Financing and Mortgages Flashcards
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Read the first 7 Financing and Mortgages flashcards as text
What is a 'due-on-sale' clause in a mortgage?
Answer: A clause that makes the full loan balance due if the property is sold or transferred
A due-on-sale (alienation) clause requires the mortgage to be paid in full if the property is sold or title is transferred.
The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on all of the following EXCEPT:
Answer: Credit score
ECOA prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance — not credit score.
A buyer assumes the seller's existing mortgage. Which statement is TRUE?
Answer: The buyer takes over the loan with its existing terms and rate
In a mortgage assumption, the buyer takes over the existing loan's terms, rate, and balance — subject to lender approval.
What does 'subordination' mean in real estate financing?
Answer: A junior lien agreeing to remain in a lower priority position
Subordination means a lienholder agrees their lien will remain junior (lower priority) to another lien on the property.
Which of the following best describes a 'construction-to-permanent' loan?
Answer: A short-term construction loan that automatically converts to a long-term mortgage
A construction-to-permanent loan funds the building phase and then converts to a standard mortgage once construction is complete.
What is a 'buydown' in mortgage financing?
Answer: Paying upfront points to lower the interest rate temporarily or permanently
A buydown involves paying discount points at closing to reduce the mortgage interest rate, either temporarily (e.g., 2-1 buydown) or permanently.
Under the TILA-RESPA Integrated Disclosure (TRID) rules, how many business days before closing must the borrower receive the Closing Disclosure?
Answer: 3 business days
TRID requires the Closing Disclosure to be delivered to the borrower at least 3 business days before consummation of the loan.
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