Term
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Definition
| Federal Housing Administration |
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Term
| How much money do you have to put down in order to take out a FHA loan? |
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Definition
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Term
| What two things does FHA loans subsidize? |
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Definition
| Home ownership, and default insurance |
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Term
| What is the owner occupant requirement for FHA loans? |
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Definition
| Borrower must move in within 60 days of signing for the mortgage and continue living there for at least one year |
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Term
| At an affordable interest rate, What is the maximum loan value a borrower can receive? |
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Definition
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Term
| What is the maximum number of FHA loans one can receive? |
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Definition
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Term
| What happens if the purchase price exceeds the appraisal of the house in a FHA loan? |
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Definition
| The whole contract can be voided or the seller must reduce the price to the appraisal price |
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Term
| Who originates FHA loans? |
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Definition
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Term
| What is required of the home-owner under the FHA guidelines that protects the buyer? |
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Definition
| Inspections! Home-owner must pay for repairs before selling the home. |
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Term
| Why was the Va loan originated? |
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Definition
| It was more like a payback plan for the veterans after WW2 for their service to the country |
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Term
| What does the Va loan guarantee? |
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Definition
| the payment of a mortgage loan made by a private lender to a qualified veteran should the borrower default |
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Term
| What is the price limit on the VA loan? |
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Definition
| There are no house price limits but maximum guarantee applies. In other words you can't really buy the expensive house unless you are putting money down |
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Term
| What are the assumption rules for the VA loan? |
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Definition
| Same as FHA loan...The loan can be transferred. If you want to sell your home, you can transfer he loan to a new buyer who doesnt have to be a veteran |
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Term
| How many homes can you own under the VA loan? |
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Definition
| No multiple unit property financing, limited to single family homes |
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Term
| What is the loan to value ratio? |
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Definition
loan amount/property amount
must be equal or less than .8 because you must make a 20% down payment |
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Term
| What information is seen on a credit report? |
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Definition
| Credit activities, balance owed, payments paid on time, how many times you have been late, home foreclosure, bankruptcy |
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Term
| How long does bankruptcy stay on your credit report? |
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Definition
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Term
| What does your credit score represent? |
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Definition
| Prediction of the likelihood of fault (300-850) |
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Term
| How is credit score computed? |
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Definition
| All the factors calculated to get a # between 300 and 850. 850 being the highest. Similar to SAT percentile ranking |
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Term
| What are the 4 components of a Budget Mortgage Payment? |
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Definition
| Principal (for amortizing loans), Interest, Escrow deposits for property tax, hazard insurance payments |
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Term
| What do Hazard Insurance Payments and Property taxes have in common? |
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Definition
| Both paid once a year, payments are required in order for a mortgage loan to be in good standing, usually costly |
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Term
| Because Hazard Insurance loans can be costly for homeowners what do mortgage lenders require? |
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Definition
| Monthly "escrow" payment to "budget" for these large expenses |
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Term
| What is an escrow account? |
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Definition
| a "set aside" or separate account that is dedicated for a certain purpose |
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Term
| What does the prepayment right state? |
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Definition
| Residential mortgage borrowers have the right to pay off mortgage loans early, either partially or fully |
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Term
| What is the purpose of making partial prepayments? |
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Definition
| If made regularly it reduces the term of the loan. |
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Term
| When do full or total prepayments occur? |
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Definition
1) homeowner sells the house and uses the purchase money proceeds to pay off the loan (required for title to be transferred).
2) Borrower refinances the existing mortgage (proceeds from a new mortgage are used to terminate or pay off the original mortgage) |
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Term
| When would borrowers be induced to refinance (FRM loans) ? |
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Definition
| when the current market or REFI rate is less than the contract rate on the current mortgage |
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Term
| What are the 2 components of a loan pricing cost? |
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Definition
| the contract rate (up-front cost) and points (loan discount points: up front cost) |
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Term
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Definition
industry term for a fee of 1% of the loan amount, charged by the lender.
Must be paid when the loan is made.
Points are the main, largest cost of obtaining a mortgage loan |
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Term
| What are the two types of loans? |
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Definition
| The origination fee and loan discount fees |
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