amortization
The process of making periodic payments that include both interest on the loan and partial repayment of the loan principal until the balance at the end of the loan term is -0- is called ____________________.
loan to value ratio
The ratio of loan amount to sale price or market value is called _______________________ or LTV.
80%
_____% or lower LTV is preferred by lenders on single family residences.
75%
Commercial or rental property may require ____% LTV.
greater
The lower the LTV, the ______ the down payment required.
equity
The difference between the market value of a property and all liens or debts secured by the property is called the owner's ________________.
point
In mortgage terms, one percent of the loan amount is called a __________.
origination
Most borrowers pay ? to one _________ point to the lender at closing to pay the loan officer's commission.
discount
One or more _________________ points can be paid by the borrower at closing to lower the interest rate of the loan.
higher
Example: A borrower may have a choice between obtaining a loan at 6% interest with no discount points or a loan at 5 1/2% with one discount point.
**** Everything else being equal, the more discount rates paid by the borrower, the ________________ the yield to the lender.
lowering
When a borrower pays discount points at closing, he/she is
_______________________ the interest rate.
one origination and one discount point.
A loan officer may quote "1 and 1" meaning what?
Buydown Loan
Example: A __________ means the borrower is paying enough discount points at closing to lower the interest rate either for a short term or over the entire length of the loan.
balloon
A last payment at the end of a loan term that is larger than the preceding regular payments is called a ___________________ payment.
Term loan
* Typically, interest only payments were made every 6 months.
* The loan may or may not be renewed at maturity.
* The structure of the loan and the fact it may not be renewed at the end of the term caused hardship during the great depression of
The main type of loan popular until 1930's that was a non-amortizing loan was called a _____________ loan. It was typically a 3-5 year loan with interest only payments and a balloon payment at end of the term equal to the original principal.
amortized
The type of loan that became the standard after term loans is the _____________________ loan.
Home Owners Loan Corp. (HOLC)
* Amortized loans require regular payments sufficient to cover interest and
principal.
* The loan amount is reduced to zero at maturity date.
The ________________________ started amortized loans in 1933.
budget (piti loan)
The type of loan that requires monthly payments of principal and interest as well as 1/12 of annual property taxes and hazard insurance premiums is called a _________________ loan.
escrow account
The tax and insurance payments are placed in an ____________ account each month so that the lender is assured that the amounts owed by the borrower at the
end of the year will be paid.
piti
_____________ is the acronym for principal, interest, taxes and insurance.
balloon loan
balloon payment
The type of loan where the final payment is larger than the preceding payments is a _________________ loan.
The final payment is called a ____________.
partially amortized
Example: A 30 year loan with a 15 year balloon means the monthly payments are based on a 30 year schedule and at the end of 15 years, the unpaid principal is due.
* This type of loan is common in commercial real estate lending.
A type of loan whereby the monthly payments are based on a longer period of time than the actual length of the loan is called a ____________________ loan.
partially amortized loan
At the end of a ____________ loan, the collateral must be sold to pay the balance or the loan must be refinanced with a new loan.
conventional
A type of loan that is neither insured by the FHA or guaranteed by the VA is called a ___________________ loan.
*** 15 year loans carry lower interest rates than 30 year loans due to less interest risk (maturity risk).
** Typically, 15 year loans are 0.4 to 0.5 points lower than a 30 year loan.
Example: 15 year = 5.5%; 30 year = 6%
15 yr loan vs 30 yr loan
Mortgage loan interest can be used to offset taxable income if the taxpayer itemizes deductions on their tax return.
� Obviously, more interest accrues during the longer term loan.
� The 15 year loan requires a greater monthly income and higher (P&I) paym
Considerations when comparing 15 and 30 yr loans
* Example: $100,000 loan amount at 6% for 30 years = $599/month
$100,000 loan amount at 5.5% for 15 years = $817/month
� The $218 reduced P&I payment of the 30 year loan can be invested.
� Longer loan term = less P&I = higher initial loan amount
*** You c
EX
1. FHA
2. VA guaranteed
3. conventional
3 types of loans