Financing and Mortgages Flashcards
7 cards from real Real Estate Sales Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financing and Mortgages flashcards as text
A seller agrees to make monthly payments to the buyer who previously owned the property — what type of financing is this?
Answer: Purchase-money mortgage
A purchase-money mortgage is created when the seller finances part or all of the purchase price, acting as the lender.
Which federal law requires lenders to disclose the annual percentage rate (APR) to borrowers?
Answer: Truth in Lending Act (TILA)
TILA (Regulation Z) requires lenders to disclose the APR and total cost of credit to borrowers.
What is a 'balloon mortgage'?
Answer: A loan requiring a large lump-sum payment at the end of the term
A balloon mortgage has smaller periodic payments with a large final lump-sum payment due at the end of the term.
Which ratio compares a borrower's total monthly debt payments to gross monthly income?
Answer: Back-end (total debt-to-income) ratio
The back-end DTI ratio includes all monthly debt obligations (housing + other debts) divided by gross monthly income.
A home equity line of credit (HELOC) is best described as:
Answer: A revolving line of credit secured by the borrower's home equity
A HELOC is a revolving credit line secured by home equity, allowing borrowers to draw and repay as needed.
What is 'negative amortization'?
Answer: Loan balance increases because payments don't cover interest
Negative amortization occurs when minimum payments are less than the interest owed, causing the unpaid interest to be added to the principal balance.
Which type of loan allows seniors aged 62+ to convert home equity into cash without making monthly mortgage payments?
Answer: Reverse mortgage
A reverse mortgage lets homeowners aged 62 or older convert equity into loan proceeds, with repayment deferred until they sell, move out, or die.
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