Term
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Definition
| to protect children/spouse/ business and or cover estate taxes in the case of debt |
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Term
| Things considered (life insurance qualifications) |
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Definition
Medical Exam
Age
Medical Records
Family medical history
***should be 7-10 times annual income*** |
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Term
| Cost to Consider (expenses covered by life insurance) |
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Definition
Cash fund
funeral costs
final injury/illness costs (medical expenses)
Bills
Fees (executors,legal accounting appraisal)
Home maitenence
Education/ wedding (children) |
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Term
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Definition
Conserve as many of your assets as possible to benefit your heirs
adequate coverage at the most reasonable cost |
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Term
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Definition
1. Single Premium Insurance
2. Term Life Insurance
3. Universal Life Insurance
4. Variable Life Insurance
5. Whole Life Insurance |
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Term
| Single Premium Life Insurance |
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Definition
| An individual has a lump sum to commit |
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Term
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Definition
Most common*
10,20 or 30 years--> Paid monthly, semi annually or annually.
Provides short term coverage of expenses *no cash value |
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Term
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Definition
Similar to term insurance
excess premium based on your behalf to be invested for cash value
Market sensitive rate of return |
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Term
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Definition
More flexibility than universal in terms of investments
Return based on portfolio performance |
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Term
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Definition
| Life long at premium levels, meant to build cash value |
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Term
| Triggers for Plan Reassessment |
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Definition
-should constantly update life insurance policy based on life and financial changes
-birth/adoption/death of a child
-financially independent child
-retirement/job change/ business establishment
-large financial obligation or home purchase |
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Term
| Steps for Estate Planning (4) |
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Definition
1. Calculate Estate Size
2. Decide objective
3. Provide liquidity/ flexibility to family
4. Minimize taxes |
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Term
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Definition
Spend less than you earned and save the rest.
Current consumption vs future consumption |
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Term
| 3 reasons it is so difficult to save |
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Definition
1. temptation
2. lack of understanding (importance and profitability of saving)
3. Optimism (don't need to save, it will work out) |
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Term
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Definition
-separate goal oriented savings accounts
-save all windfalls (bonuses/refunds/etc)
- Make saving a habit
-reminders to save per paycheck
-compound interest (investing)
Learn the difference between WANT and NEED
-window shop
-buy a used car
-home equity lines of credit (play a fixed rate that turns into an amortized rate) |
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Term
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Definition
1. Health Insurance
2. Creditworthiness
3. Budget Online (group expenses, financial websites)
4. Invest (401k, IRA, Mutual Funds, etc)
5. Live Small (limit eating out/shopping/entertainment) |
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Term
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Definition
roadmap creator for financial future
plans for retirement/ college. taxes |
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Term
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Definition
Specifically deals with investment strategy
After visiting financial planner, the financial advisor helps allocate the funds available for investment. |
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Term
| Signs the you are in too much debt |
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Definition
-making minimum payments
-cash advances on one card just so you can pay the other
-putting off medical visits because of money
- paying bills with money intended for utilities and groceries
-depleting savings to pay bill |
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Term
Renting vs buying
Benefits of renting |
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Definition
No maintenance or repair obligations
flexibility to move
monthly rent lower than mortgage fees
live somewhere short term |
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Term
Renting vs buying
Benefits of buying |
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Definition
No remodeling restrictions
Income tax deductions (property tax)
Plan to live somewhere longterm (4+ years)
Can afford mortgage/insurance/property tax
Emotional Investment and responsibility |
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Term
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Definition
Given at contract signing
Assurance of purchase finalization (seller is taking house of market if you decide not to buy he could lose alternate sale)
Buyer's laser is responsible for contract (meant to cover contingencies if the person pulls out or can't obtain financing) |
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Term
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Definition
Protects lender (valuing collateral against loaned $)
Protects buyer (not buying or borrowing too much)
Inspect the house before finalization--> 3 to 48 hours before, make sure everything is in the state that has been recognized in the contract. |
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Term
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Definition
Make sure there is public record of completion of payment
-certificate of satisfaction
-deed of reconveyence
-deed of release |
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Term
Land Contract *instead of Mortgage
(Installment Land agreement) |
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Definition
-Seller provides financing for the buyer
For a buyer who cannot qualify for a mortgage
*BUYER BEWARE**
can be predatory because land/house does not have to pass and and lender regulations--> Make sure you know what you're buying
This favors sellers-->high interest/ short payment period
buyer must refinance or sell |
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Term
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Definition
Annual Percentage return
Annual cost of mortgage over the full term (30 years)
Interest Rate + Other (closing) costs |
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Term
| Where does Money From Mortgage Loans come from? |
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Definition
Fannie Mae, Freddie Mac, Ginnie Mae
-Meet with lender and receive loan contract( could be making payments to company that originated loan or to a secondary institution) |
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Term
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Definition
the company you purchase loan rom will sell :service: your loan to another institution
loan gets packaged into a pool and is redivided into mortgage backed securities and re sold to other institutions
prevents banks from being *loaned up* |
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Term
| Mortgage Backed Securities |
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Definition
-once loans are serviced to Freddie, Ginnie and Mac--> they are broken down into small ownership parcels
Risk is diversified by pooling loans (backed by homes as collateral) they are safe investments
Sold on wall street/to investment firms/ to individuals
Payment goes to servicer (small amount) and the investor
Stimulating to the economy |
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Term
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Definition
Above $333,700 (does not conform to regulations of Freddie, Ginnie and Fannie, cannot be sold to these institutions)
Can be sold as mortgaged backed securities just sold to different investors |
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Term
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Definition
Market of buying and selling mortgages
Mortgage backed securities--> biggest way to make money |
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Term
| Steps to buying a home (7) |
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Definition
1. Develop stability in life
2. Save for Down Payments and other costs
3. Determine how much you can afford to borrow
4. Choose the right home
5. Contract lawyer to draw up purchase offer
6. Negotiate for best price
7. Inspect the house |
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Term
| Steps Preparing for Closing (9) |
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Definition
1. Hire Lawyer
2. Make financial arrangements (mortgage/funds transfer/etc)
3. Purchase homeowners insurance
4. Have property surveyed (so it's legit/usually already done by lender)
5. Arrange for termite/other inspections
6. Final Walk through
7. Know your closing costs
8. Have prepared bank check
9. Make sure deed is on public record |
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Term
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Definition
Protection from Financial Losses
1. Emergency Reserve
2. Transfer risk to a third party (insurance) |
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Term
| Types of Risk Insurance (5) |
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Definition
1. Property Insurance (protection against natural disasters/ fire/ theft/ damages to house or car) (does not protect against hurricanes/ too much $)
2. Health Insurance (medical bills and expenses)
3. Life Insurance (Income protection for your dependents)
4. Disability (replaces/ subsidizes loss of income)
5. Liability Insurance (protect against claims made by others against you) |
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Term
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Definition
1. Increase net worth (price appreciation)
2. Increase net worth (mortgage loan repayment)
3. Deductions from taxable Income: Interest paid on mortgage loan and property taxes)
4. Hedge against inflation (home prices increase with inflation/ bringing you to a lower tax bracket)
5. Using leverage (other peoples debt) to increase your return |
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Term
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Definition
| Legal contract or agreement between lender and borrower, pledging the borrowers property as loan security |
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Term
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Definition
The amount of the loan
DOES NOT EQUAL PRICE OF HOME
(value may go down because of risk) |
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Term
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Definition
Percentage of home price paid by borrower
Usually 5% (20% in 2008)
Seller gets downpayment
Principal+down= price of home |
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Term
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Definition
Most standard mortgage loan
30 years
can be 10,15,20 years |
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Term
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Definition
| Used to determine payments for the loan |
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Term
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Definition
Annual percentage rate--> total cost of loan
Loan rate+lender fees |
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Term
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Definition
1. each payment goes partially to principal and partially to interest.
2. Non-Amortized (pay only interest-->principal comes back in the end (savings bond)) |
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Term
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Definition
1. A fee is paid to the lender for a lower loan rate
2. Each point is 1% of the mortgage amount
3. Fee is paid at closing
4. As rate goes down-->pay more points
Get money up front
Short term" high rate, low points
Long term" low rate, high points |
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Term
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Definition
Borrower makes payments to lender on property insurance and taxes one year in advance, and every year after that
Money accumulates
When money is due for insurance and taxes, lender pays form this account (lender ensures bills get paid, protecting collateral)
When buyer owns 30%, no longer required
Borrower will pay hazard insurance and property taxes once they have ownership |
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Term
| Types of Mortgage Lenders (6) |
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Definition
1. Banks
2. Credit Unions
3. Mortgage Companies
4. Insurance Companies
5. Investment Banks
6. Online Lenders |
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Term
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Definition
| Final step/ owner takes title to property |
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Term
| Steps for buying a one *10* |
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Definition
1. Find home
2. Buyer submits purchase offer (what they are willing to pay and conditions (appliances/repairs/ inspections/good faith deposits)
3. Seller counters
4. Seller signs purchase offer
5. Buyer Shops for Mortgage
6. Documents for Lender
7. Documents go to Underwriting
8. Appraisal
9. Buyer's lawyer ensures legitimacy (no liens)
10. Closing |
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Term
| Two Calculations to qualify Borrower for a loan |
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Definition
1. All housing expenses cannot exceed 28% of GMI
2. Debt payments and Escrow cannot exceed 35% GMI |
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Term
| When borrowers don't qualify |
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Definition
-calculations are lower than the offer
-buyer must seek a lower rate/ payment (could pay more point/ change loan type or seek out new lender)
Higher down payment=lower principal |
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Term
| After buyer qualification Lender needs (5) |
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Definition
1. employment verification (2 years minimum/steady job)
2. tax returns (2 years minimum)
3. Statements of financial assets (down payment, points, fees, closing costs-->want to make sure you can pay)
4. All Loan statements (credit card/car/student/making sure you can pay)
5. Credit report |
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Term
| What happens when Documents go to underwriting??? |
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Definition
Lender evaluates borrower risk
a. credit report/ history
b. capacity to pay
c. collateral to back up loan |
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Term
| Process of Home Appraisal |
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Definition
a. look at comparable homes in past 6 months and what they sold for
b. look at comps***
c. Loan to Value (85% of home price is maximum loan)
d. borrower wants appraisal to make sure what they are getting is fair |
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Term
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Definition
All parties meet/sign papers/ exchange money
buyer and buyers lawyer/ seller and sellers lawyer
Buyer pays down payment (5% of mortgage), closing costs, points |
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Term
| Types of Mortgage Loans (3) |
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Definition
1. Fixed Rate Mortgage (FRM)
2. Adjustable Rate Mortgage (ARM)
3. Balloon Mortgage |
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Term
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Definition
- rate is fixed and stays over life of loan
-does NOT fluctuate with marker
- If market rates drop/ borrower can refinance
RISK assumed by LENDER
PREFERRED by BORROWER |
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Term
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Definition
- Loan adjusts yearly (+/- 2%)
-Benchmark rate+margin= New ARM Rate
1% (Tbill)+2% Margin= 3% New rate
Cap is 14%
RISK assumed by BORROWER
PREFERRED by LENDER
**Almost ALWAYS lower than FRM, lenders want to encourage borrowers*** |
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Term
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Definition
Like FRM but for 3,5 or 7 years
Fixed rate until end of payment period and the loan is due
Owner must refinance, pay the lender or sell the home |
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Term
| 4 steps to determine which loan is best for you |
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Definition
1. Qualify (which loans do you qualify for)
2. Income (can you afford the loan)
3. How long will you live in the home(short term (balloon) or long term (FRM) )
4. Risk (borrower is risk averse, FRM is almost always the best) |
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Term
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Definition
VA/FHA/SONY MAE
-low rates
-low down payment
-TONS of restrictions and paperwork**** |
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Term
| Owner Financed (land contract) |
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Definition
Seller holds mortgage (no make involvement)
-preferred by buyer (no closing costs/etc)
-Seller assumes risk and assumes payment as income
-Between buyer and seller (flexible/ cheaper)
**buyer beware** home does not have to meet lender/ bank qualifications
Usually done in sale of land or homes in risky places (home on side of cliff) |
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Term
| Secondary Mortgage Market |
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Definition
-75% of mortgages sold on secondary markets
-Mortgages bundled into million dollar portfolios and sold to Fannie/Freddie and Ginnie
-Securitized/divided and sold |
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Term
| Value of 41345 Appears in cell (what is it) |
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Definition
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Term
| Picture Behind a worksheet |
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Definition
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Term
| When a chart is inserted directly into a worksheet and not in a separate file) |
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Definition
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Term
| Visual Indicator of data trends |
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Definition
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Term
| Worksheets can be open together rather than individually |
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Definition
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Term
| If you want people to see your worksheet but not change it/ you mark the worksheet as |
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Definition
| Final or Protect Workbook |
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Term
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Definition
| allows you to print title of a table on all pages |
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Term
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Definition
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Term
| TO keep specific columns visible when scrolling to the left |
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Definition
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Term
| An independent element located in a cell |
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Definition
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