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C9 Finance
CA Real Estate Practice- Understanding the Process of Finance
Question | Answer |
---|---|
Trustor | party borrowing money |
Beneficiary | lender |
Trustee | Third party who holds naked legal title to property |
Interest | the cost of borrowing money |
Loan Origination Fee | charge based on loan amount and is collected as compensation by lender for processing the loan |
Prevailing Market Rate | interest rate charged on conventional loans |
Examples of Institutional Financing | savings banks, commercial banks, life insurance companies |
Examples of Non-Institutional Financing | private individuals, credit unions, investments trusts, mortgage companies, pensions plans, land contracts |
Examples of Government Financing | FHA (insured), VA (guaranteed), CalVet (land) |
APR | rate that represents relationship of total finance charges and total amount financed as a percentages (actual cost of borrowing money) |
Within how many years is a Prepayment Penalty enforceable? | first 5 years of a one-to-four unit home loan |
Impound Account | prepaid items consisting of property taxes, hazard insurance, mortgage insurance reserves |
Mortgage Broker | earns a fee from borrower by shopping for lenders for them |
Prime Loan | loan to borrowers on well-located properties with good income and credit (interest rate of 2-7%) |
Savings banks usually make which kinds of loans? | residential |
Commercial banks usually make which kinds of loans? | general purpose: business, auto, FHA/VA, credit cards, construction |
Life insurance companies usually make which kinds of loans? | big money: shopping centers, office buildings, hotels |
What is the FICO score of a Subprime Borrower | 650 or below |
A borrowers total mortgage should not exceed what percent of their gross income? | 25-30% |
Adjustable Rate Mortgages (ARMs) are usually based upon...? | index |
Negative Amortization | monthly payments are insufficient to pay interest so that unpaid interest is added to principal |
Secondary Mortgage Market | financial institutions buy & sell first mortgages to and from other financial institutions |
What does Fannie Mae (FNMA) stand for? | Federal National Mortgage Association |
Jumbo Loan | loan amount higher than Fannie Mae & Freddie Mac loan limit |
Name the 3 primary sources of government financing | FHA, VA, and CalVet |
Certificate of Reasonable Value (CRV) | appraisal of property a veteran wishes to buy |
Formula for Qualifying a Buyer is... | gross monthly income x 43% - fixed debt |
Truth in Lending Act (Regulation Z) | lets borrowers and clients know the cost of credit so they can compare |
Junior Loans / Secondary Financing | secured by a second trust deed or mortgage and any other loans on a property that come after the first or prime security |
Alienation Clause | if property is sold or default occurs, the entire note becomes due and payable (ARMs fully assumable) |
Balloon Payment | junior trust deed loans that are not self-amortizing will require large payment to satisfy remainder of loan |
Land Contract (contract of sale) | seller retains legal title until buyer has paid most or all |
Loan Assumption | buyer pays part or all equity and assumes responsibility of existing loan |
Equity | difference between market value and existing loan(s) |
Subject To | agreement to take over and make loan payments or lose property |
Taking title "subject to" can trigger which clause? | Alienation Clause |
Which loans are usually not assumable? | conventional fix loans |
Licensed agents who can negotiable mortgage loans for a fee must obtain what first from CalBRE? | MLO License Endorsement |
How long must you keep a Mortgage Loan Disclosure Statement (MS)? | 3 years |
Usury | a charge more than legally permitted percent of interest |
Real Estate Owned (REO) Property | property which is in possession of lender as a result of foreclosure |
Short Sale | lender accepts less than what is owed on a loan |