING AND LOANS:
Financing Markets:
Who BUYS All Of The Mortgages?
* Entities such as Freddie Mac and Fannie Mae set guidelines for how the loans they buy should be underwritten known as _______.

Answer 17

Mortgage Backed
Security (MBS) Pools

Question 18

LENDING AND LOANS:
Financing Markets:
Who BUYS All Of The Mortgages?
* Mortgage Backed
Security (MBS) Pools can also consist of loans that do NOT fit Fannie Mae or Freddie Mac
guidelines, like jumbo loans where _______ or _______ are likely to purchase these pools.

Answer 18

Hedge Funds

Private Investors

Question 19

LENDING AND LOANS:
Financing Markets:
Who BUYS All Of The Mortgages?
o _______:
This is a privately run government institution that buys mainly conventional loans on the secondary market
from larger commercial banks.

Answer 19

Federal National Mortgage Association / Fannie Mae (FNMA)

Question 20

LENDING AND LOANS:
Financing Markets:
Who BUYS All Of The Mortgages?
o _______:
This is a privately run government institution that buys mainly conventional loans from smaller banks or credit unions.

Answer 20

Federal Home Loan Mortgage Corporation / Freddie Mac (FHLMC)

Question 21

LENDING AND LOANS:
Financing Markets:
Who BUYS All Of The Mortgages?

o ________:
This is a government
entity that buys mainly VA, FHA, RHA, and other government backed mortgages.

Answer 21

Government National Mortgage Association / Ginnie Mae (GNMA)

Question 22

LENDING AND LOANS:
Financing Markets:
Mortgage Banker vs Broker (Who ISSUES the Mortgages?):
* _______:
They work in the loan department of larger financial institutions like banks, savings and loan association or credit unions.
o Usually a banker works directly with the public i.e. realtors, direct borrowers etc.
o Understands and tries to use his own products to get people into a loan.
o Wells Fargo & Chase Bank are examples of these individuals.

Answer 22

Mortgage Banker

Question 23

LENDING AND LOANS:
Financing Markets:
Mortgage Banker vs Broker (Who ISSUES the Mortgages?):
* Mortgage Banker:
o The _______ define a banker as an individual, firm or corporation that originates, sells and or services loans secured by mortgages.

Answer 23

Mortgage Bankers Association

Question 24

LENDING AND LOANS:
Financing Markets:
Mortgage Banker vs Broker (Who Issues the Mortgages?):
* _______:
This person has no direct ties to any one institution and can shop loan programs.
o Determines the loan type that is best for the individual borrower.
o Shops different mortgage bankers to determine who could offer best terms.
o Has the ability to compare loans from different institutions.

Answer 24

Mortgage Broker

Question 25

LENDING AND LOANS: Financing Markets: Mortgage Banker vs Broker (Who Issues the Mortgages?): * Mortgage Broker: o The _______ define a broker as an independent real estate financing professional who specializes in the origination of mortgages.

Answer 25

National Association of Mortgage Brokers

Question 26

Real Life Note: Most real estate agents work with mortgage brokers. Brokers can "shop" different banks and lender programs to find a loan for the borrower that fits that borrowers needs. Not all banks offer the same programs, so find yourself a great loan broker as they can get your clients the best rates, which in turn, gets you the agent, more business! What is this called?

Answer 26

Dual Agency

Question 27

This lender has the option of shopping for better rates for their client: Broker Banker

Answer 27

Broker

Question 28

LENDING AND LOANS: Conventional Loans: * Loans that are _______ federally insured or guaranteed. * Banks or private financial institutions originate the loan.

Answer 28

Not

Question 29

LENDING AND LOANS: Conventional Loans: * These loans are determined to be either conforming or non-conforming: * _______: Any mortgage loan that CONFORMS to federal guidelines.

Answer 29

Conforming Loans

Question 30

LENDING AND LOANS: Conventional Loans: o _______ are loans that meet the criteria set by Freddie Mac and Fannie Mae and are sold on the Secondary Market.

Answer 30

Conforming Loans

Question 31

LENDING AND LOANS: Conventional Loans: o Loans must be below $_______ in order to be considered ‘CONFORMING’ o (This is the new loan limit as per 2022).

Answer 31

$625,000

Question 32

LENDING AND LOANS: Conventional Loans *_______: A loan that fails to meet bank criteria for funding.

Answer 32

Non-Conforming Loans

Question 33

LENDING AND LOANS: Conventional Loans *Non-Conforming Loans: o Loan amount is higher than the conforming loan limits, lack of _______, the unusual nature of the loan, or other out of the ordinary criteria.

Answer 33

Sufficient Credit

Question 34

LENDING AND LOANS: Conventional Loans *Non-Conforming Loans: o Jumbo Loans: loans in the amount over the conforming rate of $_______. o Government buyers typically don’t by jumbo loans or pools consisting of jumbos.

Answer 34

$484,350

Question 35

LENDING AND LOANS: Conventional Loans *Non-Conforming Loans: o Private entities or corporations will buy Non-Conforming loans. o Higher risk to lender, usually require larger down payments and _______ borrower qualifications.

Answer 35

Stricter

Question 36

LENDING AND LOANS: Quiz: A _______ loan is over the conforming loan limit size.

Answer 36

Jumbo

Question 37

LENDING AND LOANS: Quiz: You purchase your home through the local ABC Bank. They have decided to sell your loan and ______________ it with other loans. They then sell it on the ____________ market.

Answer 37

Bundle Secondary

Question 38

LENDING AND LOANS: Quiz: What is the difference between a Mortgage Banker and a Mortgage Broker?

Answer 38

Mortgage Banker works in the loan department of larger financial institutions like banks, savings and loan associations, or credit unions. On the other hand, Mortgage Broker has no direct ties to any institution and can shop loan programs.

Question 39

LENDING AND LOANS: Quiz: Why would a Primary Lender sell your loan?

Answer 39

The lender needs their money freed up to continue making new loans to new borrowers. When they sell these loans on the secondary market, they not only profit from this sale, but they get their money back, which they then turn around and loan out again, and the process starts all over again.

Question 40

LENDING AND LOANS: Quiz: Who would most likely purchase a Jumbo Loan on the Secondary Market?

Answer 40

Hedge funds or private investors will likely purchase a Jumbo Loan on the Secondary Market.

Question 41

LENDING AND LOANS: Quiz: Conforming loans: Are similar to other loans in the area Are not government insurable Exceed $424,100 Meet federal criteria guidelines

Answer 41

Meet federal criteria guidelines

Question 42

LENDING AND LOANS: Quiz: The largest buyer of Mortgage Backed Securities is: Federal Government FMLA FHA Big Banks and Investment Firms

Answer 42

Federal Government

Question 43

LENDING AND LOANS: Quiz: All of the following loans would be considered conforming except: Rural Home Loans under $250,000 Jumbo Loans VA ensured loans with no down payments New construction home loans

Answer 43

Jumbo Loans

Question 44

LENDING AND LOANS: Quiz: Your client, a newly graduated student from university who has large student loans but a good credit score. The problem is that the borrower has limited funds to be used as a down payment and has a somewhat high debt to income ratio. This borrower would most likely be best served by which type of home lenders? Loan Broker Loan Banker Vendor FHA

Answer 44

Loan Broker

Question 45

LENDING AND LOANS: Government Insured Loans: *The federal government insures a ________ of each loan in the event the borrower defaults on their home loan.

Answer 45

Portion

Question 46

LENDING AND LOANS: ________: * This backing, or guarantee, is what gives lenders more confidence in homebuyers and the ability to extend favorable rates and terms.

Answer 46

Government Insured Loans

Question 47

LENDING AND LOANS: Government Insured Loans: FHA Loans: * Managed by ________. FHA Does NOT originate or make loans, they ONLY INSURE these loans.

Answer 47

Department Housing and Urban Development (HUD)

Question 48

LENDING AND LOANS: Government Insured Loans: FHA Loans: * Available to all types of buyers not just first-time homeowners by having looser lending ________ versus a conventional loan would.

Answer 48

Guidelines

Question 49

LENDING AND LOANS: Government Insured Loans: FHA Loans: * IMPORTANT: FHA Loans NEVER have a ________ on it's loans.

Answer 49

Prepayment Penalty

Question 50

LENDING AND LOANS: Government Insured Loans: FHA Loans: * IMPORTANT: FHA Loans are only for owner occupied homes up to 4 units as long as 1 is ________. * Low down payment compared to conventional with only a 3.5% down payment.

Answer 50

Primary Owner

Question 51

LENDING AND LOANS: Government Insured Loans: FHA Loans: * FHA loan limits will vary between counties and states * IMPORTANT: FHA loans will carry a MIP on loans that have LESS THAN a ________% down payment.

Answer 51

20%

Question 52

LENDING AND LOANS: Government Insured Loans: FHA Loans: o MIP = ________ carried on FHA insured loans. o This is designed to PROTECT the lender in cases where the borrower has defaulted.

Answer 52

Mortgage Insurance Premium

Question 53

LENDING AND LOANS: Government Insured Loans: FHA Loans: o FHA has an ________ and an ongoing monthly premium that now, never goes away until the loan is paid off or refinanced.

Answer 53

Upfront Mortgage Insurance Premium (UFMIP)

Question 54

LENDING AND LOANS: Government Insured Loans: FHA Loans: * FHA ________ will perform a specific type of appraisal to satisfy FHA terms.

Answer 54

Certified Appraisers

Question 55

LENDING AND LOANS: Government Insured Loans: FHA Loans: * ________: A typical FHA clause where by the borrower is mandated to receive their earnest money back in full without penalty if the property FAILS to meet value or appraise.

Answer 55

FHA Conditional Commitment / FHA Amendatory Clause

Question 56

LENDING AND LOANS: Government Insured Loans: VA Loans: * Loans offered SPECIFICALLY for the use of qualified US Military Veterans. * VA loans are for ________ units only.

Answer 56

Owner Occupied

Question 57

LENDING AND LOANS: Government Insured Loans: VA Loans: o ________: Proof that the Veteran has served and is eligible.

Answer 57

Certificate of Eligibility

Question 58

LENDING AND LOANS: Government Insured Loans: VA Loans: Certificate of Eligibility: ELIGIBILITY INCLUDES: o ________ Consecutive Days of active military service during wartime.

Answer 58

90 Consecutive Days

Question 59

LENDING AND LOANS: Government Insured Loans: VA Loans: Certificate of Eligibility: ELIGIBILITY INCLUDES:  ________ Days of active service during peacetime.

Answer 59

181 Days

Question 60

LENDING AND LOANS: Government Insured Loans: VA Loans: Certificate of Eligibility: ELIGIBILITY INCLUDES:  More than ________ Years of service in the National Guard or Reserves.

Answer 60

6 Years

Question 61

LENDING AND LOANS: Government Insured Loans: VA Loans: Certificate of Eligibility: ELIGIBILITY INCLUDES:  The spouse of a service member who ________ in the line of duty or as a result of a service-related disability.

Answer 61

Died

Question 62

LENDING AND LOANS: Government Insured Loans: VA Loans: * ________: VA loans have a NO down payment needed.

Answer 62

Zero Down Payment

Question 63

LENDING AND LOANS: Government Insured Loans: VA Loans: * There is NO ________ on VA Loans.

Answer 63

Mortgage Insurance

Question 64

LENDING AND LOANS: Government Insured Loans: VA Loans: * VA loan limits vary by county and state. AZ current 2018 limits are $________.

Answer 64

$453,100

Question 65

LENDING AND LOANS: Government Insured Loans: VA Loans: * Appraisals are done in accordance with the ________.

Answer 65

Department of Veterans Affairs

Question 66

LENDING AND LOANS: Government Insured Loans: VA Loans: o ________: Veteran is given a certificate good for a period of 6 MONTHS that the property meets the value at asking price.

Answer 66

Certificate of Reasonable Value

Question 67

LENDING AND LOANS: Government Insured Loans: VA Loans: o Certificate of Reasonable Value: VETERAN is given a certificate good for a period of ________ Months that the property meets the value at asking price.

Answer 67

6 Months

Question 68

LENDING AND LOANS: Government Insured Loans: VA Loans: o Certificate of Reasonable Value: * ________ : These fees for VA loans vary between loans and can be paid by seller or Veteran.

Answer 68

Variable Funding Fee

Question 69

LENDING AND LOANS: Government Insured Loans: VA Loans: o Certificate of Reasonable Value: * Veterans can ________ their VA loans over and over using their ‘certificate of eligibility’.

Answer 69

Reuse

Question 70

LENDING AND LOANS: Government Insured Loans: Which statements about government insured loans are correct? The federal government insures a portion of each loan in the event the borrower defaults on their home loan FHA loan limits do not vary between counties and states VA loans have no down payment needed FHA Loans do NOT have a prepayment penalty on it’s loans

Answer 70

The federal government insures a portion of each loan in the event the borrower defaults on their home loan VA loans have no down payment needed FHA Loans do NOT have a prepayment penalty on it’s loans

Question 71

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service):  This is specifically for _______borrowers with certain income requirements that are not able to obtain adequate housing with conventional financing.

Answer 71

Rural

Question 72

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service): There are _______ Insured loans for rural borrowers with certain income requirements that makes it harder for them to obtain housing with conventional financing.

Answer 72

Government

Question 73

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service):  IMPORTANT: _______ DO exist and are based off of the average for the area.

Answer 73

Income Limits

Question 74

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service):  The _______ of the property being financed must be eligible and recognized as rural as per the guidelines of the United States Department of Agriculture.

Answer 74

Address

Question 75

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service):  Does NOT have to be a first-time buyer, can be _______ used.

Answer 75

Repeatedly

Question 76

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service):  IMPORTANT: 100% Financing, no _______ is needed.

Answer 76

Down Payment

Question 77

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service):  USDA loans do NOT have PMI, but instead have an _______ that is meant to cover any losses incurred by borrowers who may default.

Answer 77

Upfront Premium

Question 78

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service): o IMPORTANT: Up front mortgage insurance is _______% of the loan amount and can be financed.

Answer 78

2%

Question 79

LENDING AND LOANS: Servicing of a Loan: Who SERVICES The Mortgage? * IMPORTANT: _______ = the collection of funds due monthly to the loan owner and the distributions of those funds to the appropriate party, for a collection fee.

Answer 79

Loan Servicing

Question 80

LENDING AND LOANS: Servicing of a Loan: Who SERVICES The Mortgage? Loan Servicing: * IMPORTANT: The ‘_______’ of a loan could be the same as the original lender. * Most often, the originator of the loan will have a 3rd party servicer.

Answer 80

Servicer

Question 81

LENDING AND LOANS: Servicing of a Loan: Who SERVICES The Mortgage? Loan Servicing: * The property owner must be notified in _______ if their loan is going to be sold or serviced by another party in advance of the action taking place. * At initial closing of the loan, a disclosure states what _______ of loans that broker/banker keeps VS sells on the secondary market to give people an idea of if their loan will be sold.

Answer 81

Advance Percentage

Question 82

LENDING AND LOANS: Common Loans: Fully Amortized Loans: * IMPORTANT: Most frequently borrowers have both fully amortized and _______ loans.

Answer 82

Budget

Question 83

LENDING AND LOANS: Common Loans: * _______: These are loans where both the principal and interest are being paid per month.

Answer 83

Fully Amortized Loans

Question 84

LENDING AND LOANS: Common Loans: Fully Amortized Loans: o All mortgages are ‘_______’ which means you are paying back the majority of the interest in the up-front period of the loan and principal increases over time.

Answer 84

Front Loaded

Question 85

LENDING AND LOANS: Common Loans: Fully Amortized Loans: o IMPORTANT: At the _______ of the loan term, both the principal and the interest will have been paid back.

Answer 85

End

Question 86

LENDING AND LOANS: Common Loans: Budget Loans: These are loans that include the payments that will be made to _______ and _______.

Answer 86

Insurance Taxes

Question 87

LENDING AND LOANS: Common Loans: Budget Loans: o IMPORTANT: Commonly known as _______ loans or Principal, Interest, Taxes and Insurance.

Answer 87

P.I.T.I.

Question 88

LENDING AND LOANS: Common Loans: Budget Loans: o Loans with PMI are known as _______ loans as they include PMI amounts. o Lenders use this PITI to determine your ratios on how much you can afford.

Answer 88

P.I.T.I.-M.I. loans Remember: Pity Me

Question 89

LENDING AND LOANS: Common Loans: Budget Loans: o IMPORTANT: Each month, the lender is taking 1/12 of your taxes and insurance bill and place these monies into your ‘_______’ account.

Answer 89

Impound / Escrow / Special

Question 90

LENDING AND LOANS: Common Loans: Budget Loans: o IMPORTANT: The _______ will pay your taxes and insurance bills when they come due from this Impound / Escrow / Special account.

Answer 90

Lender

Question 91

LENDING AND LOANS: Uncommon Loans: * Not Every borrower will qualify for a conventional loan and as such there are quite a few types of loans that lenders have created in the past to satisfy the demand of _______ lending.

Answer 91

Unconventional

Question 92

LENDING AND LOANS: Uncommon Loans: * _______: o Borrowers who wish to build will obtain this type of loan where the lender will finance both the materials and the labor being used to construct the building.

Answer 92

Construction Loans

Question 93

LENDING AND LOANS: Uncommon Loans: * Construction Loans: o These loans have a short duration and at end of the construction, the loan is _______ to a conventional loan.

Answer 93

Converted

Question 94

LENDING AND LOANS: Uncommon Loans: * Construction Loans: o Lender issues draw payments to borrower at predefined increments called _______.

Answer 94

Draw Periods

Question 95

LENDING AND LOANS: Uncommon Loans: * Construction Loans: IMPORTANT: _______: These are detailed payment plans for a construction project.

Answer 95

Draw Payments

Question 96

LENDING AND LOANS: Uncommon Loans: * _______: o In this type of loan payments is lower because only the interest is being paid, not principal.

Answer 96

Interest Only Loans

Question 97

LENDING AND LOANS: Uncommon Loans: * Interest Only Loans: o In this type of loan the entire _______ loan amount is due on the final payment at the end of their terms.

Answer 97

Remainder

Question 98

LENDING AND LOANS: Uncommon Loans: * _______: o Any type of financing that is provided directly by the seller to the buyer.

Answer 98

Seller Financing

Question 99

LENDING AND LOANS: Uncommon Loans: * Seller Financing: o Usually, a down payment is made followed by monthly payments at an agreed upon _______ until the loan is repaid.

Answer 99

Interest Rate

Question 100

LENDING AND LOANS: Uncommon Loans: * Seller Financing: o Also known as a _______, ________, or _________.

Answer 100

Contract for Deed Land Contract Agreement for Sale

Question 101

LENDING AND LOANS: Uncommon Loans: * _______: o This type of loan is used to fund the purchase of more than one piece of real property.

Answer 101

Blanket Loans

Question 102

LENDING AND LOANS: Uncommon Loans: * Blanket Loans: o Popular with builders who buy large tracts of land, then _______ them to create many individual parcels to be gradually sold one at a time.

Answer 102

Subdivide

Question 103

LENDING AND LOANS: Uncommon Loans: * _______: o This type of loan is typically issued by PRIVATE investors or companies. o Interest rates are usually HIGHER than a standard lender.

Answer 103

Hard Money Loans

Question 104

LENDING AND LOANS: Uncommon Loans: * Hard Money Loans: o There is little to NO _______ oversight and regulation.

Answer 104

Government

Question 105

LENDING AND LOANS: Uncommon Loans: * _______: o In this type of loan borrowers over the age of 62 pledge their current home as collateral to a bank who in turn makes payments to the borrowers who own the home.

Answer 105

Reverse Mortgage Loans

Question 106

LENDING AND LOANS: Uncommon Loans: * Reverse Mortgage Loans: o Typically reserved for the elderly who own their homes free and clear. o Owners are still responsible for homes _______ and _______.

Answer 106

Taxes Insurance

Question 107

LENDING AND LOANS: Uncommon Loans: * Reverse Mortgage Loans: Upon the owner’s _______, the home reverts to the bank as an asset.

Answer 107

Death

Question 108

LENDING AND LOANS: Uncommon Loans: * Adjustable Rate Loans: o IMPORTANT: Also known as an ARM where the rate ADJUSTS over the life of the loan. o Adjustments are tied to a _______.

Answer 108

Specific Index

Question 109

LENDING AND LOANS: Uncommon Loans: * _______: o This is a type of loan where the borrower is borrowing for the purchase of both real and personal property. o Think of a farm – the new buyer is buying the farm (land) and the equipment (personal). o IMPORTANT: Sometimes can be used for the purchase of property that is furnished already.

Answer 109

Package Loans

Question 110

LENDING AND LOANS: Uncommon Loans: * _______: o Borrower makes equal payments until a predefined point where the balance is due. o The final payment is for the remainder of the balance.

Answer 110

Balloon Loans

Question 111

LENDING AND LOANS: Uncommon Loans: * _______: o This is the type of loan that allows owners to use their equity as a loan to receive cash out payments.

Answer 111

Home Equity Loans HELOC Home Equity Lines of Credit

Question 112

LENDING AND LOANS: Uncommon Loans: * _______: o This type of loan is through a bank or other institution that originates mortgage loans and holds a portfolio of loans instead of selling them in the secondary market.

Answer 112

Portfolio Lenders

Question 113

LENDING AND LOANS: Uncommon Loans: * _______: o The seller carries a SECONDARY mortgage which wraps around and exists in addition to any first loan already secured by the property.

Answer 113

Wrap Loans / Carryback Loans

Question 114

LENDING AND LOANS: Uncommon Loans: * Wrap Loans / Carryback Loans: o Sellers carry some risk in the case that buyer defaults on the loan, SELLER is still _______ for paying the primary mortgage.

Answer 114

Responsible

Question 115

LENDING AND LOANS: Uncommon Loans: * _______Open End Loan: o Where the seller can keep ‘OPEN’ the maximum amount he can borrow. o As they pay down their principal, the borrower can go back and borrow up to their loan limit again and again.

Question 116

LENDING AND LOANS: Uncommon Loans: * _______: o A short-term financing tool that helps purchasers to "BRIDGE" the gap between old and new mortgages by allowing them to tap the equity in their current residence as a down payment, while essentially owning two properties CONCURRENTLY as they wait for the sale of their existing home to close.

Answer 116

Gap Loan Bridge Loan Swing Loan

Question 117

LENDING AND LOANS: Uncommon Loans: * _______: o Long-term take-out loans replace interim financing, such as a short-term construction loan.

Answer 117

Take Out Loan

Question 118

LENDING AND LOANS: Uncommon Loans: * _______: o A loan used for the specific purpose of obtaining a non-affixed home whereby the borrower can borrow money to obtain both the land and the mobile/manufactured home in one loan.

Answer 118

Manufactured Home Mobile Home Loan

Question 119

LENDING AND LOANS: Uncommon Loans: * Manufactured Home or (Mobile Home) Loan:  IMPORTANT: A _______ financing statement is a legal form that a creditor files to give notice that it has or may have an interest in the personal property of a debtor. This is used primarily in financing mobile homes.

Answer 119

UCC-1

Question 120

LENDING AND LOANS: Uncommon Loans: Quiz: Which of these is NOT an uncommon loan? Reverse loan Budget loan Construction loan Blanket loan

Answer 120

Budget loan

Question 121

LENDING AND LOANS: Commercial Financing * Types Of Commercial Loans: o _______ = Similar to residential financing, but in the case of a business, personal AND business credit scores are used. The down payments is usually 20-30% down and rates are HIGHER versus residential.

Answer 121

Conventional

Question 122

LENDING AND LOANS: Commercial Financing * Types Of Commercial Loans o _______ = In some cases, the SELLER of commercial will act as the bank, thus carrying the borrower.

Answer 122

Seller Financing

Question 123

LENDING AND LOANS: Commercial Financing: * Types Of Commercial Loans o _______ = These loans guarantee loans on behalf of small business. They are GOVERNMENT insured and will pay back up to 85% of a loan in case of a business DEFAULT.

Answer 123

Small Business Administration (SBA) Loans

Question 124

LENDING AND LOANS: Commercial Financing: * _______ = Many new businesses can’t show profit and loss statements on their TAXES so the owner of the business/real estate can opt to personally guarantee the loan, using their own money and assets.

Answer 124

Personal Guarantee

Question 125

LENDING AND LOANS: Commercial Financing: * _______ = This premium cost is a contractual clause that compensates a lender for the loss of interest payments arising from a borrower's early payment of the loan.

Answer 125

Yield Maintenance / Pre-Payment Penalty

Question 126

LENDING AND LOANS: Commercial Financing: * _______ = These are used to measure the fees, spreads and rates in commercial real estate finance. Each one is worth 0.01 percent of a single percentage point. (100 = 1%)

Answer 126

Basis Points (BPS)

Question 127

LENDING AND LOANS: Commercial Financing: * _______ = This is a popular benchmark used in the measurement of an entity's ability to produce enough cash to cover its debt payments, expressed as a ratio (NOI / Debt Owed).

Answer 127

Debt Coverage Ratio

Question 128

LENDING AND LOANS: Commercial Financing: * _______: Rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property. IMPORTANT: Used primarily in commercial – the amount put out vs cash that comes in is expressed as a %)

Answer 128

Cash-on-Cash Returns

Question 129

LENDING AND LOANS: _______: * Many loans are in fact able to be taken over and the new borrower can assume or take over the existing terms and conditions of the seller's current loan.

Answer 129

Assumable Loans

Question 130

LENDING AND LOANS: Assumable Loans: * Most _______ loans and all _______ loans are ASSUMABLE and are set up that way. o *New buyer still have to qualify* for the loan just as if it were a new loan and the lender will have to ALLOW the new buyer to assume the loan.

Answer 130

FHA VA

Question 131

LENDING AND LOANS: Assumable Loans: * _______ = The buyer assumes the debt and terms of the sellers existing loan. o In some loans, the original buyer (now seller) can be held liable for the original loan.

Answer 131

Assumption

Question 132

LENDING AND LOANS: Assumable Loans: * _______ = Substitution of a new contract in place of an old one. o When the seller (original borrower) doesn’t want to be on the hook for new borrower in case of default, they can use this clause.

Answer 132

Novation / Nomination

Question 133

LENDING AND LOANS: Assumable Loans: * _______= Subject to the existing mortgage on the property. o Loan stays in the seller’s name, but the buyer gets the deed and controls the property. o Buyer makes the mortgage payments but the seller remains responsible for the loan.

Answer 133

Subject To Loans

Question 134

LENDING AND LOANS: Assumable Loans: * _______ = This is a way to prevent a new buyer from assuming the loan (lender can call the note due and payable IMMEDIATELY, also found in foreclosures). o This dictates that the loan must be paid off in full before a new borrower or owner can take over the property.

Answer 134

Due on Sale Clause / Alienation Clause

Question 135

LENDING AND LOANS: Qualifying for a Loan: * Lenders look at the Ratio’s and the overall _______ performance to qualify borrowers * The borrowers Debts and their Incomes will be a primary source of determining the capability of obtaining a loan and repaying it over time.

Answer 135

Credit

Question 136

LENDING AND LOANS: Qualifying for a Loan: Quiz: A seller has an existing VA loan and wants to sell to another Veteran. The VA loan is ____________ as long as the new buyer qualifies!

Answer 136

This is an ASSUMABLE loan where the new buyer can take over the original loan 'assuming' all the same terms as long as they qualify.

Question 137

LENDING AND LOANS: Qualifying for a Loan: Quiz: Why (primarily) does the federal government insure a portion of most mortgages?

Answer 137

The federal government insures a portion of each loan if the borrower defaults on their home loan. This backing, or guarantee, gives lenders more confidence in home buyers and the ability to extend favorable rates and terms.

Question 138

LENDING AND LOANS: Qualifying for a Loan: Quiz: For an FHA loan, when is mortgage insurance required? What does mortgage insurance provide?

Answer 138

Mortgage insurance is designed to protect the lender when the borrower defaults.

Question 139

LENDING AND LOANS: Qualifying for a Loan: Quiz: Despite the added cost of Mortgage Insurance Premiums (MIP), what is the primary advantage to a buyer of an FHA loan?

Answer 139

FHA has an upfront mortgage insurance premium and an ongoing monthly premium that never goes away until the loan is paid or refinanced.

Question 140

LENDING AND LOANS: Qualifying for a Loan: Quiz: What is the difference between assumption and novation?

Answer 140

In assumption, the buyer ASSUMES the debt and terms of the seller's existing loan. In some loans, the original buyer (now seller) can be held liable for the original loan. For Novation, the SUBSTITUTION of a new contract replaces an old one. When the seller (original borrower) doesn't want to be on the hook for the new borrower in case of default, they can use a novation clause.

Question 141

LENDING AND LOANS: Qualifying for a Loan: Quiz: The interest rate on an amortized fixed-rate mortgage will? Change every year Stay the same for the entire repayment Increase gradually Decrease gradually

Answer 141

Stay the same for the entire repayment

Question 142

LENDING AND LOANS: Qualifying for a Loan: Quiz: Conforming loans: Are similar to other loans in the area Are not government insurable Exceed $424,100 Meet federal criteria guidelines

Answer 142

Meet federal criteria guidelines

Question 143

LENDING AND LOANS: Qualifying for a Loan: Quiz: Which is not a characteristic of an FHA loan? No mortgage insurance premium Low down payment High down payment Government insured

Answer 143

No mortgage insurance premium

Question 144

LENDING AND LOANS: Qualifying for a Loan: Quiz: Which loan would have A clause that protects A borrower from paying more than the house is worth? VA Loan using Protection Clause USDA using Rural Guidance Clause Conventional using Fair Market Clause FHA using the Amendatory Clause

Answer 144

FHA using the Amendatory Clause

Question 145

LENDING AND LOANS: Qualifying for a Loan: Quiz: In lieu of A conventional appraisal process, A VA loan applicant receives Certificate of reasonable value Certificate of eligibility FHA appraisal Cost method appraisal

Answer 145

Certificate of reasonable value

Question 146

LENDING AND LOANS: Qualifying for a Loan: Quiz: USDA/RHS loans require A(n): Mortgage insurance premium Certificate of eligibility Down payment Upfront premium

Answer 146

Upfront premium

Question 147

LENDING AND LOANS: Qualifying for a Loan: Quiz: Fully amortized loans: Pay interest only Pay principal only Pay both interest and principal Have A balloon payment at A predetermined time

Answer 147

Pay both interest and principal

Question 148

LENDING AND LOANS: Qualifying for a Loan: Quiz: With A budget loan, money collected each month for taxes and insurance is put into what type of account? Impound Escrow Savings PITI

Answer 148

Impound ONLY ON BUDGET LOANS. Escrow Account on all other loans.

Question 149

LENDING AND LOANS: Qualifying for a Loan: Quiz: With interest only loans, when is the principal paid? At the closing of the property Gradually every 12 calendar months Beginning midway through the term Paid in full at the end of the term

Answer 149

Paid in full at the end of the term

Question 150

LENDING AND LOANS: Qualifying for a Loan: This is why you need a good lender, well, that and a good borrower! These are the items that will qualify or disqualify your borrower from obtaining credit. Lenders look at the DTI Ratio’s and the overall Credit performance to qualify borrowers. The borrowers Debts and their Incomes will be a primary source of determining the capability of obtaining a loan and ________ it over time.

Answer 150

Repaying

Question 151

LENDING AND LOANS: Qualifying for a Loan: * ________ = A form that was developed by the Federal National Mortgage Association (Fannie Mae), as a standardized form for the industry.

Answer 151

Uniform Residential Loan Application (URLA) Form 1003

Question 152

LENDING AND LOANS: Qualifying for a Loan: * All loan officers, brokers or lenders must be licensed according to the Nationwide ________ and follow national guidelines. * Lenders will look at your DTI ratio to determine how much they can qualify for known

Answer 152

Mortgage Licensing System (NMLS)

Question 153

LENDING AND LOANS: Qualifying for a Loan: * ________ = You have a unique score that helps determine your creditworthiness. This is one of the 4 C’s (Credit, Character, Collateral, Capacity).

Answer 153

Credit Score

Question 154

LENDING AND LOANS: Qualifying for a Loan: * ________ = A credit report where all 3 credit reporting bureaus are reporting to the lender information that is in their credit report on you, which can and will vary between agencies.

Answer 154

Tri-Merged Credit Report

Question 155

LENDING AND LOANS: Qualifying for a Loan: ________ = This is calculated by dividing total recurring monthly debt by gross monthly income, and it is expressed as a percentage. o Example, if you pay $1500 a month for your mortgage and another $100 a month for an auto loan and $400 a month for the rest of your debts, your monthly debt payments are $2000. ($1500 + $100 + $400 = $2,000.) If your gross monthly income is $6000, then your debt-to-income ratio is 33 percent. ($2000 is 33% of $6000.)

Answer 155

Debt to Income Ratio DTI Ratio

Question 156

LENDING AND LOANS: Qualifying for a Loan: It's not always how much you can borrow, but how much you can '________'

Answer 156

Afford

Question 157

LENDING AND LOANS: Qualifying for a Loan: o ________ = Any index that is used to adjust pricing on loans, borrowing costs, lease rate etc. The consumer price index or inflation index are two examples of an index.

Answer 157

Indices

Question 158

LENDING AND LOANS: How Much Is Being Borrowed? * ________ = Ratio is a number that describes the size of a loan compared to the value of the property securing the loan.

Question 159

LENDING AND LOANS: How Much Is Being Borrowed? * Lenders use the Loan to Value (LTV) ratio to understand how ________ a loan is, and it can be used for approving loans or requiring mortgage insurance. LTV is always expressed as a percent: o Loan amount/ Property Value = LTV o $320,000 loan + $400,000 property = 80% LTV o The borrower here is financing 80%

Answer 159

Risky

Question 160

LENDING AND LOANS: Income & Debt Ratios: * ________ = Monthly housing expenses / Monthly Gross Income o The lower the better which means you have lower monthly expenses. o The lower your expenses overall, the more you can ‘BORROW’ on a loan.

Answer 160

Income Ratio

Question 161

LENDING AND LOANS: Income & Debt Ratios: * ________ = All Housing expenses + All Other Monthly expenses / Monthly Gross Income. o This is your total debts, not just housing and again, the LOWER the better. o Many people can’t afford a home because their car loans, student loans and credit cards absorb too much of their total income.

Answer 161

Debt Ratio

Question 162

LENDING AND LOANS: Income & Debt Ratios: Understanding borrowers '________' will give you the real estate agent an idea of what they can qualify for, even before you talk to a lender. It should be obvious that the more income you have, the more you qualify for, unless you have a lot of debt. so again, we are looking at ratios being express as a percentage or a fraction.

Answer 162

Ratios

Question 163

LENDING AND LOANS: Income & Debt Ratios: Case Study: Express this to me as a RATIO please! To qualify for a conforming loan, most lenders require a DTI of 43% or lower, commonly known as the "43% rule." So if your borrower has income of $100,000 and debts of $50,000 you would divide the debt by the income: $50,000 / $100,000 to determine they have a 50% DTI - Not going to qualify! Better, a borrower earns $60,000 a year and has $12,000 in debt. ($12,000 / $60,000 = .20) This buyer has a _____% DTI and looks like a great buyer!

Answer 163

20%

Question 164

LENDING AND LOANS: Income & Debt Ratios: Quiz: If a borrower has a yearly income of $90,000 but has debts of $34,000 per year, what is their DTI expressed as a percentage? 2.65% 37% 45% 19%

Answer 164

37% NOTE: Remember, small (debt) divided by big (income) = percent or rate. $34,000 / $90,000 = .37 or 37%

Question 165

LENDING AND LOANS: Income & Debt Ratios: Like Diamonds and the 4 C’s, lending has the 4 C’s 1. 2. 3. 4.

Answer 165

1. Credit 2. Collateral 3. Character 4. Capacity

Question 166

LENDING AND LOANS: Income & Debt Ratios: THE 4 C'S of Lending: * Credit: o Lenders look at credit to determine borrowers past borrowing patterns. o Most often a tri-merged credit report is pulled. o Equal Credit Opportunity Act prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. o IMPORTANT: HOWEVER, you _______ place bias or discriminate on the basis of credit.

Answer 166

Can

Question 167

LENDING AND LOANS: Income & Debt Ratios: THE 4 C'S of Lending: * Collateral o Is the property being loaned against good enough to be used as collateral. o An appraisal will determine the _______ of the asset.

Answer 167

Value

Question 168

LENDING AND LOANS: Income & Debt Ratios: THE 4 C'S of Lending: * Character o _______ can be made about a borrower to determine his ABILITY to repay. o Past history is used as evidence to help determine character.

Answer 168

Assumptions

Question 169

LENDING AND LOANS: Income & Debt Ratios: THE 4 C'S of Lending: * Capacity: o Does the borrower have the _______ means necessary to repay the loan. o Can the borrower pay not only the loan but also their other monthly debt obligations?

Answer 169

Financial

Question 170

LENDING AND LOANS: Loan Limits and Rates: * It is very likely that two borrowers will get two completely different loans if applying for the same property from the same lender * Most of the time the lender has loan limits set by the _______, NOT federal requirements. * Designed to not take advantage of borrowers with varying credit backgrounds

Answer 170

State

Question 171

LENDING AND LOANS: Loan Limits and Rates: * ________ = The illegal practice of lending money at unusually high interest rates.

Answer 171

Usury

Question 172

LENDING AND LOANS: Loan Limits and Rates: * Usury = o IMPORTANT: Arizona has this rates set at 10% - BUT – Creditors and Borrowers can ‘________’ and as such, there is NO limit to what a creditor can charge (as long as agreed upon).

Answer 172

Agree to Any Rate

Question 173

LENDING AND LOANS: Loan Limits and Rates: * ________ = Loans where the borrower is not prime or A grade. These borrowers will usually have a higher interest rate due to lower credit, capacity, collateral or character.

Answer 173

Sub-Prime Loan

Question 174

LENDING AND LOANS: Fixed vs. Adjustable Rate Loans: * ________ = Have SAME interest rate for entire repayment. o Slightly higher rate but PREDICTABLE payments.

Answer 174

Amortized Fixed-Rate Mortgages

Question 175

LENDING AND LOANS: Fixed vs. Adjustable Rate Loans: * ________: Will change, typically every year. o Lower initial rate but UNCERTAINTY about future payments.

Answer 175

Adjustable Rate Mortgage (ARMs)

Question 176

LENDING AND LOANS: Fixed vs. Adjustable Rate Loans: * Adjustable Rate Mortgage (ARMs): * Some ________ loans will begin fixed for several years and then change to adjustable.

Answer 176

Hybrid

Question 177

LENDING AND LOANS: Government Effect On Rates: * Federal Reserve directly CONTROL interest rates by raising or lowering the ________.

Answer 177

Federal Funds Rate

Question 178

LENDING AND LOANS: Government Effect On Rates:  ________: Interest rate conventional banks use to lend money.

Answer 178

Federal Funds Rate

Question 179

LENDING AND LOANS: Government Effect On Rates: * By raising the cost to borrow money from the Federal Reserve, banks in turn ________ the interest rates at which they lend their money in the form of mortgages.

Answer 179

Raise

Question 180

LENDING AND LOANS: Government Effect On Rates: o By raising the cost to borrow money from the Federal Reserve, banks in turn ________ interest rates, the cost of borrowing money becomes cheaper.

Answer 180

Lower

Question 181

LENDING AND LOANS: Government Effect On Rates: o Lower interest rates mean people can borrow more money at lower costs, which ________ public buying and directly affects the real estate market by increasing home sales.

Answer 181

Stimulates

Question 182

LENDING AND LOANS: Government Effect On Rates: Quiz: Name one of the 4 C's of Credit?

Answer 182

Credit, Capacity, Collateral, or Character

Question 183

LENDING AND LOANS: Fixed vs. Adjustable Rate Loans: Quiz: What is the difference between a Fixed Rate Mortgage and an Adjustable Rate Mortgage?

Answer 183

Fixed-rate mortgages have the same interest rate for repayment. It is a slightly higher rate but predictable payments. On the other hand, Adjustable Rate Mortgage (ARMs) will change, typically every year: lower initial rate but uncertainty about future costs.

Question 184

LENDING AND LOANS: Fixed vs. Adjustable Rate Loans: Quiz: How can lenders legally exceed the usury rates?

Answer 184

Arizona has usury rates set at 10%, but lenders can ‘agree to any rate,’ so there is no limit to what a creditor can charge (as long as agreed upon).

Question 185

LENDING AND LOANS: Fixed vs. Adjustable Rate Loans: Quiz: What is the difference between income ratio and debt ratio?

Answer 185

The income Ratio is calculated as Monthly housing expenses / Monthly Gross Income. The lower, the better, which means you have lower monthly expenses. The lower your costs, the more you can ‘borrow’ on a loan. However, the Debt Ratio equals All Housing expenses added to All Other Monthly expenses / Gross Income. This is your total debt, not just housing, and again, the lower the better.

Question 186

LENDING AND LOANS: Fixed vs. Adjustable Rate Loans: Quiz: Name one of the four items lenders look at to determine credit?

Answer 186

1). Uniform Residential Loan Application (URLA) Fannie Mae Form 1003 2). Credit Score 3). Tri Merged Credit Report 4). DTI Ratio

Question 187

LENDING AND LOANS: Quiz: The interest rate on an amortized fixed-rate mortgage will? Change every year Stay the same for the entire repayment Increase gradually Decrease gradually

Answer 187

Stay the same for the entire repayment

Question 188

LENDING AND LOANS: Quiz: Which loan criteria is being investigated when looking at a borrower’s financial means to repay the loan and other debts? Credit Collateral Character Capacity

Answer 188

Capacity

Question 189

LENDING AND LOANS: Quiz: When can A creditor charge interest above the usury rate? When borrower has had A past bankruptcy During hard times When agreed upon by the borrower When A borrower’s DTI exceeds 49%

Answer 189

When agreed upon by the borrower

Question 190

LENDING AND LOANS: Quiz: Which of the following criteria can be discriminated against in regards to lending: Social and Ethnic Background Community Property Applications Job length history Supplemental government assistance

Answer 190

Job length history

Question 191

LENDING AND LOANS: Quiz: The ratio describing the size of A loan compared to the value of the property is referred to as: Debt to income ratio Income ratio Loan to value ratio Collateral ratio

Answer 191

Loan to value ratio

Question 192

LENDING AND LOANS: Quiz: The total of all housing expenses and other expenses compared to monthly gross income is referred to as: Investment Ratio Debt to Income Ratio Loan to value ratio Collateral ratio

Answer 192

Debt to Income Ratio

Question 193

LENDING AND LOANS: Loans Terms Defined: * ________ = Mortgages are paid in arrears, you are paying interest on money you used.

Answer 193

Arrears

Question 194

LENDING AND LOANS: Loans Terms Defined: * Arrears: o IMPORTANT: October 1st mortgage payment is for the money borrowed for the month of ________.

Answer 194

September

Question 195

LENDING AND LOANS: Loans Terms Defined: * Arrears: o IMPORTANT: March 1st mortgage payment is for the money borrowed for the month of ________.

Answer 195

February

Question 196

LENDING AND LOANS: Loans Terms Defined: * ________ = The amount of the loan being financed.

Answer 196

Principal

Question 197

LENDING AND LOANS: Loans Terms Defined: * ________ = The money paid to a lender for the use of their money.

Answer 197

Interest

Question 198

LENDING AND LOANS: Loans Terms Defined: * ________ = A percentage rate applied to the principal which determines the amount of interest owed to the lender over time.

Answer 198

Interest Rate

Question 199

LENDING AND LOANS: Loans Terms Defined: * ________ = The rate that is offered to a borrower before actually making a loan decision can fluctuate depending on external forces, and is where rates are for any given day, before a borrower has ‘locked in’ their rate.

Answer 199

Floating Rate

Question 200

LENDING AND LOANS: Loans Terms Defined: * ________ = When the borrower gets closer to the close of escrow date, the lender will ask the borrower to ‘lock in’ their rate which we try and get the most favorable terms based on the market.

Answer 200

Rate Lock

Question 201

LENDING AND LOANS: Loans Terms Defined: * ________ = The rate charged and represents the actual amount of borrowed moneys cost over the life of the loan.

Answer 201

Annual Percentage Rate (APR)

Question 202

LENDING AND LOANS: Loans Terms Defined: * ________ = Lenders clause in the borrowing documents that states there will be a financial penalty if the loan is paid off early.

Answer 202

Pre-Payment Penalties

Question 203

LENDING AND LOANS: Loans Terms Defined: * Pre-Payment Penalties =  Usually his penalty is only for the first couple of years. Normally ________ Years.  They are NOT as common as they once were.

Answer 203

3-5 Years

Question 204

LENDING AND LOANS: Loans Terms Defined: * ________ = When financing multiple properties and the borrower pays off one of the properties under a blanket loan, the lender will ‘release’ that property from being encumbered.

Answer 204

Release (Partial Release)

Question 205

LENDING AND LOANS: Loans Terms Defined: * ________ = This is defined as a loan where the borrower or guarantors are not personally liable for repaying any outstanding balance on the loan.

Answer 205

Non-Recourse Loan

Question 206

LENDING AND LOANS: Loans Terms Defined: * ________ = When the borrower has successfully paid of their MORTGAGE, the lien holder will send a satisfaction of mortgage letter indicating fully repaid. This is also recorded as a release of liability.

Answer 206

Satisfaction Of Mortgage

Question 207

LENDING AND LOANS: Loans Terms Defined: * ________: This is the same concept of the satisfaction of mortgage, but used in States where the Deed of Trust is used and indicates full satisfaction and REPAYMENT of the DEED OF TRUST.

Answer 207

Deed of Reconveyance

Question 208

LENDING AND LOANS: Loan Points: * ________ = Prepaid interest that lowers the APR over the life of the loan.

Answer 208

Discount Points

Question 209

LENDING AND LOANS: Loan Points: Lender and Loan Points: There are a few types of "POINTS" that you will see in Real Estate. REMEMBER THIS: EVERY POINT is equal to ________% of the LOAN AMOUNT

Answer 209

1%

Question 210

LENDING AND LOANS: Loan Points: ________: Prepaid interest that lowers the APR over the LIFE of the loan.

Answer 210

Discount Points

Question 211

LENDING AND LOANS: Loan Points: Discount Points: IMPORTANT: THIS REDUCES THE BORROWERS PAYMENTS FOR THE LIFE OF THE LOAN:  1 Discount Point = 1% of the PRINCIPAL LOAN AMOUNT: o 1 Discount point on a $240,000 loan = $________

Answer 211

$2400

Question 212

LENDING AND LOANS: Loan Points: Discount Points: IMPORTANT: THIS REDUCES THE BORROWERS PAYMENTS FOR THE LIFE OF THE LOAN:  1 Discount Point = 1% of the PRINCIPAL LOAN AMOUNT: o $240,000 loan buying 2 Discount Points.  $240,000 x .02 (2 points) = $________

Answer 212

$4800

Question 213

LENDING AND LOANS: Loan Points: * 1 Discount Point = a 1/8 % Reduction in Interest Rate: o To lower the interest rate 1 % = ________ Discount Points

Answer 213

8 Discount Points

Question 214

LENDING AND LOANS: Loan Points: * 1 Discount Point = a 1/8 % Reduction in Interest Rate: o To lower the interest rate 1/2 % = ________ Discount Points

Answer 214

4 Discount Points

Question 215

LENDING AND LOANS: Loan Points: 1 Discount Point = 1% of the LOAN AMOUNT 1 Discount point on a $240,000 loan = $2400 $240,000 loan buying 2 Discount Points = $________

Answer 215

$4800

Question 216

LENDING AND LOANS: Loan Points: 1 Discount Point = a 1/8 % Reduction in Interest Rate To lower the interest rate by ONE FULL PERCENT (1 %) = 8 Discount Points Think going from 5% rate to 4% rate, that is 1 full % so you need 8 points 1/8 = ________ x 8 = 1

Answer 216

.125

Question 217

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 1/8 = _________%

Answer 217

.125%

Question 218

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 2/8 = _________%

Answer 218

.250%

Question 219

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 3/8 = _________%

Answer 219

.375%

Question 220

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 4/8 = _________%

Answer 220

.5%

Question 221

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 5/8 = _________%

Answer 221

.625%

Question 222

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 6/8 = _________%

Answer 222

.75%

Question 223

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 7/8 = _________%

Answer 223

.87%

Question 224

LENDING AND LOANS: Loan Points: Calculating Discount Points by Reduction in Interest Rate: 8/8 = _________%

Answer 224

1%

Question 225

LENDING AND LOANS: Loan Points: * _________ = An upfront fee that borrowers will pay to the lender as compensation for issuing a loan, processing, underwriting, and closing.

Answer 225

Origination Points

Question 226

LENDING AND LOANS: Loan Points: * Origination Points: o 1 Origination Point = 1% of the PRINCIPAL LOAN AMOUNT  1 Origination Point on a $185,000 loan = $_________

Answer 226

$1850

Question 227

LENDING AND LOANS: Loan Points: * Origination Points:  1.5 Origination Points on a $300,000 loan = $_________

Answer 227

$4500

Question 228

LENDING AND LOANS: Loan Points: Points as a Whole: There will be times where a borrower has both discount points (reduce their interest rate) and origination points (lender profit). It doesn't matter. To do the math it's the same as above but remember, each point is 1% of the _________, not the purchase price!

Answer 228

Loan Amount

Question 229

LENDING AND LOANS: Loan Points: Case Study: Question: A borrower is getting an 80% loan on a $400,000 property. She has 1 origination point and 2 discount points. What are her costs? Answer: $400,000 is the purchase price. She has an 80% loan so that is 320,000 (400,000 x .80 = 320,000) 1 origination point = $3,200 (1% of $320,000) 2 discount points = $6,400 (2% of $320,000) Total costs = $________

Answer 229

$9,600

Question 230

LENDING AND LOANS: Loan Points: Case Study: A borrower wants to reduce their interest rate by 1/2% from 7.5% to 7%. This will cost the borrower _________ discount points to do this.

Answer 230

This is 4 points. Each discount point is going to lower the borrowers rate by 1/8% or .125. So 4/8 or 1/2 is 4 points or .5%!

Question 231

LENDING AND LOANS: Loan Points: * _________ = By paying upfront fees to a lender a borrower can receive a reduced interest rate for a set amount of time.

Answer 231

Temporary Buydown Points

Question 232

LENDING AND LOANS: Loan Points: Temporary Buydown Points: * _________: This is a 2-year reduced payment and rate.  1st Year rate reduced by 2%, 2nd year rate reduced by 1% and 3-30 rate is fixed.

Answer 232

2-1 Buydown

Question 233

LENDING AND LOANS: Loan Points: Temporary Buydown Points: * 2-1 Buydown:  This could be paid for by the buyer or more often by the SELLERS as an _________ to entice people to buy. This is common with developers or builders.

Answer 233

Incentive

Question 234

LENDING AND LOANS: Loan Points: Quiz: True or False; Discount points are an upfront fee that borrowers will pay to the lender as compensation for issuing/processing a loan. True False

Answer 234

False - Sellers Normally cover to Entice Buyers

Question 235

LENDING AND LOANS: Loan Points: Case Study: A client’s potential mortgage is $1,350 a month in addition to $500 worth of additional debt payments that they have for their car, student loans, etc. If their monthly income is $3,600 a month (before taxes - gross), what is their DTI Ratio?

Answer 235

Total debt payment=1350 + 500 = $1850 Monthly income= $3600 DTI Ratio= 51.38%.

Question 236

LENDING AND LOANS: Loan Points: Case Study: What does Arrears mean?

Answer 236

Mortgages are paid in arrears; you are paying interest on money you used.

Question 237

LENDING AND LOANS: Loan Points: Case Study: To lower an interest rate by 0.5%, how many discount points would be required?

Answer 237

To lower the interest rate by 0.5 % , 4 Discount Points would be required

Question 238

LENDING AND LOANS: Loan Points: Case Study: How are temporary buydown points used?

Answer 238

By paying upfront fees to a lender, a borrower can receive a reduced interest rate for a set amount of time. For example, a 2-1 Buydown is a two-year reduced payment (and rate). 1st Year rate reduced by 2%,, 2nd year rate reduced by 1%, and 3-30 rate is fixed.

Question 239

LENDING AND LOANS: Loan Points: Quiz: Pledging real property in order to secure a mortgage is an example of: Credit Collateral Character Capacity

Answer 239

Collateral

Question 240

LENDING AND LOANS: Loan Points: Quiz: What is the interest rate that the governments banks lend to conventional banks so that they can then lend money? APR Federal funds rate Lending rate Principal

Answer 240

Federal funds rate

Question 241

LENDING AND LOANS: Loan Points: Quiz: To lower an interest rate over the life of the loan by 1/2%, how many discount points would A borrower have? 1 2 4 8

Answer 241

4 [EACH POINT IS 0.125%]

Question 242

LENDING AND LOANS: Loan Points: Quiz: In an effort to cool an overzealous housing market, the federal reserve would typically: Decrease interest rates Relax lending guidelines Create new programs designed to stimulate investment Raise interest rates

Answer 242

Raise Interest Rates

Question 243

LENDING AND LOANS: Loan Points: Quiz: The difference between the current owner’s balance and the asking price on an assumable mortgage loan is: Negotiable Adjustable Buyer’s equity Seller’s equity

Answer 243

Seller’s Equity

Question 244

LENDING AND LOANS: Loan Points: Quiz: In an attempt to lure potential buyers to their community, A builder could legally entice people by offering which of the following lending practices: Discount Purchase Loans Temporary buy down Free prequalification Not disclosing the APR

Answer 244

Temporary Buy Down

Question 245

LENDING AND LOANS: Loan Points: Quiz: A borrower is told that they can get a 4.625% loan for 30 years. The lender states they can buy it down by 1/2% if they wanted to. If the loan amount is $240,000, how much would this cost them if they did end up buying the rate down? $9600 $2400 $1200 $12,000

Answer 245

$9600

Question 246

LENDING AND LOANS: Loan Points: Quiz: With A budget loan, money collected each month for taxes and insurance is put into what type of account? Impound Escrow Savings PITI

Answer 246

Impound

Question 247

Points and Loan Math: Qualifying for a home purchase is a lenders job, but as an agent we have to know what goes into that as well as know discount points and fees that are common in real estate loans. A Discount Point is equal to 1% of the loan amount and will lower the interest rate by _______%. These points are used to buy down the interest rate on a loan. Buydowns are temporary in nature where they are only for a defined duration. Origination fee is an upfront fee charged by a lender to obtain a loan.

Answer 247

1/8%

Question 248

Points and Loan Math: Qualifying for a home purchase is a lenders job, but as an agent we have to know what goes into that as well as know discount points and fees that are common in real estate loans. A Discount Point is equal to _______ of the loan amount and will lower the interest rate by 1/8%. These points are used to buy down the interest rate on a loan. Buydowns are temporary in nature where they are only for a defined duration. Origination fee is an upfront fee charged by a lender to obtain a loan.

Answer 248

1%

Question 249

Points and Loan Math: A borrower has been told that he can obtain 80% financing on a home purchase. If he can borrow a maximum of $160,000, what is the max purchase price he can qualify for?

Answer 249

* $160,000 ÷ .80 (80%) = $200,000 ANSWER: $200,000 purchase price max

Question 250

Points and Loan Math: Lender AZUSA is quoting a potential borrower that they can get a loan at 4.5% on a $200,000 purchase loan but there are additional finance costs of $2300. What is the Actual Percentage Rate (APR)?

Answer 250

* $200,000 x .045 (4.5%) = $9,000 Annual Interest * $9,000 + $2,300 = $11,300 Total Costs * $11,300 ÷ $200,000 = .00565 or 5.65% APR ANSWER: 5.65% actual APR

Question 251

Points and Loan Math: A grant program is offering a down payment grant on new purchases to borrowers with a 620 fico score or higher at 7.5%. There is an origination fee of 1% of the purchase price and 2 discount points for all borrowers. Your client wants to buy a $135,000 townhouse in Avondale. What is his actual interest rate and what is the interest they will be paying per month on the loan?

Answer 251

* $135,000 x .075 = $10,125 * $10,125 + $1,350 (origination) + $2,700 (two discount points) = $14,175 o $14,175 ÷ 12 = $1,181.25/monthly interest o $14,175 ÷ $135,000 = .105 or 10.5% Rate ANSWER: Actual monthly interest $1,181.25 and 10.5% Rate

Question 252

Points and Loan Math: Joan de Arc has a great loan (her lender thinks!!). She borrowed 90% LTV on a conventional mortgage and she is paying $1320 monthly in interest at a rate of only 12.25%! What is her loan amount?

Answer 252

* $1320 x 12 = $15,840 * $15,840 ÷ .1225 = $129,306 ANSWER: Her loan amount is $129,306

Question 253

Points and Loan Math: What was the purchase price of the home that Joan de Arc just bought? * $129,306 ÷ .9 (90% of purchase price) = $_________ * Don’t forget that the purchase price should always be higher than the loan!

Answer 253

ANSWER: Purchase price of $143, 673

Question 254

Points and Loan Math: Lieutenant Dan is proud to be getting a VA loan. His lender can get him a 4.25% rate to buy a home but Dan really wants to get a 3.875% rate. On a $255,000 loan amount, how much is this going to cost Lieutenant Dan?

Answer 254

$255,000 x .03 (3 discount points) = $7,650 * Discount points are 1% of loan amount * 1% of loan amount = 1/8% lower rate * 1/8% is equal to .125 on a rate ANSWER: This will cost him $7,650

Question 255

Points and Loan Math: Tina Turnaround is paying the price for having poor credit, but since she makes good money, she is ok with the fee’s associated with getting a loan. The lender LoanSharks Inc has told Tina that she can get a loan for a condo at 7%. In order to get that loan, she has to pay 5 discount points. What was the rate that she was offered initially by LoanSharks Inc?

Answer 255

* 1/8 x 5 = .625% * .625 + 7% = 7.625% ANSWER: She was initially offered a rate of 7.625%

Question 256

Points and Loan Math: Monica and Chandler are finally buying their first home. They are going for an interest only loan at 3.375% and buying their dream home for $555,000 where they are putting 25% down. What is the total amount of interest they will pay for the 1st year?

Answer 256

* $555,000 x .75 (75% of sales price) = $416,250 * $416,250 x .03375 (3.375%) = $14,048 ANSWER: They will pay $14,048 in interest the 1st year

Question 257

LENDING AND LOANS: Government Insured Loans: USDA/RHS Loans (US Department of Agriculture/Rural Housing Service):  IMPORTANT: _______ DO exist and are based off of the average for the area.

Answer 257

Income Limits