California Real Estate Salesperson Exam
Acceleration Clause -correct answer-The clause in a mortgage or deed of trust that can be
enforced to make the entire debt due immediately if the borrower defaults on an
installment payment or other covenant. (Pay now)
Adjustable Rate Mortgage (ARM) -correct answer-a mortgage with an interest rate that
increases or decreases during the life of the loan
adjustment date -correct answer-The date the interest rate changes on an adjustable-rate
mortgage.
Amortization -correct answer-A method for computing equal periodic payments for an
installment loan. (Paid within certain range of time)
amortization schedule -correct answer-A table showing precisely how a loan will be repaid. It
gives the required payment on each payment date and a breakdown of the payment,
showing how much is interest and how much is repayment of principal.
Annual Percentage Rate (APR) -correct answer-Cost of borrowing money on an annual basis;
takes into account the interest rate and other related fees on a loan.
Application -correct answer-The form used to apply for a mortgage loan, containing
information about a borrower'a income, savings, assets, debts, and more.
Appraisal -correct answer-A written justification of the price paid for a property, primarily
based on an analysis of comparable sales of similar homes nearby.
appraised value -correct answer-An opinion of a property's fair market value, based on an
appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based
primarily on comparable sales, and the most recent sale is the one on the property in
question, the appraisal usually comes out at the purchase price.
Appraiser -correct answer-An individual qualified by education, training, and experience to
estimate the value of real property and personal property. Although some appraisers work
directly for mortgage lenders, most are independent.
Appreciation -correct answer-increase in value over time
Assessed Value (AV) -correct answer-The valuation placed on property by a public tax
assessor for purposes of taxation.
Assessment -correct answer-The placing of a value on property for the purpose of taxation.
Assessor -correct answer-A public official who establishes the value of a property for
taxation purposes.
Asset -correct answer-item of value owned by a firm or an individual
,Assignment -correct answer-When ownership of your mortgage is transferred from one
company or individual to another, it is called an assignment.
Assumable Mortgage -correct answer-A mortgage that can be assumed by the buyer when a
home is sold. Usually, the borrower must "qualify" in order to assume the loan.
assumption -correct answer-The term applied when a buyer assumes the seller's mortgage.
Balloon Mortgage -correct answer-A mortgage loan that requires the remaining principal
balance be paid at a specific point in time. For example, a loan may be amortized as if it
would be paid over a thirty year period, but requires that at the end of the tenth year the
entire remaining balance must be paid.
Balloon Payment -correct answer-The final lump sum payment that is due at the termination
of a balloon mortgage.
bankruptcy -correct answer-By filing in federal bankruptcy court, an individual or individuals
can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various
types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy
which relieves the borrower of most types of debts. A borrower cannot usually qualify for an
"A" paper loan for a period of two years after the bankruptcy has been discharged and
requires the re-establishment of an ability to repay debt.
Bill of sale -correct answer-A written document that transfers title to personal property.
biweekly mortgage -correct answer-A mortgage in which you make payments every two
weeks instead of once a month. The basic result is that instead of making twelve monthly
payments during the year, you make thirteen. The extra payment reduces the principal,
substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are
independent companies that encourage you to set up bi-weekly payment schedules with
them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every
payment. Your funds are deposited into a trust account from which your monthly payment is
then made, and the excess funds then remain in the trust account until enough has accrued
to make the additional payment which will then be paid to reduce your principle. You could
save money by doing the same thing yourself, plus you have to have faith that once you
transfer money to them that they will actually transfer your funds to your lender.
bond market -correct answer-Usually refers to the daily buying and selling of thirty year
treasury bonds. Lenders follow this market intensely because as the yields of bonds go up
and down, fixed rate mortgages do approximately the same thing. The same factors that
affect the Treasury Bond market also affect mortgage rates at the same time. That is why
rates change daily, and in a volatile market can and do change during the day as well.
Bridge loan -correct answer-Not used much anymore, bridge loans are obtained by those
who have not yet sold their previous property, but must close on a purchase property. The
bridge loan becomes the source of their funds for the down payment. One reason for their
, fall from favor is that there are more and more second mortgage lenders now that will lend
at a high loan to value. In addition, sellers often prefer to accept offers from buyers who
have already sold their property.
Broker -correct answer-Broker has several meanings in different situations. Most Realtors are
"agents" who work under a "broker." Some agents are brokers as well, either working form
themselves or under another broker. In the mortgage industry, broker usually refers to a
company or individual that does not lend the money for the loans themselves, but broker
loans to larger lenders or investors. (See the Home Loan Library that discusses the different
types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing
two parties together for any type of transaction and earns a fee for doing so.
Buydown -correct answer-Usually refers to a fixed rate mortgage where the interest rate is
"bought down" for a temporary period, usually one to three years. After that time and for
the remainder of the term, the borrower's payment is calculated at the note rate. In order to
buy down the initial rate for the temporary payment, a lump sum is paid and held in an
account used to supplement the borrower's monthly payment. These funds usually come
from the seller (or some other source) as a financial incentive to induce someone to buy
their property. A "lender funded buydown" is when the lender pays the initial lump sum.
They can accomplish this because the note rate on the loan (after the buydown
adjustments) will be higher than the current market rate. One reason for doing this is
because the borrower may get to "qualify" at the start rate and can qualify for a higher loan
amount. Another reason is that a borrower may expect his earnings to go up substantially in
the near future, but wants a lower payment right now.
Call option -correct answer-Similar to the acceleration clause
Cap -correct answer-Adjustable Rate Mortgages have fluctuating interest rates, but those
fluctuations are usually limited to a certain amount. Those limitations may apply to how
much the loan may adjust over a six month period, an annual period, and over the life of the
loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the
interest rate to fluctuate freely, but require a certain minimum payment which can change
once a year. There is a limit on how much that payment can change each year, and that limit
is also referred to as a cap.
cash-out refinance -correct answer-When a borrower refinances his mortgage at a higher
amount than the current loan balance with the intention of pulling out money for personal
use, it is referred to as a "cash out refinance."
Certificate of Deposit -correct answer-A time deposit held in a bank which pays a certain
amount of interest to the depositor.
Acceleration Clause -correct answer-The clause in a mortgage or deed of trust that can be
enforced to make the entire debt due immediately if the borrower defaults on an
installment payment or other covenant. (Pay now)
Adjustable Rate Mortgage (ARM) -correct answer-a mortgage with an interest rate that
increases or decreases during the life of the loan
adjustment date -correct answer-The date the interest rate changes on an adjustable-rate
mortgage.
Amortization -correct answer-A method for computing equal periodic payments for an
installment loan. (Paid within certain range of time)
amortization schedule -correct answer-A table showing precisely how a loan will be repaid. It
gives the required payment on each payment date and a breakdown of the payment,
showing how much is interest and how much is repayment of principal.
Annual Percentage Rate (APR) -correct answer-Cost of borrowing money on an annual basis;
takes into account the interest rate and other related fees on a loan.
Application -correct answer-The form used to apply for a mortgage loan, containing
information about a borrower'a income, savings, assets, debts, and more.
Appraisal -correct answer-A written justification of the price paid for a property, primarily
based on an analysis of comparable sales of similar homes nearby.
appraised value -correct answer-An opinion of a property's fair market value, based on an
appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based
primarily on comparable sales, and the most recent sale is the one on the property in
question, the appraisal usually comes out at the purchase price.
Appraiser -correct answer-An individual qualified by education, training, and experience to
estimate the value of real property and personal property. Although some appraisers work
directly for mortgage lenders, most are independent.
Appreciation -correct answer-increase in value over time
Assessed Value (AV) -correct answer-The valuation placed on property by a public tax
assessor for purposes of taxation.
Assessment -correct answer-The placing of a value on property for the purpose of taxation.
Assessor -correct answer-A public official who establishes the value of a property for
taxation purposes.
Asset -correct answer-item of value owned by a firm or an individual
,Assignment -correct answer-When ownership of your mortgage is transferred from one
company or individual to another, it is called an assignment.
Assumable Mortgage -correct answer-A mortgage that can be assumed by the buyer when a
home is sold. Usually, the borrower must "qualify" in order to assume the loan.
assumption -correct answer-The term applied when a buyer assumes the seller's mortgage.
Balloon Mortgage -correct answer-A mortgage loan that requires the remaining principal
balance be paid at a specific point in time. For example, a loan may be amortized as if it
would be paid over a thirty year period, but requires that at the end of the tenth year the
entire remaining balance must be paid.
Balloon Payment -correct answer-The final lump sum payment that is due at the termination
of a balloon mortgage.
bankruptcy -correct answer-By filing in federal bankruptcy court, an individual or individuals
can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various
types, but the most common for an individual seem to be a "Chapter 7 No Asset" bankruptcy
which relieves the borrower of most types of debts. A borrower cannot usually qualify for an
"A" paper loan for a period of two years after the bankruptcy has been discharged and
requires the re-establishment of an ability to repay debt.
Bill of sale -correct answer-A written document that transfers title to personal property.
biweekly mortgage -correct answer-A mortgage in which you make payments every two
weeks instead of once a month. The basic result is that instead of making twelve monthly
payments during the year, you make thirteen. The extra payment reduces the principal,
substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are
independent companies that encourage you to set up bi-weekly payment schedules with
them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every
payment. Your funds are deposited into a trust account from which your monthly payment is
then made, and the excess funds then remain in the trust account until enough has accrued
to make the additional payment which will then be paid to reduce your principle. You could
save money by doing the same thing yourself, plus you have to have faith that once you
transfer money to them that they will actually transfer your funds to your lender.
bond market -correct answer-Usually refers to the daily buying and selling of thirty year
treasury bonds. Lenders follow this market intensely because as the yields of bonds go up
and down, fixed rate mortgages do approximately the same thing. The same factors that
affect the Treasury Bond market also affect mortgage rates at the same time. That is why
rates change daily, and in a volatile market can and do change during the day as well.
Bridge loan -correct answer-Not used much anymore, bridge loans are obtained by those
who have not yet sold their previous property, but must close on a purchase property. The
bridge loan becomes the source of their funds for the down payment. One reason for their
, fall from favor is that there are more and more second mortgage lenders now that will lend
at a high loan to value. In addition, sellers often prefer to accept offers from buyers who
have already sold their property.
Broker -correct answer-Broker has several meanings in different situations. Most Realtors are
"agents" who work under a "broker." Some agents are brokers as well, either working form
themselves or under another broker. In the mortgage industry, broker usually refers to a
company or individual that does not lend the money for the loans themselves, but broker
loans to larger lenders or investors. (See the Home Loan Library that discusses the different
types of lenders). As a normal definition, a broker is anyone who acts as an agent, bringing
two parties together for any type of transaction and earns a fee for doing so.
Buydown -correct answer-Usually refers to a fixed rate mortgage where the interest rate is
"bought down" for a temporary period, usually one to three years. After that time and for
the remainder of the term, the borrower's payment is calculated at the note rate. In order to
buy down the initial rate for the temporary payment, a lump sum is paid and held in an
account used to supplement the borrower's monthly payment. These funds usually come
from the seller (or some other source) as a financial incentive to induce someone to buy
their property. A "lender funded buydown" is when the lender pays the initial lump sum.
They can accomplish this because the note rate on the loan (after the buydown
adjustments) will be higher than the current market rate. One reason for doing this is
because the borrower may get to "qualify" at the start rate and can qualify for a higher loan
amount. Another reason is that a borrower may expect his earnings to go up substantially in
the near future, but wants a lower payment right now.
Call option -correct answer-Similar to the acceleration clause
Cap -correct answer-Adjustable Rate Mortgages have fluctuating interest rates, but those
fluctuations are usually limited to a certain amount. Those limitations may apply to how
much the loan may adjust over a six month period, an annual period, and over the life of the
loan, and are referred to as "caps." Some ARMs, although they may have a life cap, allow the
interest rate to fluctuate freely, but require a certain minimum payment which can change
once a year. There is a limit on how much that payment can change each year, and that limit
is also referred to as a cap.
cash-out refinance -correct answer-When a borrower refinances his mortgage at a higher
amount than the current loan balance with the intention of pulling out money for personal
use, it is referred to as a "cash out refinance."
Certificate of Deposit -correct answer-A time deposit held in a bank which pays a certain
amount of interest to the depositor.
