Podcast
Questions and Answers
What does 'accrued interest' in mortgage loans refer to?
What does 'accrued interest' in mortgage loans refer to?
- Interest that has been incurred but not yet paid. (correct)
- Interest calculated on the total loan amount.
- Interest due only at the beginning of the loan term.
- Interest that has been paid in advance.
Which of the following describes an 'Alt-A' loan?
Which of the following describes an 'Alt-A' loan?
- A loan that is characterized by lower credit quality.
- A loan requiring full income verification.
- A loan that meets all conventional lending guidelines.
- A loan with good credit but limited documentation. (correct)
What is the main purpose of amortization in a mortgage?
What is the main purpose of amortization in a mortgage?
- To convert a loan into a grant.
- To wait until the end of the term to pay off the loan.
- To increase the debt owed over time.
- To systematically reduce or pay off a debt. (correct)
The term 'Annual Percentage Rate (APR)' is defined under which act?
The term 'Annual Percentage Rate (APR)' is defined under which act?
What characterizes a 'stated income' loan?
What characterizes a 'stated income' loan?
What does 'assigned loan' mean in the mortgage lending context?
What does 'assigned loan' mean in the mortgage lending context?
Which term describes payments made toward the principal of a debt?
Which term describes payments made toward the principal of a debt?
Which of the following statements about terms in the mortgage industry is true?
Which of the following statements about terms in the mortgage industry is true?
What is the primary purpose of an assumable loan?
What is the primary purpose of an assumable loan?
Which automated underwriting system is associated with Freddie Mac?
Which automated underwriting system is associated with Freddie Mac?
How is the Average Prime Offer Rate (APOR) primarily used?
How is the Average Prime Offer Rate (APOR) primarily used?
What does a cash-out refinance provide to the borrower?
What does a cash-out refinance provide to the borrower?
What is the definition of conveyance in real estate?
What is the definition of conveyance in real estate?
What does a debt ratio assess?
What does a debt ratio assess?
What constitutes a delinquent loan?
What constitutes a delinquent loan?
What do discount points do for a mortgage loan?
What do discount points do for a mortgage loan?
What is the purpose of an escrow account in a mortgage?
What is the purpose of an escrow account in a mortgage?
What happens during an early payment default?
What happens during an early payment default?
How are conventional loans defined?
How are conventional loans defined?
What does the daily simple interest formula typically influence?
What does the daily simple interest formula typically influence?
What outcome occurs when a borrower defaults on their mortgage?
What outcome occurs when a borrower defaults on their mortgage?
What are closing cost concessions?
What are closing cost concessions?
Flashcards
Accrued Interest
Accrued Interest
Interest that has been earned but not yet paid. In mortgage loans, interest is paid in arrears, meaning the borrower pays for the previous month's interest.
Alt-A Loan
Alt-A Loan
A loan that falls between conforming and subprime. It has good credit but may have poorly documented income or assets.
Amortization
Amortization
The process of gradually paying off a debt with regular payments that reduce the principal amount.
Annual Percentage Rate (APR)
Annual Percentage Rate (APR)
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Assigned Loan
Assigned Loan
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Stated Income Loan
Stated Income Loan
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Non-Income Verifying Loan
Non-Income Verifying Loan
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What is the difference between a conforming and a subprime loan?
What is the difference between a conforming and a subprime loan?
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Assumable Mortgage
Assumable Mortgage
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Automated Underwriting System (AUS)
Automated Underwriting System (AUS)
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Average Prime Offer Rate (APOR)
Average Prime Offer Rate (APOR)
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Cash Out Refinance
Cash Out Refinance
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Closing Cost Concessions
Closing Cost Concessions
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Conforming Loan
Conforming Loan
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Conventional Loan
Conventional Loan
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Conveyance
Conveyance
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Daily Simple Interest
Daily Simple Interest
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Debt Ratio (DTI)
Debt Ratio (DTI)
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Deed
Deed
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Default
Default
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Delinquent Loan
Delinquent Loan
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Discount Points
Discount Points
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Early Payment Default
Early Payment Default
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Study Notes
Mortgage Lending Terminology
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Accrued Interest: Interest earned but not yet paid; borrowers pay November interest with December payment.
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Alt-A Loans: Loans with credit characteristics between conforming and subprime, now largely obsolete. Often involve "stated income" or "no income" verification, relying on credit score and assets instead of income.
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Amortization: Reducing debt through regular principal payments.
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Annual Percentage Rate (APR): Cost of credit, defined by the Truth in Lending Act.
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Assigned Loan: Loan sold to a servicer other than the originator; a legal process to record the sale.
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Assumable Loan: Purchaser can take over seller's mortgage loan.
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Automated Underwriting System (AUS): Computer program analyzing loan applications; Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Product Advisor common.
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Average Prime Offer Rate (APOR): Lender survey estimate of APRs on prime mortgage loans; used for HMDA reporting and identifying higher-priced mortgages.
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Cash-Out Refinance: Using a mortgage to pay off an existing mortgage and receive additional cash.
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Closing Cost Concessions: Seller's payment of buyer's closing costs or prepaid expenses.
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Conforming Loan: Loan adhering to Fannie Mae and Freddie Mac guidelines.
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Conventional Loan: Loan not insured by FHA or guaranteed by VA/USDA.
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Consumer Credit: Credit extended to individuals for goods/services.
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Conveyance: Transferring property ownership; done using legal instruments like contracts, titles, or deeds.
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Daily Simple Interest: Interest calculated daily; used to determine per diem interest from closing date to month end.
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Debt Ratio: Assessment of a borrower's ability to repay a mortgage; debt-to-income ratio (DTI) is monthly debt payments over gross monthly income.
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Deed: Legal document transferring property ownership; a mortgage deed gives lender a security interest, similar to a Deed of Trust with a neutral third party.
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Default: Failure to meet mortgage contract terms, most often non-payment.
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Delinquent Loan: Loan where borrower hasn't made required payment; usually considered delinquent if payment is 30 days late.
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Discount Points: Percentage of loan amount paid at closing to lower the interest rate.
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Early Payment Default: Loan terms stipulate if first four payments are 90+ days delinquent; seller often has to repurchase.
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Escrow: Financial/legal agreement where a third party holds funds and gathers requirements until deal is finalized; used for down payments and/or required repairs.
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Escrow Account: Account to hold funds for taxes, insurance, and mortgage insurance, managed by the loan servicer.
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Description
Test your knowledge on key mortgage lending terms with this quiz. Understand concepts like accrued interest, APR, and amortization through various questions. Perfect for aspiring mortgage professionals or anyone interested in the lending process.
