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Exam 9: Financing Sources in Real Estate Transactions

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Interest payable at the beginning of each payment period is known as "payment in arrears."

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One major underwriting concern for a permanent lender is the estimate of the cost of construction.

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A savings bank may make only residential loans.

The Veterans Administration guarantees loans made by private lenders.

Interest on most mortgage loans is paid in advance.

Payments under a straight-line amortized plan become smaller each month.

Mortgage loans are closed in the secondary market and are bought and sold in the primary market.

A subprime loan is a loan with very low interest rates (less than the bank's prime lending rate).

A loan in which the borrower makes periodic payments of interest, and principal becomes payable in full in one installment at the end of the loan, is known as a negative amortized loan.

The last payment on a partially amortized loan will always be a balloon payment.

Construction loans are generally straight or term loans.

Subprime loans generally involve residential loans made with high interest rates or high up- front fees.

The risk of repayment of a conventional loan depends upon the ability of the borrower to pay and the value of the security provided by the mortgage.

The FHA makes direct loans to home buyers.

Government-guaranteed loans are called conventional loans.

An interest-only loan means that so long as interest is being paid on the loan, the loan never has to be repaid.

The term of repayment on a permanent loan is generally longer than that on a construction loan.

Interest due at the end of each payment period is known as "payment in arrears."

A loan made to fund construction of a bridge is known as a bridge loan.

The principal balance of the loan may increase as payments are made under a negative amortization loan.