Mortgage Loans and Financial Concepts Review

These flashcards cover key mortgage terminology and financial concepts, helping students prepare for their exam.

Recourse loan

A type of loan where the borrower is personally responsible for paying back the loan, and the lender can take collateral to recover unpaid debts.

Non-recourse loan

A type of loan where the lender can only seize the collateral bought with the loan if the borrower defaults, with no personal liability on the borrower.

Amortizing loan

A loan that is paid off in regular installments over time.

Balloon loan

A loan with smaller payments for most of the term but a large payment due at the end to cover the remaining balance.

Fixed interest rate

An interest rate that remains the same for the entire term of the loan.

Adjustable interest rate

An interest rate that can change over time based on market conditions.

Teaser rate

A low initial interest rate offered at the beginning of a loan for a short period of time.

Negative amortization

A situation where monthly payments are insufficient to cover interest, causing unpaid interest to be added to the loan balance.

Promissory note

A written agreement in which one party agrees to repay a loan under specific terms.

Collateral

An asset that a borrower offers to a lender to secure a loan.

Equity right to redemption

The homeowner's right to stop foreclosure by paying the full debt before the sale.

Deficiency judgment

A court order to collect the remaining balance from the borrower if the sale of foreclosed property does not cover the full mortgage debt.

Bankruptcy

A legal proceeding that may prevent the lender from foreclosing on a property.

Qualified Mortgages

A category of home loans defined by the Dodd-Frank Act of 2010 that meets strict guidelines to ensure that borrowers can reasonably repay their loans.

Home equity loan

A loan where the borrower uses the equity they have in their home as collateral.

Subprime loan

A high-risk loan given to borrowers with poor or limited credit history, typically with higher interest rates.

Mortgage broker

An intermediary who helps borrowers find lenders but does not fund loans directly.

Secondary mortgage market

The market where existing mortgages are bought and sold, providing liquidity to the primary mortgage market.

Interest rate cap

A limit on how high an adjustable interest rate can go during the life of a loan.

Debt-to-income ratio (DTI)

A personal finance measure that compares an individual's debt payment to their overall income.