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21 Cards in this Set
- Front
- Back
- 3rd side (hint)
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PITI |
Principal Interest Taxes Insurance |
Basic costs of owning a home dt |
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DTI (Debt to income) |
- Lenders generally look at a loan applications percentage of debt to income - monthly payments on all debts normally including long term debt would be expected to not exceed 36% of gross monthly income - Formula can vary, depending on the type of loan program and the borrowers earnings, credit history, number of dependents, and other factors |
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Loan-to-value Ratio |
The amount of the loan as percentage of the purchase prices of the property |
The lower the “LTV” the greater the down payment, the less risk is assumed by the lender |
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Promissory Note (“note” or “financing instrument”) |
Borrowers personal promise to repay a debt according to the agreed terms. |
A promissory note executed by a borrower ( they maker or payer) is a contract with the lender (the payee) |
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Note |
A negotiable instrument . - the payee who holds the note may transfer the right to receive payment to a third party in one of two ways: *by signing the instrument over (or assigning it ) to the third party
*by delivering the instrument to the third party |
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Interest |
A charge for the use of money, expressed as a percentage of the remaining balance |
Loan amount x The rate of interest usury |
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Usury |
Charging interest in excess of the maximum rate allowed by law |
Getting over or Taxing |
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Loan origination fee |
Charged by most lenders to cover expenses involved in generating the loan. |
Aka: Transfer fee Salary of the loan officer 1% of the .... |
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Discount points |
Used to increase the lenders yield (rate of return ) on its investment . |
A point is 1% of the amount borrowed not the purchase price |
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Discount points |
Used to increase the lenders yield (rate of return ) on its investment . |
A point is 1% of the amount borrowed not the purchase price |
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Prepayment penalty |
Paid against the unearned portion of the interest for any payments made ahead of schedule , typically during the first years of the loan. |
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Hypothecation |
Pledging your house as collateral for the loan |
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Hypothecation |
Pledging your house as collateral for the loan |
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Mortgage |
A voluntary , specific lien on the real property of a debtor. The borrower or mortgagor receives a loan and in return gives a promissory note and mortgage to the the lender. |
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Satisfaction of Mortgage |
When a loan is paid in full, the mortgagee issues this document . Can be filed in the public record as evidence of removal of the security interest , which would otherwise continuum to be an encumbrance on the ownership interest of the borrower |
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Deed of trust |
Three way party security instrument . Trustor Beneficiary Trustee Conveys bare legal title, or title without the right of possession , from the borrower to their a third party called the trustee. The trustee holds the legal title on behalf of the lender, the holder of the promissory note , who is known as the beneficiary . On full payment of the underlying debt, the lender/beneficiary notifies the trustee, who returns legal title to the trustor. |
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Deed of trust |
Three way party security instrument . Trustor Beneficiary Trustee Conveys bare legal title, or title without the right of possession , from the borrower to their a third party called the trustee. The trustee holds the legal title on behalf of the lender, the holder of the promissory note , who is known as the beneficiary . On full payment of the underlying debt, the lender/beneficiary notifies the trustee, who returns legal title to the trustor. |
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Duties of the Borrower |
-payment of the debt in accordance with terms of the promissory note -payment of all real estate taxes on the property used as security -maintenance of adequate insurance to protect the lender in the event that the property is destroyed or damaged by fire, windstorm, or other hazard -Maintenance of the property in good repair at all times -receipt of lender authorization before making any major alterations on the property |
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Defeasance Clause |
Paid the bank off all money owed |
The receipt is a satisfaction of mortgage |
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Tax and Insurance Reserves |
Required reserve fund that borrowers must meet to fund future real estate taxes and property insurance premiums. This fund is called a impound or escrow account Takes 1/12 of taxes Takes 1/12 of insurance Monthly loan payments include PITI: principal, interest , taxes, insurance |
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Flood insurance reserves |
National flood insurance reform act of 1994 imposes certain mandatory obligations on lenders and loan services to set aside (escrow) funds for flood insurance on new loans for property in flood prone areas |
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