Exam (elaborations)
Champions Real Estate Finance: Q’s & A’s
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Champions Real Estate Finance: Q’s & A’s
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Champions Real Estate Finance: Q’s & A’sLoan-to-Value Ratio (LTV) Correct Ans - The percentage of the lesser
of the appraised value or sales price that the lender will lend.
ex: If a borrower is approved for an 80% loan, it means that the lender will
loan up to 80% of the sales price or appraised value, whichever is lower.
Package Mortgage Correct Ans - Includes both real and personal
property ( fixtures and furnishings)
Blanket Mortgage Correct Ans - Covers more than one piece of
property.
Wraparound Mortgage Correct Ans - Method of financing which
preserves the low, existing interest rate on the original note.
Open-End Mortgage Correct Ans - Permits additional borrowing on
the same note. This is sometimes called a credit card mortgage or a home
equity line of credit - HELOC.
Budget Mortgage Correct Ans - The monthly house payment includes
principal, interest, taxes and insurance (known as PITI)
Collateral -Dependent Loans Correct Ans - A hard money loan is a
specific type of asset-based financing in which a borrower receives funds
secured by the value of a parcel of real estate.
Character Correct Ans - Is a measure of the willingness of a borrower
to make on-time payments. Credit character is revealed in the borrower's
credit report.
Capacity Correct Ans - Is a measure of the borrower's ability to repay
the debt, and is demonstrated through current earnings and job stability.
Capital Correct Ans - Is the sum of all assets that the borrower has
accumulated.
,Collateral Correct Ans - Is something of value that can be pledged as
security for repayment.
Yield Correct Ans - Is the return that the investor recieves over the life
of the loan. (Also known as profit)
Originator Correct Ans - The process of creating a new mortgage loan,
including all steps taken by a lender to attract and qualify a borrower.
Mortgage Broker Correct Ans - Typically functions as a middleman
between the borrower and the lender, negotiating, selling or arranging loans
to be delivered to larger investors. At one time originated up to 80% of all
mortgage loans. (Back on the rise)
Mortgage Banker Correct Ans - Entities which provide their own funds
for the purpose of providing mortgage financing, as opposed to commercial
banks/savings associations. (Held, or "Warehoused")
Correspondent Lender Correct Ans - Usually smaller in scale than
mortgage bankers or brokers, these lenders typically extend loans with their
own funds, at their own risk.
Processing Correct Ans - Once application is complete the file moves
into this phase.
Underwriting Correct Ans - The detailed process of evaluating a
borrower's loan application to determine the risk involved for the lender.
Closing Correct Ans - The consummation of a real estate transaction in
which all appropriate documents are signed and the proceeds of the mortgage
loan are then disbursed by the lender.
Servicing Correct Ans - Includes collecting monthly payments,
maintaining records of payments and balances, collecting and paying taxes
and insurance ( and managing escrow and impound funds) remitting funds to
the note holder, and following up on delinquencies.
, Supply and Demand Correct Ans - an economic concept that states that
the price of a good rises and falls depending on how many people want it and
depending on how much of the good is available.
Funding Correct Ans - The process of transferring funds to a title or
escrow company for disbursement
The Safe Act Correct Ans - Designed to enhance consumer protection
and reduce fraud. (Key component of HERA)
M1 Correct Ans - Is defined as the sum of currency held by the public
and transaction deposits at depository institutions.
M2 Correct Ans - Is defined as M1 plus saving deposits, small-
denomination time deposits (those issued in amounts of less than $100,000)
and retail money market mutual funds shares.
Fiat Money Correct Ans - Is currency that is not backed by any
precious metals at all.
Monetary Policy Correct Ans - Is the maintenance of a stable money
supply that provides for growth in the economy while keeping inflation in.
The federal reserves is responsible for this policy in the United States.
Fiscal Policy Correct Ans - Federal Government spending. Approved by
Congress. At the treasury level, funds can be raised to pay for government
spending by raising taxes and increasing borrowing.
Federal Reserve (The Fed) Correct Ans - is the central bank of the
United States
Monetary inflation Correct Ans - When there is an excess of money
supply in the market.
Demand-pull inflation Correct Ans - When there is more money in the
market and less goods for sale.
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