FIN 3300 Real Estate Finance Tim
Scheu WMU Exam-Graded A
the Promissory note - ANS-1) the evidence of the debt
2) if a friend borrows, and you write out an IOU
3) Fancy IOU
What do you put on an IOU? - ANS-Borrower and Lender
- Obligee is the "Lender" of the promissory note
- Obligor is the "borrower" of the promissory note
what's on the IOU - ANS--how much you borrow
-rate of interest
-how frequently you make payments
-how long to pay it
-when it's due
Mortgage Document - ANS--technically the security of the debt
-Lender is now called the "Mortgagee"
-and the borrower is now called "Mortgagor"
Mortgage Document #2 - ANS-legal description on it
- you must maintain the property
covenant of removal - ANS-you're not allowed to pick up the house and move it to a
new property
-literally move the collateral on the property
-sometimes you are restricted from cutting trees down
-you have to keep the property insured
-record interest on the property
---Record the mortgage or a mortgage lien
---can get more than one mortgage on a home
pay property taxes - ANS-if you don't the government will sell the property
New loan transfer settings - ANS-borrower gets a new loan plus the down payment and
they pay the...
Cash transfer setting - ANS-Pay in cash/ or check
, subject to or assumption - ANS-the buyer pays the seller the equity and simply takes
over the other persons loan.
due on sales clause - ANS-whatever the loan balance is at the time of sale, you have to
pay the balance
terminating the loan - ANS-the most common way to terminate the loan is to (pre-pay)
-7 years most loans are (pre-payed)
-pay it off over the life of the loan (doesn't happen very often)
-back in the day loans used to be 20 years, and that didn't change until relatively
recently
-you couldn't't even refinance your home (that changed in the 70s)
adjustable rate Loans - ANS-this is going to change during the life of the loan (the rate)
-taking on risk; why would you do that?
---listen I'm taking risk but I'm paying 3% this year, and after that the rate could either go
up or down
the borrower is taking on risk, what are they getting in return?q - ANS-one year
adjustable is the most popular, can you get a 5 year loan? yes, can you get a 10 year
loan? I think.
-the difference between 1 and 5 years
----the amount of risk!
--------5 years would only have one change, less amount of change, less risk you're
taking on.
cap limits the borrower's risk of the payment change - ANS-
cap per adjustment - ANS-limits the payment change at each anniversary
term cap - ANS-added to the original rate to which you pay, giving you the ceiling.
-gives the borrower the MAX rate they will ever pay in that term
adjusted rate loan - ANS--where the rate can be adjusted, but the adjustments are set
into the contract
-most lenders offer fixed and adjustable
term loan - ANS--where you pay interest only
-say for ten years, at the end of the 10 years you own the whole loan
-typically, wealthy people use this loan
constructional loan - ANS-basically a term loan where you pay interest at some points
hybrid loan - ANS-fixed for 10 years and then converts to a 1 year adjustable for the
next 20 years
Scheu WMU Exam-Graded A
the Promissory note - ANS-1) the evidence of the debt
2) if a friend borrows, and you write out an IOU
3) Fancy IOU
What do you put on an IOU? - ANS-Borrower and Lender
- Obligee is the "Lender" of the promissory note
- Obligor is the "borrower" of the promissory note
what's on the IOU - ANS--how much you borrow
-rate of interest
-how frequently you make payments
-how long to pay it
-when it's due
Mortgage Document - ANS--technically the security of the debt
-Lender is now called the "Mortgagee"
-and the borrower is now called "Mortgagor"
Mortgage Document #2 - ANS-legal description on it
- you must maintain the property
covenant of removal - ANS-you're not allowed to pick up the house and move it to a
new property
-literally move the collateral on the property
-sometimes you are restricted from cutting trees down
-you have to keep the property insured
-record interest on the property
---Record the mortgage or a mortgage lien
---can get more than one mortgage on a home
pay property taxes - ANS-if you don't the government will sell the property
New loan transfer settings - ANS-borrower gets a new loan plus the down payment and
they pay the...
Cash transfer setting - ANS-Pay in cash/ or check
, subject to or assumption - ANS-the buyer pays the seller the equity and simply takes
over the other persons loan.
due on sales clause - ANS-whatever the loan balance is at the time of sale, you have to
pay the balance
terminating the loan - ANS-the most common way to terminate the loan is to (pre-pay)
-7 years most loans are (pre-payed)
-pay it off over the life of the loan (doesn't happen very often)
-back in the day loans used to be 20 years, and that didn't change until relatively
recently
-you couldn't't even refinance your home (that changed in the 70s)
adjustable rate Loans - ANS-this is going to change during the life of the loan (the rate)
-taking on risk; why would you do that?
---listen I'm taking risk but I'm paying 3% this year, and after that the rate could either go
up or down
the borrower is taking on risk, what are they getting in return?q - ANS-one year
adjustable is the most popular, can you get a 5 year loan? yes, can you get a 10 year
loan? I think.
-the difference between 1 and 5 years
----the amount of risk!
--------5 years would only have one change, less amount of change, less risk you're
taking on.
cap limits the borrower's risk of the payment change - ANS-
cap per adjustment - ANS-limits the payment change at each anniversary
term cap - ANS-added to the original rate to which you pay, giving you the ceiling.
-gives the borrower the MAX rate they will ever pay in that term
adjusted rate loan - ANS--where the rate can be adjusted, but the adjustments are set
into the contract
-most lenders offer fixed and adjustable
term loan - ANS--where you pay interest only
-say for ten years, at the end of the 10 years you own the whole loan
-typically, wealthy people use this loan
constructional loan - ANS-basically a term loan where you pay interest at some points
hybrid loan - ANS-fixed for 10 years and then converts to a 1 year adjustable for the
next 20 years
