NJ Real Estate Unit 14: Financing I: Conventional, FHA, and VA Loans

NJ Real Estate Unit 14: Financing I: Conventional, FHA, and VA Loans Flashcards Your Home Loan Toolkitexplanation of financing terms Borrowers with a 30-year mortgage loan payA. twice as much per month as for a 20-year loan.B. less per month than for a 20-year loan.C. one-third more than for a 20-year loan.D. the same per month as for a 20-year loan.

• less per month than for a 20-year loan.

Straight loanmortgage with payments of interest only Adjustable Rate Mortgage (ARM)plan with interest rate changed either up or down periodically Federal Housing Administration - FHA 203(b low down-payment insured mortgage loan Federal Housing AdministrationU.S. agency that insures mortgage to protect lending institutions A borrower obtains a $150,000 mortgage loan at 5% interest. If the monthly payments of $805.15 are credited first on interest and then on principal, what is the balance of the principal after the borrower makes the first payment?A.

$150,000B. $149,819C. $149,250D. $149,194

B. $149,819

Amortized loanrepayment plan including principal payments; gradually reduces debt The Department of Housing and Urban Development insures mortgage loans made throughA. the FHA.B. the VA.C. Fannie Mae.D. Freddie Mac.

• the FHA.

The buyers purchased their first home for $250,000. Their down payment was $50,000 and they took a first mortgage for $200,000. At the time of purchase, their equity wasA.$250,000B. $200,000C. $50,000D. Not enough information to determine equity

C. $50,000

• mortgage interest on a third home.Federal income tax regulations allow a homeowner to

reduce his or her taxable income by amounts paid forA.repairs and maintenance.B. hazard insurance premiums.C.real estate taxes.D. principal and interest.The government normally lends money directly in which kind of loan?A. FHAB. VAC. RECDD. All of the above

C. RECD

Biweekly mortgagerepayment plan, the equivalent of 13 monthly payments per year Money for FHA and VA mortgages comes fromA. different departments of the federal government.B. qualified local lending institutions.C. the Federal Reserve Bank.D. the secondary mortgage market.

• qualified local lending institutions.

The bank that makes a lower-rate loan in return for the payment of extra points is offering aA. reduced

loan-to-value ratio.B. graduated payment loan.C.buydown.D. second mortgage.

• buydown.

• an amortized loan.A lender may protect its interest in a mortgage loan by

obtaining additional security fromA. private mortgage insurance.B. title insurance.C. the borrower's note.D.impound accounts.Loan-to-value ratiopercentage of a property's market value that may be borrowed In an amortized loan, how are monthly payments applied?A. Principal and interest payments remain constant.B. Principal payment decreases as interest decreases.C. Principal increases as interest decreases.D.Total monthly payment decreases each year.

• Principal increases as interest decreases.

Amortization schedulelisting of each payment: interest, principal paid, remaining debt When FHA approves a loan, it thenA. lends the money directly to the purchaser.B. sets the interest rate to be charged.C. determines how the points will be dispersed between the buyer and seller.D. determines the required down payment based on the appraisal value.

• determines the required down payment based on the

appraisal value.Broker Price Opinion (BPO)written estimate of value by a real estate licensee VA mortgageloan guaranteed by federal government Which of the following loan plans provides the best feature to accomplish the lowest down payment possible?A. VA loanB. Conventional loanC. Conventional loan with PMID.FHA loan

• VA loan

Which of the following is an example of a conventional loan?A. A mortgage loan insured by the Federal Housing AdministrationB. A second loan for home improvements secured through a credit unionC. A mortgage obtained through a private lender with a VA guaranteeD. All of the above

• A second loan for home improvements secured through

a credit union The homeowners purchased their home for $250,000, using a conventional loan of $200,000. They now want to refinance their home to take advantage of lower interest rates. The appraisal comes in at $275,000 but they still owe about $185,000 on their mortgage. How much equity, if any, have they built up?A. $90,000B. $50,000C.$185,000D. Not enough information to determine equity

A. $90,000

• real estate taxes.Conventional Loans areA. Guaranteed and insured by the

governmentB. Guaranteed by the governmentC.Guaranteed by the mortgagorD. Guaranteed by the mortgage and FHA Rate locklender agrees to hold the interest rate for a certain period of time Buydownpayment of extra points in return for lower interest rate

With some exceptions, a homeowner may take as an income tax deductionA. the mortgage insurance premium.B. the mortgage interest paid.C. the property insurance premium.D. all of the above.

• the mortgage interest paid.

Private mortgage insuranceprotection for the lender on a low-down-payment mortgage loan The seller sells his home for $300,000 and agrees to pay three points to his buyer's lending institution. The buyer is putting 20% down on the property. How much will the points cost the seller?A. $240B. $1,800C. $7,200D. $9,000

C. $7,200

Who pays points?A. The lenderB. Either the buyer or sellerC. Only the sellerD. Only the buyer

• Either the buyer or seller

If the monthly interest at 5% is $1,250, what is the principal amount of the loan?A. $250,000B. $300,000C. $408,500D.

$625,000

B. $300,000

Ceilinghighest interest rate ever allowed on a specific adjustable loan

• debt-to-equity ratio.A real estate loan payable in periodic installments that are

sufficient to pay the principal in full during the term of the loan is calledA. a conventional loan.B. a straight loan.C. a participation loan.D. an amortized loan.The borrower with a biweekly mortgage makes how many half-payments every year?A. 12B. 13C. 24D. 26

• 26

Principal, Interest, Taxes, and Insurance (PITI) mortgage payment, including interest, amortization, and certain expenses Budget Loaninsured loan with monthly payments including property taxes and insurance Equitydifference between current value and money owed A savings and loan institution offers a mortgage plan with an 80% LTV ratio. On the purchase of a $240,000 property, how much down payment is required?A. $40,000B.

$48,000C. $80,000D. $160,000

B. $48,000

The terms index, margin, and cap are used in evaluating what type of mortgage?A. PackageB. BlanketC.ConventionalD. Adjustable rate

• Adjustable rate

Point1% of the loan amount, charged as extra up-front interest when loan is made The amount of a loan expressed as a percentage of the value of the real estate used as security is known as theA.depreciation.B. loan-to-value ratio.C. amortization.D.principal balance.

• loan-to-value ratio.

Marginpercentage charged by lender above index rate Cappercentage beyond which interest rate cannot be raised at adjustment