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Real Estate Finance review for NYS real estate exam
Types of Mortgages
Conventional Mortgage |
a loan secured by real property through the use of a mortgage note |
ARM |
a mortgage loan with the interest rate on the note periodically adjusted |
FHA Mortgage |
backed loans that usually require a lower down payment and may sometimes have a lower interest rate |
Reverse Annuity Mortgage |
lender makes periodic payments to the borrower using the borrower’s equity in the home as satisfaction of mortgage |
Balloon Mortgage |
a mortgage which does not amortize over the term of the note, thus leaving a balance due at maturity |
Blanket Mortgage |
used to fund the purchase of more than one piece of real property |
Package Mortgage |
a method of financing in which the loan that finances the purchase of a home also finances the purchase of personal items |
Shared Equity Mortgage |
Joint ownership of real estate by both lenders and property dwellers |
Wrap-Around Mortgage |
The seller extends to the buyer a junior mortgage which wraps around the existing in addition to any superior mortgages already secured by the property |
10/1 ARM - fixed 10 yrs/adjust every yr
ARM best suited for people who move; fixed overall is better
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Key Terms
point |
a loan fee equal to 1% of the mortgage amt |
Private Mortgage Insurance (PMI) |
insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan |
HELOC |
a line of credit extended to a homeowner that uses the borrower's home as collateral |
usury |
on a loan, claiming a rate of interest greater than that permitted by law |
Subprime Loans:
-high interest rates & closing costs
-balloon payments
-geared towards unqualified buyers
-refinancing (flipping)
Other Things to Remember
LTV is based on the appraised value or contract price, whichever is less |
Housing expense ratio (PITI) = front-end ratio (shouldn't be greater than 33%) |
Need to be at least 62 yrs old for reverse annuity loan |
Fixed rate mortgage offers the least amount of risk and is preferred among long term homeowners |
FHA Mortgage is best suited for first time home buyers who lack the funds for a large down payment |
Banks look for appraisal and title in a property |
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Missed/Unsure Questions
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What type of mortgage is often recommended for buyers seeking to live in the house for only a short period of time? adjustable rate mortgage
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If Michael wants the lowest starting interest rate, what ARM should he get? 3/1 ARM
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Which ARM has the closest starting interest rate to a 30 yr fixed mortgage? 10/1 ARM
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What is the typical annual cap on ARM? 2%
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What valuation method does a lender typically use when determining the value of a property? Market approach
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What parameters do appraisers typically use to determine the value of a property using sales comparison approach? Properties w/in 1 mile radius, sold w/in the last 6 months
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What are known as the limits to the interest rate on an ARM? Rate Caps
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