Real Estate Finance Flashcards

A borrower has a gross monthly income of $8,000 and total monthly debt payments of $2,400. What is their debt-to-income ratio?

Answer: 30%

DTI is calculated by dividing total monthly debt ($2,400) by gross monthly income ($8,000), which equals 30%.

Which type of mortgage allows the borrower to pay only interest for an initial period before principal and interest payments begin?

Answer: Interest-only mortgage

An interest-only mortgage requires the borrower to pay only interest for a set period, after which payments increase to include principal.

What is the primary purpose of a title search in a real estate transaction?

Answer: To verify the seller has clear ownership and no liens

A title search examines public records to confirm the seller has legal ownership and identifies any existing liens or encumbrances.

Under RESPA, within how many business days must a lender provide a Loan Estimate to a mortgage applicant?

Answer: 3 business days

RESPA requires lenders to deliver a Loan Estimate within three business days of receiving a completed loan application.

What does the term 'seasoning' refer to in the context of mortgage lending?

Answer: The length of time assets or credit history have been established

Seasoning refers to the length of time a borrower has held an asset, account, or credit tradeline, which lenders use to assess stability.

A property is purchased for $300,000 with a 10% down payment. What is the loan-to-value ratio at origination?

Answer: 90%

LTV is the loan amount ($270,000) divided by the property value ($300,000), resulting in a 90% LTV.

Which federal law requires lenders to disclose the Annual Percentage Rate (APR) to borrowers?

Answer: TILA

The Truth in Lending Act (TILA) requires lenders to disclose the APR and other key loan terms to borrowers.