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Finance3
Finance
Question | Answer |
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Package loan | A loan secured by real property plus personal property |
Budget loan | A loan where the monthly payment includes not only principal and interest but taxes and insurance-called the PITI payment |
PITI | Principal, interest, tax, insurance-a common payment for amortized loans |
Balloon loan | A partial amortization loan-equal regular payments of principal and interest, but long before the debt is amortized a final payment, substantially larger that the others is required to pay off the debt-the balloon payment |
Participation loan | Two or more lenders own a share-to lessen the lenders' risk; or the lender who collects principal interest plus a percent of the profits on the investment property |
Shared Appreciation loan | A loan with an investor/lender who collects principal and interst payments and then a percent of the profits when the property is sold |
Open-end loan | A home equity line of credit-similar to a credit card but secured by real property |
Adjustable Rate Mortgage-ARM | A loan with an interest rate tied to a readily available index-the rate will be adjusted periodically causing payment changes |
Margin | On an adjustable rate mortgage the percent added to the index |
Construction loan | Short term financing with funds advanced periodically during the stages of construction-term loan |
Wraparound loan | A new mortgage on a property is placed in a secondary lien position it includes both the unpaid balance of the first mortgage plus additional amounts-the first mortgage is not paid off |
GPM-Graduated Payment Mortgage | A loan whose payments start low and rise every year, usually for live years, after which they level off by the remaining term of the loan-can resulrt in negative amortization |
Negative Amortization | An increased in debt due to payments less than the interest owed- can be associated with a graduated payment mortgage |
Reverse Annuity Mortgage | A home equity loan available to homeowners over 62 years of age the lender makes payments to the borrower based on the equity in their property-the loan comes due upon the sale of the property or the death of the owner |
Sub-prime loan | A loan with risk based pricing for borrowers with a credit rating in the A minus to F range-the interest rate will be one to live five percent higher than for a prime borrower |
Primary Market | Where consumers go to borrow money-banks, mortgage companies, ect |
Secondary Market | Where lenders go to borrow money-Fannie Mae, Ginnie Mae, Freddie Mac |
Conforming loan | A standarized conventional loan written on uniform documents that meets the purchase requirements of Fannie Mae and Freedie Mac-both loan amount and borrower characteristics must meet the guidelines |
Non-Conforming loan | A loan unable to be sold to Fannie Mae or Freddie Mac-for example a sub-prime loan |
Truth in lending | TIL, REG Z, Regulation Z, or the Consumer Credit Protection Act-a law passed to help consumers understand the true cost of borrowing money |