Real Estate Finance – Champions Questions & Answers 100% Correct!!

Mortgage - ANSWERSA pledge of real property as security for a debt. Deed of Trust - ANSWERSA three party loan instrument - borrower, lender and trustee. Note, Promissory Note - ANSWERSA personal promise to repay a debt. Mortgagor - ANSWERSBorrower under a mortgage Mortgagee - ANSWERSLender under a mortgage Beneficiary - ANSWERSLender under a deed of trust Trustor - ANSWERSBorrower under a deed of trust Trustee - ANSWERSA third party under a deed of trust who acts as an agent for the lender Power of Sale - ANSWERSA clause in a deed of trust allowing non-judicial foreclosure Non-judicial foreclosure - ANSWERSForeclosure that does not require court proceedings or a judgment of foreclosure - the result of power of sale clause in a deed of trust Hypothecation - ANSWERSThe action of pledging real property as security for a debt Acceleration Clause - ANSWERSA clause in a mortgage allowing the lender to declare the whole amount of the principal due and payable in the event of default by the borrower. Alienation Clause - ANSWERS"Due on Sale" clause stating that the balance of the debt becomes due if the property is sold by the mortgagor Defeasance Clause - ANSWERSA clause stating that the lien on the property is defeated when the debt is repaid Escalation Clause - ANSWERSA clause allowing the lender to raise the existing interest rate - although most often associated with an Adjustable Rate Mortgage, it can be used to overcome an alienation clause Prepayment Clause - ANSWERSA clause stating that the borrower can pay the entire amount or the stated amount prior to the due date in the note and whether there will be a penalty associated with that prepayment. Subordination Clause - ANSWERSA clause allowing a lender to move to or take a lower lien position Assumption Clause - ANSWERSA clause outlining the obligations of the original borrower and a new borrower in the event the loan is assumed Straight Assumption - ANSWERSA new borrower assumes the payments and liability on an existing loan and usually releasing the original borrower from liability Assumption "subject to" - ANSWERSA new borrower assumes the payments but not the liability on an existing loan - the original borrower remains liable FHA - ANSWERSFederal Housing Administration - aids in home financing by insuring high LTV loans with more lenient qualifying ratios. MIP - ANSWERSMortgage Insurance Premium - insurance on the FHA loan - insures the whole loan VA - ANSWERSVeterans Admin - assists veterans in the purchase of housing by guaranteeing loans. DD 214 - ANSWERSVeterans discharge papers - provided to demonstrate eligibility for a VA loan Certificate of Eligibility - ANSWERSEvidence of VA approval of a qualified veteran for a VA loan CRV - ANSWERSVA appraisal - Certificate of Reasonable Value Funding Fee - ANSWERSA fee required to be paid by the buyer, seller or included in the loan at closing on all VA loans Amortization - ANSWERSThe repayment or satisfaction of a debt by installment payments of principal and interest on a regular basis Conventional Loan - ANSWERSA loan that is neither federally insured nor guaranteed - a private sector loan Fixed Rate Amortized Loan - ANSWERSA loan with equal regular payments of principal and interest until the debt is fully repaid or amortized Bi-weekly Loan - ANSWERSA fixed rate amortized loan in which one-half of a monthly payment is made every two weeks resulting in much quicker growth of equity and significant interest savings Term Loan - ANSWERSA loan with payments of interest only until the end of the term, when the entire principal is repaid in one lump sum - a zero amortization loan - a straight loan Straight Loan` - ANSWERSA loan with payments of interest only until the end of the term, when the entire principal is repaid in one lump sum - a zero amortization loan - a term loan Blanket Loan - ANSWERSSeveral pieces of property secured by a single loan (several lots on one note) Release Clause - ANSWERSA clause often found in a blanket loan allowing the borrower to obtain partial releases of specific lots by making required lump sum payments Package Loan - ANSWERSA loan secured by real property plus personal property Budget Loan - ANSWERSA loan where the monthly payment includes not only principal and interest but taxes and insurance - called the PITI payment PITI - ANSWERSPrincipal, interest, tax, insurance - a common payment for amortized loans. Balloon Loan - ANSWERSA partial amortization loan - equal regular payments of principal and interest, but long before the debt is amortized a final payment, substantially larger that the others is required to pay off the debt - the balloon payment Participation Loan - ANSWERSTwo or more lenders own a share - to lessen the lenders' risk; or one lender who collects principal and interest plus a percent of the profits on the investment property. Shared Appreciation Loan - ANSWERSA loan with an investor/lender who collects principal and interest payments and then a percent of the profits when the property when the property is sold Open-end Loan - ANSWERSA home equity line of credit - similar to a credit card but secured by real property Adjustable Rate Mortgage - ARM - ANSWERSA loan with an interest rate tied to a readily available index - the rate will be adjusted periodically causing payment changes Margin - ANSWERSOn an adjustable rate mortgage the percent added to the index Construction Loan - ANSWERSShort term financing with funds advanced periodically during the stages of construction - a term loan. Wraparound Loan - ANSWERSA new mortgage on a property is placed in a secondary lien position - it includes both the unpaid balance of the first mortgage plus additional amounts - the first mortgage is not paid off GPM - Graduated Payment Mortgage - ANSWERSA loan whose payments start low and ra