Term
| What type of loan has a rate of 5% for 5 years and a rate of 6% for the remaining 25 years? |
|
Definition
| Variable Rate. This differs from an ARM in that it changes from one fixed rate to another. The rate is not based on an index. The interest rate on an ARM varies based on an index. |
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|
Term
| How does a Variable Rate mortgage differ from an ARM? |
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Definition
| The interest rate of an ARM varies based on an index which can go up or down. A loan that has multiple rates that are fixed (not based on a fluctuating index) is considered a Variable Rate mortgage but is NOT considered an ARM. |
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Term
| What type of loan cannot be required to be repurchased? |
|
Definition
| No-bid loan.(JUST NEED TO KNOW THAT A NO BID LOAN CANNOT BE REQUIRED TO BE REPURCHASED) |
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Term
| What is a no-bid loan? (just need to know one thing about it) |
|
Definition
| A no-bid loan is not ever required to be repurchased. |
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|
Term
| A loan that is not ever required to be repurchased is called a __________. |
|
Definition
| A loan that is not ever required to be repurchased is called a no-bid loan. |
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Term
| What is the maximum coverage a lender can require for Hazard Insurance? |
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Definition
| The maximum coverage a lender can require for HOI (Hazard Insurance) is the replacement cost of the structure. (dirt cannot burn) |
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Term
| Is the value of the property minus the value of the land the same thing as replacement cost? |
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Definition
| This NOT the same thing as replacement cost. |
|
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Term
| Who is protected by Hazard Insurance? |
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Definition
| The lender and borrower are both protected. Both receive the insurance money if the property burns down and the borrower must then sign the check over to the lender to disburse the funds to replace/repair the property. |
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Term
| Can a lender require a borrower to have replacement cost on the home and any attached garage or just the home without the attached garage? |
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Definition
| Lenders can require the borrower to have hazard insurance that covers the replacement cost of the property AND attached garage if applicable. |
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Term
| When will force placed insurance be placed on the home? |
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Definition
| If the borrower does not have or did not pay for hazard insurance a lender may place force placed insurance after sending 2 notices with no response. Lender must cancel the policy within 15 days of receipt of evidence consumer has HOI and refund fees that overlap. |
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Term
| How many notices must a lender send without receiving a response before they can place force placed insurance on the property? |
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Definition
| A lender must send 2 notices without a response before they can place force placed insurance on the property and must cancel the force placed insurance within 15 days of receipt of evidence that the borrower does have valid HOI. Lender must also refund any fees that overlap. |
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Term
| How many days does a lender have to cancel force placed insurance after they receive evidence that the consumer has insurance? |
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Definition
| The lender has 15 days to cancel force placed insurance after receipt of evidence that the consumer has insurance. The lender must also refund any fees that overlap. |
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Term
| What 5 things must the HOI policy have on it? |
|
Definition
1. Borrower's name
2. Loan number
3. Street address of the property being purchased
4. Lender listed as the loss payee (mortgagee clause)
5. Amount of coverage |
|
|
Term
| Who is listed as the loss payee on HOI? |
|
Definition
| The lender must be listed as the loss payee (also known as the mortgagee clause) on the HOI policy. |
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Term
| What is the mortgagee clause on HOI? |
|
Definition
| The mortgagee clause protects the lender by listing them as the loss payee. |
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Term
| What kind of loans use PMI and what kind of loans use MIP? |
|
Definition
| MIP is on FHA loans and PMI is on conventional conforming loans. |
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Term
| MIP is on _______ loans and PMI is on _______ _________ loans. |
|
Definition
| MIP is on FHA loans and PMI is on conventional (non-government sponsored) conforming loans. |
|
|
Term
| Do FHA loans have PMI or MIP? |
|
Definition
| FHA loans have MIP (Mortgage Insurance Premium). |
|
|
Term
| Do conventional conforming loans have PMI or MIP? |
|
Definition
| Conventional conforming loans have Private Mortgage Insurance (PMI). |
|
|
Term
|
Definition
| PMI stands for Private Mortgage Insurance. PMI is on conventional conforming loans. (non-government sponsored) |
|
|
Term
|
Definition
| MIP stands for Mortgage Insurance Premium. MIP is on FHA loans. |
|
|
Term
| What percent do you need to put down to avoid having PMI? |
|
Definition
| A borrower must put 20% down to avoid having PMI on the loan. |
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|
Term
| All conforming loans with less than 20% down payment require _________. |
|
Definition
| Any conforming loan that has financing over 80% (less than 20% down payment) requires the gap to be covered by PMI. |
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Term
| PMI is required to cover the gap on conforming loans when the down payment is less than __% |
|
Definition
| If the down payment on a conforming loan is less than 20%, PMI is required to cover the gap. |
|
|
Term
| What is Private Mortgage Insurance? |
|
Definition
| Private Mortgage Insurance (PMI) protects the lender on conventional conforming loans in case of default by the borrower. It also allows the borrower to have less than a 20% down payment if they are willing to accept PMI. |
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Term
| At what percent equity does PMI (Private Mortgage Insurance) automatically drop off the loan? |
|
Definition
| At 22% EQUITY the Homeowners Protection Act (HPA) requires the PMI to automatically be taken off the loan. |
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Term
| At what percent LTV does Private Mortgage Insurance (PMI) automatically drop off of the loan as required by HPA (Homeowners Protection Act)? |
|
Definition
| When the loan reached 78% Loan To Value ratio, the lender is required by the Homeowners Protection Act (HPA) to drop the PMI (Private Mortgage Insurance). |
|
|
Term
|
Definition
| HPA - Homeowners Protection Act |
|
|
Term
| Under what law is the lender required to drop PMI off of the loan when the borrower reaches 22% equity (78% LTV)? |
|
Definition
| The Homeowners Protection Act, or HPA requires lenders to drop PMI off of the loan once the Loan to Value ratio reaches 78% (22% equity position for borrower). |
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Term
| If the LTV is 78%, what is the equity for the borrower? |
|
Definition
| The borrower's equity is 22% when the LTV is 78% |
|
|
Term
| If the borrower has 22% equity, what is the LTV? |
|
Definition
| The Loan to Value ratio would be 78% when the borrower's equity is at 22% |
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|
Term
| If the premium was .94 % on a $150,000 loan, what is the monthly cost of PMI? |
|
Definition
| $150,000 x .94% = $1410 / 12 = $117.50 |
|
|
Term
| PMI allows borrowers to purchase with as little as __% down. |
|
Definition
| A borrower can put as little as 5% down on conforming purchase with PMI because the Private Mortgage Insurance Company is accepting some of the risk if the borrower defaults. |
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|
Term
| A borrower can put as little as 5% down on a conventional conforming loan but the loan must have ___ if the down payment is less than 20%. |
|
Definition
| A borrower can put as little as 5% down on a conventional conforming loan but the loan must include PMI if the down payment is any less than 20% (if any more than 80% is financed [80% or more LTV]) |
|
|
Term
| What protects from financial loss due to defects in title to real property and from unenforceability of mortgage liens? |
|
Definition
| Title insurance protects from financial loss due to unenforceability of the mortgage lien or other types of liens or due to defects on title to real property. |
|
|
Term
| Do all home loans require a title search? |
|
Definition
| All home loans require a title search. |
|
|
Term
| What are the two title insurance policy types? |
|
Definition
| Owner's policy insures fee and clear vestiing without defects. Lender's policy follows the loan (Its Successors and/or Assigns) if it is sold in the secondary market. |
|
|
Term
| What does ISAOA stand for? |
|
Definition
| ISAOA - Its Successors and/or Assigns |
|
|
Term
| Title Search vs. Chain of Title |
|
Definition
| A title search allows a lender to determine if there are liens or judgments on a property, whereas a chain of title is used to determine if the home has been subject to property flipping. |
|
|
Term
| What is the purpose of a title search? |
|
Definition
| A title search allows the lender to determine if there are any liens or judgments on the property. |
|
|
Term
| What helps a lender determine whether there are any liens or judgments on a property? |
|
Definition
| The lender can determine whether there are any liens or judgments on a property by obtaining a title search. |
|
|
Term
| What helps a lender determine if the home has been subject to property flipping? |
|
Definition
| A chain of title is used to help the lender determine whether the property has been subject to property flipping. |
|
|
Term
| What is the purpose of a chain of title? |
|
Definition
| The lender can determine if the home has been subject to flipping by obtaining the chain of title. |
|
|
Term
| What does FIRMS stand for? |
|
Definition
| FIRMS - Flood Insurance Rate Maps |
|
|
Term
| What are the two flood hazard areas that require flood insurance? (use two fingers to make both) |
|
Definition
| When a property is in a flood zone containing the letter "A" (two fingers upside down) or "V" (two fingers pointing up), flood insurance is required. |
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|
Term
| Flood insurance is required when the flood zone contains the letter _ or the letter _. |
|
Definition
| If the flood zone contains the letter A or the letter V, flood insurance is required. (MEMORIZE THIS BY MAKING A PEACE SIGN FOR V OR AN UPSIDE DOWN PEACE SIGN FOR A) |
|
|
Term
| What does FEMA stand for? |
|
Definition
| FEMA - Federal Emergency Management Agency |
|
|
Term
| Who manages the flood maps to determine flood zones? |
|
Definition
| The Federal Emergency Management AGENCY manages the flood maps that determine flood zones. Flood zones requiring flood insurance will contain the letter A or the letter V. |
|
|
Term
| Does the government provide flood insurance? |
|
Definition
| Flood insurance is provided by private carriers, NOT FEMA and NOT the government. |
|
|
Term
| What types of home loans require a flood certification? |
|
Definition
| All home loans require flood certification to determine if the property is in a special flood hazard area. |
|
|
Term
| Do all home loans require a flood certification? |
|
Definition
| Yes, all home loans require a flood certification to determine the flood zone the property lies in. If the flood zone contains the letter A or the letter V, the loan will also require flood insurance, which is issued by a private carrier (NOT the goverment or FEMA). |
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|
Term
| (FOR TEST TAKING PURPOSES) Who advises the lender if the structure sits in a flood zone? |
|
Definition
| The appraiser will advise the lender if the property is in a flood zone. (FOR TEST TAKING PURPOSES) |
|
|
Term
| What amount does flood insurance cover? |
|
Definition
| 100% of the dwelling is covered by flood insurance. However, at any given time, the minimum flood insurance coverage required is 80% of the structure. |
|
|
Term
| When obtained, flood insurance covers ___% of the dwelling and at any given time the minimum amount of flood isurance required is ___%. |
|
Definition
| The minimum amount of flood insurance coverage is 80% but flood insurance covers 100% of the structure when it is obtained. |
|
|
Term
| What does URLA stand for? |
|
Definition
| URLA - Uniform Residential Loan Application aka form 1003 |
|
|
Term
| Who attests to the truthfulness of the information on the 1003? |
|
Definition
| When the borrower signs the Uniform Residential Loan Application (URLA or 1003), they are attesting to the truthfulness of the information provided on the form. |
|
|
Term
| What are the five TYPES of mortgages you can apply for on the 1003 (URLA)? |
|
Definition
The five TYPES of mortgages you can apply for on the Uniform Residential Loan Application (1003) are:
1. VA
2. FHA
3. USDA
4. Conventional
5. Other |
|
|
Term
| VA, FHA, USDA, Conventional and Other are all considered what on the URLA (1003)? |
|
Definition
| Other, USDA, VA, Conventional and FHA are the 5 TYPES of mortgages you can apply for on the URLA (Uniform Residential Loan Application). |
|
|
Term
| What are the 5 PURPOSES of the loan that you can select from on the Uniform Residential Loan Application (URLA)? |
|
Definition
The five PURPOSES of the loan that you can select from on the Uniform Residential Loan Application (1003) are:
1. Purchase
2. Refinance
3. Construction
4. Construction to Perm
5. Other |
|
|
Term
| Construction to Perm, Other, Refinance, Purchase, and Construction are all considered what on the 1003 (URLA)? |
|
Definition
| Purchase, Refinance, Construction, Construction to Perm, and Other are the five PURPOSES of the loan that you can choose between on the URLA (form 1003). |
|
|
Term
| Purchase is a ________ of a loan and FHA is a ___________ of a loan. |
|
Definition
| A purchase would be considered the purpose of the loan, while FHA is considered a type of loan. |
|
|
Term
| VA is a ____________ of a loan and Construction is a ___________ of a loan. |
|
Definition
| VA is considered a type of loan, while Construction is considered a purpose of a loan. |
|
|
Term
| Construction to Perm is considered a _________ of a loan, while USDA would be considered a ___________ of a loan. |
|
Definition
| Construction to Perm is one of the options for the purpose of a loan. USDA is one of the options for a type of loan. |
|
|
Term
| Conventional and FHA are both _________s of a mortgage, while Refinance and Purchase are both __________s of a loan. |
|
Definition
| Conventional and FHA are both types of mortgages. Refinance and purchase are both purposes of a loan. |
|
|
Term
| TRUE OR FALSE: "Other" is an option on the 1003 under the "Purpose" section and the "Type of Mortgage" section. |
|
Definition
| TRUE: "Other" is one of the 5 options under the purpose of the loan section and one of the 5 options under the type of loan section on the 1003. |
|
|
Term
| What are 3 terms that CANNOT be used to refer to the borrower's marital status on the Uniform Residential Loan Application (1003)? |
|
Definition
| Divorced, single and widowed cannot be used on the 1003 to refer to the borrower's marital status. |
|
|
Term
| What are the 3 options for marital status on the 1003 (URLA)? (remember to SUM it up) |
|
Definition
| The three options for a borrower's marital status on the 1003 are Separated, Unmarried, and Married. |
|
|
Term
| TRUE OR FALSE: Separated, Unmarried, and Married are all options on the 1003. |
|
Definition
| TRUE: Remember to SUM it up --> Separated, Married, Unmarried |
|
|
Term
| TRUE OR FALSE: Separated. Divorced, and Married are all options on the 1003. |
|
Definition
| FALSE: Remember to SUM it up --> Separated, Married, Unmarried. Terms that cannot be used on the 1003 are Divorced, Single, and Widowed. |
|
|
Term
| Can payoff amounts be obtained from the assets and liabilities section of the 1003? |
|
Definition
| Payoffs cannot be obtained from the assets and liabilities section of the 1003. This section does contain unpaid BALANCES but NOT payoff amounts. |
|
|
Term
| Name 3 things that are found in the assets and liabilities section of the URLA. |
|
Definition
| The name of the creditor, the monthly payment and the unpaid balance can all be found in the assets and liabilities section of the 1003. |
|
|
Term
| What section of the Uniform Residential Loan Application would you find monthly payments, unpaid balances, and the names of creditors? |
|
Definition
| Names of creditors, monthly payment amounts, and unpaid balances would all be in the assets and liabilities section of the 1003. |
|
|
Term
| What is the significance of the MLO signing the 1003? |
|
Definition
| When the MLO signs the 1003 he/she is expressing how the application was taken and who the MLO is employed by. |
|
|
Term
| Under the SAFE Act, is a business card required to have the NMLS ID on it? |
|
Definition
| The SAFE Act requires business cards to have the NMLS ID on them, as business cards are considered advertisements. |
|
|
Term
| What act requires the NMLS ID to be present on an MLO's business card? |
|
Definition
| An MLO's business card is required under the SAFE Act to have their NMLS ID on it. |
|
|
Term
| What must be present on all applications and all documents an MLO provides to a borrower? |
|
Definition
| The SAFE Act requires all applications and all documents provided to the borrower by an MLO to have the unique NMLS ID number. |
|
|
Term
| Can Processors and UW's hand out business cards? |
|
Definition
| Processors and UW's are NOT allowed to hand out business cards because they are considered advertisements and that goes beyond the scope of clerical work. |
|
|
Term
| We are required to ask for GMI (Government Monitoring Information) under _________. |
|
Definition
| HMDA - The Home Mortgage Disclosure Act requires us to ask for GMI; however, the borrower is not required to provide it. If app is taken face to face then MLO should guess and write in "visual observation". |
|
|
Term
| What section of the 1003 contains the GMI? |
|
Definition
| The GMI is in section X (10) of the 1003 - (SECTION X BECAUSE THE BORROWE IS NOT REQUIRED TO PROVIDE IT) |
|
|
Term
| What GMI information is requested on the 1003? (3 things) |
|
Definition
| The GMI section (X) of the 1003 asks for information about ethnicity, race, and sex (clap with each one when memorizing) |
|
|
Term
| Information on race, ethnicity, and sex are all collected in which section of the GFE? |
|
Definition
| Information on race, ethnicity, and sex (Government Monitoring Information) are all collected in section X (GMI section) of the 1003. We are required to ask for this information under HMDA (the Home Mortgage Disclosure Act). |
|
|
Term
| What information on the 1003 are we required to request but the borrower is not required to provide under the Home Mortgage Disclosure Act? |
|
Definition
| HMDA (Home Mortgage Disclosure Act) requires us to request GMI info (ethnicity, race, sex) from the borrower but they are NOT required to provide it to us. |
|
|
Term
| If an application is taken face to face and the borrower declines to offer the information on ethnicity, race, and sex (GMI info), the MLO should ________. |
|
Definition
| If the borrower declines to provide GMI info in a face to face application, the MLO should write in "visual observation" above the declination answer and guess at their ethnicity, race, and sex. |
|
|
Term
| What are the 4 ways to take an application? |
|
Definition
The 4 ways to take an application are:
1. Face to face
2. Over the phone
3. Internet/Email
4. Mail/Fax |
|
|
Term
| What does URAR stand for? |
|
Definition
| URAR stands for Uniform Residential Appraisal Report. An appraisal provides an estimate of the property value and is used in the UW decision to determine if it is sufficient collateral. |
|
|
Term
| What is another name for an appraisal? |
|
Definition
| Uniform Residential Appraisal Report or URAR is another name for an appraisal. |
|
|
Term
| What are the 3 types of appraisals for determining value? |
|
Definition
The three types of appraisals for determining value are:
1. Sales Comparison Approach (most common) aka Market Data/Analysis Approach
2. Cost Approach - usually used for new construction
3. Income Approach - typically used for investment or commercial
**MLS Approach is not a valid appraisal approach** |
|
|
Term
| Is the MLS Approach a valid appraisal approach? |
|
Definition
| The MLS Approach is NOT a valid appraisal approach. |
|
|
Term
| What is the most common appraisal approach called? |
|
Definition
| The most common appraisal approach is the Sales Comparison Approach, which is also known as the Market Data/Analysis Approach |
|
|
Term
| What is another term for the Sales Comparison Approach for appraisals? |
|
Definition
| The Sales Comparison Approach is also referred to as the Market Data/Analysis Approach |
|
|
Term
| The Market Data/Analysis Approach for an appraisal is another name for the most common approach which is commonly referred to as ____________. |
|
Definition
| Sales Comparison Approach |
|
|
Term
| Which appraisal approach is usually used on investment or commercial properties? |
|
Definition
| The Income Approach is typically used for investment or commercial properties. |
|
|
Term
| What type of property is the Income Approach for appraisals usually used for? |
|
Definition
| Investment or commercial properties typically use the Income Approach for the appraisal. |
|
|
Term
| Which appraisal approach is usually used for new construction? |
|
Definition
| The appraisal approach that is usually used for new construction is the Cost Approach. |
|
|
Term
| When the cost approach is used for the appraisal, what is usually the "purpose" of the loan on the 1003? (what is this approach usually used for?) |
|
Definition
| The Cost Approach is usually used for new construction loans. |
|
|
Term
| For the Sales Comparison Approach (most common), what are the 3 types of adjustments that can be made and what are the limits of those adjustments? |
|
Definition
1. Gross Adjustment - 25%
2. Net Adjustment - 15%
3. Single Line Adjustment - 10% |
|
|
Term
| How far away can the 3 comparable properties used in the Sales Comparison Approach be from the subject property? |
|
Definition
| The 3 comparable properties used have to be within 1 mile. |
|
|
Term
| In the Sales Comparison Approach, what is the single line adjustment maximum? |
|
Definition
| The single line adjustment maximum in the sales comparison approach is 10%. |
|
|
Term
| What is the maximum amount of the net adjustment in the sales comparison approach? |
|
Definition
| The maximum amount for the net adjustment in the sales comparison approach is 15%. |
|
|
Term
| What is the maximum amount of the gross adjustment (all adjustments down the column for the comp divided by the sales price) when using the sales comparison approach? |
|
Definition
| The maximum gross adjustment when using the sales comparison approach is 25%. |
|
|
Term
The market conditions addendum required in conjunction with the appraisal report lists all of the following information except?
a.) number of foreclosure in the market
b.) seller concessions
c.) current inventory of homes for sale
d.) description of improvements to property |
|
Definition
| d.) description of improvements to property (this is the appraisal itself, not the addendum) |
|
|
Term
| What will the interest rate be the first time it can adjust on a 3/1 ARM with an initial rate of 4.25% and caps 2/1/2, when at the time of the adjustment the index is 4% and the margin is 2.5%? |
|
Definition
|
|
Term
| What does FEMA stand for? |
|
Definition
| FEMA - Federal Emergency Management AGENCY** |
|
|
Term
| FEMA is an ______ and FHA is an _________ |
|
Definition
FEMA is an Agency and FHA is an Administration.
Federal Emergency Management Agency
Federal Housing Administration |
|
|
Term
| How often can an MLO be put under examination by authorities? |
|
Definition
|
|
Term
| Describe the relationship between defeasance and reconveyance. |
|
Definition
| Defeasance is what defeats the mortgage (mortgage is satisfied) to reconvey the property back to the borrower. |
|
|
Term
|
Definition
| CRA - Credit Reporting Agency |
|
|
Term
| How many credit repositories are there? |
|
Definition
There are 3 credit repositories:
1. Experian
2. Trans Union
3. Equifax |
|
|
Term
| What are the three credit repositories? |
|
Definition
1. Experian
2. Trans Union
3. Equifax |
|
|
Term
| How many types of credit reports are there? |
|
Definition
Three types of credit reports:
1. In file report - one repository
2. tri merge - all three rpositories on one report (most popular)
3. factual data report (RMCR) |
|
|
Term
| Public records stay on a credit report for ___ years unless it is a Chapter 7 bankruptcy, which stays on the report for ___ years. |
|
Definition
| Chapter 7 bankruptcy will stay on your report for 10 years. Other public records stay on your report for 7 years. |
|
|
Term
| Which type of bankruptcy stays on your credit report for 10 years? |
|
Definition
| A Chapter 7 bankruptcy will stay on your credit report for 10 years. |
|
|
Term
All of the following would be found in a credit report except?
a.) Judgments
b.) Collections
c.) tax liens / foreclosures
d.) utility records |
|
Definition
| d.) utility records --> WOULD NOT BE FOUND ON A CREDIT REPORT |
|
|
Term
How long does chapter 11 stay on a credit report?
A. 7 years
B. 10 years
C. Chapter 11 is not reported on credit reports
D. Until it is discharged |
|
Definition
| C. Chapter 11 is not reported on credit reports |
|
|
Term
| What is the range of a credit score? |
|
Definition
| A credit score can range from 300 to 850. |
|
|
Term
| What information does each Debt Report contain? |
|
Definition
Each debt report contains:
Creditor's name, Payment, Date Opened, Balance, Highest Credit Amount, History, Status of Account |
|
|
Term
| Name five Verification forms used in UW. |
|
Definition
VOE - Verification of Employment
VOD - Verification of Deposit
VOM - Verification of Mortgage
VOR - Verfication of Rent
VVOE - Verbal Verification of Employment |
|
|
Term
|
Definition
| VOE - Verification of Employment |
|
|
Term
|
Definition
| VOM - Verification of Mortgage (payoffs are not provided in the form) |
|
|
Term
|
Definition
| VOD - Verification of Deposit ( Reserves are how many months of mortgage payments will you have left in the bank after the transaction closes) |
|
|
Term
|
Definition
| VOR - Verification of Rent (used in purchase transaction) looks at borrower’s rental history |
|
|
Term
| What does VVOE stand for? |
|
Definition
| VVOE - Verbal Verification of Employment - UW do this prior to close to make sure the borrower is still employed. |
|
|
Term
| Which (6) types of income CANNOT be counted unless you have a 2 year history? |
|
Definition
1. Part Time
2. Overtime
3. Bonuses
4. Commissions
5. Self Employment
6 |
|
|
Term
| Which (6) types of income CANNOT be counted unless you have a 2 year history? |
|
Definition
1. Part Time
2. Overtime
3. Bonuses
4. Commissions
5. Self Employment
6. Rental Income |
|
|
Term
| Part Time, Overtime, Bonuses, Commissions, Self Employment, and Rental income all require a ____ year history to count. |
|
Definition
| A 2 year history is required on part time, overtime, bonuses, rental income, commission, and self employment income. |
|
|
Term
Which of the following types of income cannot be used or is reason to decline an applicant for a mortgage?
A. Annuity
B Part time income last 24 months
C. Social security and or public income source
D. Intermittent or seasonal income |
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Definition
| D. Intermittent or seasonal income *** |
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Term
| If you are _______ child support it is NOT required to be counted as _________ but if you are __________ child support it is required to be counted as __________. |
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Definition
| If you are receiving child support, it is NOT required to be counted as income but if you are paying child support it IS required to be counted as debt. |
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Term
| If a borrower decides to use child support income (it is their choice to use this as income or not) they must supply documentation and there must be continuity of this income for ___ years. |
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Definition
| If a borrower decides to use child support for part of their income, they must provide documentation for it and there must be continuity of this income for 3 years. |
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Term
| If a borrower is paying child support do they have to count it towards their debts? |
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Definition
| If a borrower is paying child support they MUST count it towards their debts. (SAME FOR ALIMONY) |
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Term
| If a borrower is receiving child support do they have to count this as income? |
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Definition
| A borrower can chose whether or not they want to count any child support they are receiving towards their income. (SAME FOR ALIMONY) |
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Term
| What percent of rental income is counted as income and what has to be subtracted from this income AFTER you multiply by this percent? |
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Definition
| Rental income is calculated by taking 75% of the gross income and THEN subtracting any mortgage payments. The 25% that is not used is for vacancy factor and property maintenance. |
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Term
| What percent of gross rent has to be thrown (due to vacancy factor and maintenance) out before the mortgage payments are subtracted to calculate rental income? |
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Definition
| Rental income is calculated by subtracting 25% of the gross rent to account for vacancy factor and maintenance and then subtracting any mortgage payments. |
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Term
| Borrower receives $1,000/mo rental income, he has a $600 monthly payment on the rental. How much monthly income can this borrower use for qualification purposes? |
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Definition
| $1,000 x .75 = $750 - 600 = $150 |
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Term
| What percent of fixed income (SSI) is used? |
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Definition
| SSI (fixed income) is "grossed up" by counting 125% of the income since this is untaxed income. |
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Term
| What type of income would you gross up by multiplying it by 125%? |
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Definition
| 125% of SSI income is used. This is called grossing up the income because this is untaxed income. This makes it so SSI income is given the same consideration that taxed income is given. |
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Term
| Borrower receives $600 a month SSI ( non taxed) - what is his income for qualification purposes? |
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Definition
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Term
| Tax returns must be provided for any business that the borrower owns more than ___% of. |
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Definition
| You must provide tax returns for the business if you own more than 25% of the business. |
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Term
| Do you calculate income to a daily, monthly, or annual amount to determine ratios? |
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Definition
Income must always be calculated to a monthly amount to determine ratios.
Hourly wage x # of hours x 52 weeks / 12 months = Monthly Income
Bi - Weekly : Amount per pay period x 26 / 12 = Monthly Income
Bi Monthly: (1st and the 15th) pay per period x 2 = Monthly Income |
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Term
| How is the monthly income calculated when you have an hourly wage? |
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Definition
hourly wage times number of hours per week times 52 weeks in a year divided by 12 months in a year equals monthly income.
Hourly wage x # of hours x 52 weeks / 12 months = Monthly Income |
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Term
| How is monthly income calculated when you are given bi-weekly income? |
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Definition
bi-weekly income times 26 pay periods divided by 12 months equals monthly income.
Bi - Weekly : Amount per pay period x 26 / 12 = Monthly Income |
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Term
| How is monthly income obtained when you are given bi-monthly income? |
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Definition
| Bi-monthly income times 2 equals monthly income. |
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Term
| What are the three C's of underwriting? |
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Definition
Capacity - Borrower's ability to repay the loan
Credit - Borrower's likelihood to repay the debt
Collateral - Property is adequate collateral for the loan?
(AND SOMETIMES CASH OR CAPITAL IS 4TH C) |
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Term
| Describe the difference between pre qualification, pre-approval, and commitment. |
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Definition
Pre Qualification - more of an opinion based on info provided but not documented
Pre Approval - is a formal process based on documented info
Commitment - written notification from a lender that states the terms of the loan |
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Term
| What is a lock-in agreement? |
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Definition
| A lock in agreement (aka a rate lock) is a lender's promise to hold a certain interest rate and a certain number of points for a borrower usually for a specified period of time. |
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Term
| What is it called when the borrower is locked in at a specific rate and number of points for a specified period of time? |
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Definition
| Lock in agreement or rate lock agreement. |
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Term
| What is the 6% payment factor and cents per 1/8th for a 20 year loan? |
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Definition
| The payment factor at 6% for a 20 year loan is $7.16 and you add .075 (7.5 cents) per 1/8th of a percent increase from the base of 6% then multiply by the number of thousands to get the monthly payment. |
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Term
| What is the 6% payment factor and cents per 1/8th for a 15 year loan? |
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Definition
| The payment factor at 6% for a 15 year loan is $8.44 and you add .07 (7 cents) per 1/8th of a percent increase from the base of 6% then multiply by the number of thousands to get the monthly payment. |
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Term
| What is the 6% payment factor and cents per 1/8th for a 30 year loan? |
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Definition
| The payment factor at 6% for a 30 year loan is $6.00 and you add .08 (8 cents) per 1/8th of a percent increase from the base of 6% then multiply by the number of thousands to get the monthly payment. |
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Term
| What is the legal presumption that anyone can know who is in title through inspection of public records called? |
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Definition
| Constructive Notice of Title |
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Term
| What is Constructive Notice of Title? |
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Definition
| Constructive Notice of Title is the legal presumption that anyone can know who is in title through inspection of public records. |
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Term
| What must the lender file in the county courthouse when a borrower pays off a loan? |
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Definition
| A Satisfaction of Mortgage must be signed by the lender and filed in the county courthouse when the loan is paid in full. This signature means that the lender is acknowledging the mortgage has been paid in full. |
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Term
| What is a Satisfaction of Mortgage? |
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Definition
| A Satisfaction of Mortgage is signed by the lender and filed in the county courthouse to acknowledge when a borrower has paid the loan in full. |
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Term
| What is a subordination agreement? |
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Definition
| Any lien that is in second position when a borrower seeks to refinance only their first mortgage must get the second mortgage company to agree to allow them to subordinate their lien in order for the new loan to be placed in first lien position. |
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Term
| What is it called when a lender agrees to have their lien placed in 2nd position when it would otherwise be in 1st lien position? |
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Definition
| A subordination agreement is when a lender agrees to place their lien in second lien position to another loan (when the lien would otherwise be ahead of that loan). |
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Term
| What is another term of a subordinate lien? |
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Definition
| A subordinate lien is also known as a junior lien. |
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Term
| What is another name for a junior lien? |
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Definition
| A junior lien is also known as a subordinate lien. |
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Term
| A _________ is a permanent change in the terms of the loan, while a _______ is a temporary agreement where the borrower pays a reduced amount while also paying past due amounts. |
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Definition
| A Modification is a permanent change in the terms of the loan and a Forbearance is a temporary agreement where the borrower pays a reduced amount while also paying past due amounts. |
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Term
|
Definition
| A Modification is a permanent change in the terms of the loan. |
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|
Term
|
Definition
| A Forbearance is a temporary agreement where the borrower pays a reduced amount while also paying past due amounts. |
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Term
| What is it called when the lender and borrower enter into a temporary agreement where the borrower pays a reduced amount while also paying past due amounts? |
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Definition
| A Forbearance is a temporary agreement where the borrower pays a reduced amount while also paying past due amounts. |
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Term
| What is a permanent change in the terms of the loan called? This is done when the borrower is experiencing a permanent financial hardship. |
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Definition
| A Modification is a permanent change in the terms of the loan and is usually entered into when the borrower is going through a permanent financial hardship. |
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Term
| What is the order in which payments are applied to the following: Interest, Principal, Past Due Amounts? |
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Definition
| Payments are first applied to any past due amounts, then to interest, then to principal. |
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Term
| What do the numbers in "FHA 31/43" mean? |
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Definition
| This means that the house payment can be no more than 31% of gross monthly income and when included with other debts, the total debt cannot be over 43% of monthly income. |
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Term
| A borrower and co-borrower apply for a loan with bi-weekly income of $1,800 and annual income of $10,000 respectively. What is the maximum house payment they would qualify for assuming a qualifying housing ratio of 31%? |
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Definition
$1,800x26/12=$3,900
$10,000/12=$833.33
$833.33+$3,900=$4,733.33 Monthly Income
$4,733.33x0.31=$1,467.33 Maximum Monthly Housing Payment |
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Term
| What is another name for the Housing Ratio and what does it mean? |
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Definition
| The Housing Ratio is also known as the front end ratio. This is the ratio of the monthly housing payments -including principal, interest, taxes, insurance (PITI) and any monthly HOA dues - to the borrower's monthly income. |
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Term
| What is another name for the Front End Ratio and what does it mean? |
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Definition
| The Front End Ratio is also known as the Housing Ratio and is obtained by dividing the borrower's PITI (principal, interest, taxes, insurance and any HOA dues) by the borrower's monthly income. |
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Term
| What is another name for the Debt Ratio and what is it? |
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Definition
| The Debt Ratio is also known as the back end ratio and is calculated by adding the borrower's monthly housing payments (PITI) to all other debts (installment, car loans, student loans, revolving debt, etc.) and then dividing by the borrower's monthly income. |
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Term
| What is another name for the back end ratio and what is it? |
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Definition
| The back end ratio is also known as the debt ratio and is the ratio of total debts (PITI, installment, car loans, student loans, revolving debt, etc.) to the borrower's monthly income. |
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Term
| What are the two terms that can be used to refer to the ratio of total debts (PITI, installment, car loans, student loans, revolving debt, etc.) to the borrower's monthly income? |
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Definition
| Debt Ratio or Back End Ratio refers to the ratio of the borrower's total monthly debts to the borrower's monthly income. |
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Term
| What are the two terms that are used to refer to the ratio of the borrower's monthly housing payments (PITI & HOA dues) to the borrower's monthly income? |
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Definition
| Front End Ratio or Housing Ratio refers to the ratio of the borrower's total monthly HOUSING payments to the borrower's monthly income. |
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Term
| What factors are NOT included in the debt ratio or housing ratio? |
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Definition
| Utility bills, car insurance, gas food, etc. are not included in the Housing (front end) or debt (back end) ratios. |
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Term
| Are utility bills, car insurance, gas, food, etc. included in debt ratios? |
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Definition
| Utility bills, car insurance, gas, food, etc. are NOT included in debt ratios. |
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Term
| What are the front and back end ratios for FHA loans? |
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Definition
| For FHA loans the housing (front end) qualifying ratio is 31% and the debt (back end) qualifying ratio is 43%. |
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Term
| What type of loan has qualifying ratios of 31%/43%? |
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Definition
| 31%/43% is the qualifying ratio for FHA loans. |
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Term
| What is the qualifying ratio for a VA loan? |
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Definition
| VA loans have a qualifying total debt ratio of 41%. |
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Term
| What are the front and back end qualifying ratios for FNMA/FHLMC? |
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Definition
| Fannie Mae and Freddie Mac have front and back end qualifying ratios of 28%/36%. |
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Term
| What type of loan has a qualifying debt ratio of 41%? |
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Definition
| The qualifying ratio for VA loans is 41%. |
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Term
| Which loans require front and back end minimum qualifying ratios of 28%/36%? |
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Definition
| Federal National Mortgage Association and Federal Home Loan Mortgage Corporation both have front and back end qualifying ratios of 28%/36% |
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Term
What are the housing and total debt ratio for the following borrower?:
$6,000 mo income
House is $1,000
Car 1 $ 500
Car 2 $400
Student Loan $90
Credit Cards $110 month |
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Definition
Housing: $1,000/$6,000=16.67%
Total Debt Ratio: $2,100/$6,000=35% |
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Term
Gross Income of $5,000 mo
Existing debt is $640
Lenders guidelines state the borrower must be at 28/36 to qualify for loan. What is the max house payment this borrower can afford? |
|
Definition
.28x$5,000=$1,400 to meet Housing Ratio requirements
$5,000x.36=$1,800 allowable in total debt. Subtract existing debt of $640 and you get an allowable house payment of $1,160 to qualify for total debt ratio
SO THE MAXIMUM HOUSING PAYMENT IS $1,160. |
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Term
| Define LTV and describe how it is calculated for purchase transactions. |
|
Definition
| Loan-to-Value (LTV): The loan amount divided by the lesser of the purchase price or appraised value for purchase transactions. |
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Term
| The loan amount divided by the lesser of the purchase price or appraised value for purchase transactions is referred to as _________. |
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Definition
| The loan amount divided by the lesser of the purchase price or appraised value for purchase transactions is referred to as the Loan to Value or LTV. |
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Term
| How is LTV calculated for refinance transactions? |
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Definition
| The LTV for refinance transactions is the loan amount divided by the current appraised value. |
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Term
| The LTV for refinance transactions is the loan amount divided by the _______ and the LTV for purchase transactions is the loan amount divided by the lesser of the _________ or _________. |
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Definition
| The LTV for refinance transactions is the loan amount divided by the current appraised value and the LTV for purchase transactions is the loan amount divided by the lesser of the purchase price or appraised value. |
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Term
| What is the difference between LTV, CLTV, and TLTV? |
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Definition
LTV - Loan to Value - the outstanding balance on a first mortgage only versus what it is worth
CLTV - Combined Loan to Value - The combined balances of all mortgages divided by the value.
TLTV - Total Loan to Value - Comes into play when a borrower has a HELOC and the full line of credit amount is not being utilized. Is calculated as the current balance of the first mortgage plus the full AVAILABLE balance on the HELOC (if the borrower were to pull it all out) divided by the value. |
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Term
Calculate the LTV, CLTV, and TLTV for the following:
$100,000 appraised value
$60,000 1st mortgage balance
$15,000 balance on a $40,000 HELOC |
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Definition
Loan to Value = 60%
Combined Loan to Value = 75%
Total Loan to Value = 100% |
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Term
| When dealing with a purchase transaction do you use the purchase price or the appraised value to calculate the LTV? |
|
Definition
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Term
| The purchase price is $200,000 and the appraised value is $190,000. The lenders guidelines allow 85% max LTV. What is the final loan amount? |
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Definition
| .85x$190,000=$161,500 (have to use lower of purchase price or appraised value to calculated LTV) |
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Term
| A borrower got a loan for 125,500. The current value of the first is 104,000 and a second of 14,500 the home was appraised for 132,000. What is the loan to value of this transaction? |
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Definition
We were not given the purchase price (the loan amount is not always the purchase price) so we have to use the appraised value to calculate it. At the time the loan was originated the LTV (NOT CLTV or TLTV) was: 95%
$125,500/$132,000= 95% |
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Term
THIS IS NOT A QUESTION, JUST SOMETHING TO REMEMBER:
Down Payment Calculations - Be careful and look for earnest money given upfront and reduce this amount from what's needed at closing and also watch for seller contributions. |
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Definition
| Down Payment Calculations - Be careful and look for earnest money given upfront and reduce this amount from what's needed at closing and also watch for seller contributions. |
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Term
| One discount point equals _____. |
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Definition
| One discount point equals 1% of the loan amount. |
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Term
| $275,000 loan amount and the borrower agrees to pay 1.5 discount points - what is the total cost? |
|
Definition
|
|
Term
| How many bps (basis points) equal one percent? |
|
Definition
| There are 100 basis points (bps) in one percent. |
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|
Term
| 45 basis points would be what percent? |
|
Definition
|
|
Term
| Zero point seven five percent (0.75%) would equal how many basis points? |
|
Definition
|
|
Term
| The base rate on the requested loan is 3%. However, because the home will be NOO ( non owner occupied ) lenders guidelines state, you must add 250 BPS to the rate. What is the borrowers final rate? |
|
Definition
5.5%
3% + 250 bps (2.5%) = 5.5% |
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Term
| A buy down loan is a type of _______, NOT an ARM. |
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Definition
| A buy down loan is considered a fixed rate loan, NOT an ARM. |
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Term
| Buy down mortgage and graduated payment mortgage are both examples of __________. |
|
Definition
| Buy down mortgages and graduated payment mortgages are both examples of fixed rate loans. |
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Term
| Explain how a buy down mortgage works. |
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Definition
| Borrower is given a payment based on a lower rate but the actual rate of the loan is fixed at a higher rate and someone else is paying the difference in the actual payment. (don’t have to do the math on the exam) |
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Term
|
Definition
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|
Term
| A 2/1 buydown with a start rate of 4% is actually a __% fixed rate loan. |
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Definition
| 2/1 buydown with a start rate of 4% is actually a 6% fixed rate loan. |
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Term
| 3/1 buy down with a start rate of 5% is actually an __% fixed rate loan. |
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Definition
| 3/1 buy down with a start rate of 5% is actually an 8% fixed rate loan. (3/2/1 is same as a 3/1) |
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Term
| Explain how a 2/1 buydown with a 4% start rate works and give the actual fixed rate. |
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Definition
If the loan is a 2/1 buydown with a 4% start rate it’s really a 6% fixed rate. What happens is the borrower gets to pay a payment based on the start rate and then it increases until it hits actual rate - causing someone, usually a builder to place the shortfall for each payment into an escrow account:
yr 1 - 4% payment is $400 and the actual payment at 6% is $600 Short $200/mo x12 = $2,400
yr 2 - 5% payment is $500 and actual payment is $600 is $100 short /mo = $1,200
year 3 - 30 payment is based on actual rate and payment scale of $600
Total cost of the buydown is $3,600 (the total of the shortfall) |
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Term
| On a 3/1 buydown what is the fully amortized rate of a loan with a start rate of 4? |
|
Definition
|
|
Term
| Is a buydown considered a variable rate mortgage? |
|
Definition
| A Buydown is not a variable rate mortgage because the rate is fixed from the start. The loan just has the borrower making lower payments (based on a lower rate than what the actual rate is) at the start and another party paying the difference. |
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Term
| How do you calculate interest only payments (two steps)? |
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Definition
| Interest only payments: Multiply Interest Rate times the loan amount and divide by 12 to get monthly. |
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Term
| $350,000 loan for 30 years at 5.75% IO loan, what is the monthly payment? |
|
Definition
|
|
Term
| Calculate the interest only (IO) payment on $300,000 at 7.375%. |
|
Definition
|
|
Term
| How much is 7 months interest on an interest only loan of $400,000 at 6% for 30 years? |
|
Definition
$14,000 (7 months of interest only payments)
$400,000 x 6% $24,000 / 12 = $2000 per month x 7 months = $14,000 |
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Term
| A borrower takes a 30 year loan with a 10 yr Interest only feature at 5%. The payment is $1,250, what is the borrowers loan amount? |
|
Definition
$300,000
(Take $1,250 X 12 =$15,000 in annual interest. Divide this by 5% to come up with loan amount.) $300,000 |
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Term
| How do you calculate daily interest or per diem? |
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Definition
| Per diem works just like an Interest only calculation except divide it by 360 days (use 360 instead of 365) |
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Term
| $200,000 at 6% for 30 years - collect 10 days interest as the loan is closing on the 20th of the month. What is the total cost of the interest per diem? |
|
Definition
$333.33
$200,000 x 6% = $12,000 / 360= $33.33 daily x 10 days = $333.33 |
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Term
| From the chart you memorized, what is the starting dollar amount for the P&I payment per thousand dollars for a 6%, 30 year loan. What is the additional amount you add to the payment factor (before multiplying it by the number of thousands) per .125% (1/8th percent) increase in the interest rate from 6%? |
|
Definition
| The P&I on a 30 year loan at 6% would be $6.00 per number of thousands in the loan amount. For every increase of 1/8th of a percent (from the 6% rate) you would add $.08 to the base amount of $6 and then multiply by the number of thousands in the loan amount to get the P&I. |
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Term
| From the chart you memorized, what is the starting dollar amount for the P&I payment per thousand dollars for a 6%, 20 year loan. What is the additional amount you add to the payment factor (before multiplying it by the number of thousands) per .125% (1/8th percent) increase in the interest rate from 6%? |
|
Definition
| The P&I on a 20 year loan at 6% would be $7.16 per number of thousands in the loan amount. For every increase of 1/8th of a percent (from the 6% rate) you would add $.075 to the base amount of $7.16 and then multiply by the number of thousands in the loan amount to get the P&I. |
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Term
| From the chart you memorized, what is the starting dollar amount for the P&I payment per thousand dollars for a 6%, 15 year loan. What is the additional amount you add to the payment factor (before multiplying it by the number of thousands) per .125% (1/8th percent) increase in the interest rate from 6%? |
|
Definition
| The P&I on a 15 year loan at 6% would be $8.44 per number of thousands in the loan amount. For every increase of 1/8th of a percent (from the 6% rate) you would add $.07 to the base amount of $8.44 and then multiply by the number of thousands in the loan amount to get the P&I. |
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Term
| $125,000 loan at 6% for a 30 year term - what is the P and I payment? |
|
Definition
|
|
Term
| Loan amount of $425,000 with a rate of 6.375% on a 30 yr term - what is P and I payment? |
|
Definition
$2,652.00
_______________________________
.375/.125=3 (number of 1/8ths% increase from 6%)
3x$.08=$.24
$6.00+$.24=$6.24
$6.24x425=$2,652.00 |
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Term
| $345,000 20 years at 6.75% - what is the P and I payment? |
|
Definition
$2,625.45
___________________________________
.75/.125=6 (# of 1/8ths increase from 6%)
6x$.075=$.45
$7.16+$.45=$7.61
$7.61x345=$2,625.45 |
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Term
| 6.375% 15 years $56,000 loan - what is P and I payment? |
|
Definition
$484.40
____________________________________
.375/.125=3 (# of 1/8ths increase)
3x$.07=$.21
$8.44+$.21=$8.65
$8.65x56=$484.40 |
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