BUSM 3050 Exam 3 Verified Exam Questions and Answers Latest
update 2026/2027
Question:
1. accrual
Answer:
recording income when it's earned and expenses when they're incurred
Question:
2. adjustable rate
Answer:
-rate adjusts periodically per terms of note
-when you decrease the intial rate, you decrease payment or increase loan amount
Question:
3. amortization
Answer:
-Paying remaining balance of principle, mortgage, and your out
-Principle in every month brings the balance down
Question:
4. arrears
Answer:
paid at the end of the period
Question:
5. balloon loan
Answer:
-partially amortizing
-2 terms: longer amortization duration (used to calculate payment) and shorter
maturity duration (when remaining loan balance is paid)
Question:
6. caps on ARMs (adjustable rate mortgages)
Answer:
-rate caps (limit changes in loan's interest rate)
-payment caps (limit changes in loan's payment)
,Question:
7. deed of trust
Answer:
-an agreement between a home buyer and a lender at the closing of a real
property
-grantor= owner/borrower
-beneficiary= lender
-gives trustee power of sale (conducts foreclosure)
Question:
8. default
Answer:
-Failure to perform the obligations of the promissory note/mortgage/deed of
trust
-Non-foreclosure responses to: Temporary cessation or reduction of payments,
"Short sale" for less than amount owed, Deed in lieu of foreclosure
Question:
9. deficiency
Answer:
unpaid balance after foreclosure/short sale
Question:
10. fixed rate
foreclosure
Answer:
Rate is constant/unchanging over term (duration) of loan
Question:
11. foreclosure
Answer:
-Legal process of selling the property and using the proceeds to pay the secured
obligation
-terminates subordinate/junior liens and other interests
, Question:
12. index rate
Answer:
-external (objective) variable rate reflecting current market rates
-changes when margin doesn't
-includes the yield curve
Question:
13. jumbo loans
Answer:
-greater than $548,250
-purpose: can make sense for borrowers with substantial incomes who lack the
cash to buy an expensive home outright or would rather use their cash for other purposes
Question:
14. loan to value (LTV)
Answer:
-compares the amount of money being borrowed to the value of the property
being purchased
-good= 80% or less
Question:
15. mortgage
Answer:
-"Permanent" loans (long term’5 to 30 yrs)
-Paid monthly (period) in arrears (end of period)
Question:
16. types of payment -Fully amortizing loan (aka level payment loan ["LPL']) terms for mortgage
loans
Answer:
-Partially amortizing "balloon" loan’two terms: (1) longer amortization duration
(used to calculate payment) and (2) shorter maturity duration (when remaining loan balance paid)
-Interest only "bullet" loan (non-amortizing ’all principal paid in single lump sum
upon maturity)
-Regardless of type ’"current interest" for period paid
update 2026/2027
Question:
1. accrual
Answer:
recording income when it's earned and expenses when they're incurred
Question:
2. adjustable rate
Answer:
-rate adjusts periodically per terms of note
-when you decrease the intial rate, you decrease payment or increase loan amount
Question:
3. amortization
Answer:
-Paying remaining balance of principle, mortgage, and your out
-Principle in every month brings the balance down
Question:
4. arrears
Answer:
paid at the end of the period
Question:
5. balloon loan
Answer:
-partially amortizing
-2 terms: longer amortization duration (used to calculate payment) and shorter
maturity duration (when remaining loan balance is paid)
Question:
6. caps on ARMs (adjustable rate mortgages)
Answer:
-rate caps (limit changes in loan's interest rate)
-payment caps (limit changes in loan's payment)
,Question:
7. deed of trust
Answer:
-an agreement between a home buyer and a lender at the closing of a real
property
-grantor= owner/borrower
-beneficiary= lender
-gives trustee power of sale (conducts foreclosure)
Question:
8. default
Answer:
-Failure to perform the obligations of the promissory note/mortgage/deed of
trust
-Non-foreclosure responses to: Temporary cessation or reduction of payments,
"Short sale" for less than amount owed, Deed in lieu of foreclosure
Question:
9. deficiency
Answer:
unpaid balance after foreclosure/short sale
Question:
10. fixed rate
foreclosure
Answer:
Rate is constant/unchanging over term (duration) of loan
Question:
11. foreclosure
Answer:
-Legal process of selling the property and using the proceeds to pay the secured
obligation
-terminates subordinate/junior liens and other interests
, Question:
12. index rate
Answer:
-external (objective) variable rate reflecting current market rates
-changes when margin doesn't
-includes the yield curve
Question:
13. jumbo loans
Answer:
-greater than $548,250
-purpose: can make sense for borrowers with substantial incomes who lack the
cash to buy an expensive home outright or would rather use their cash for other purposes
Question:
14. loan to value (LTV)
Answer:
-compares the amount of money being borrowed to the value of the property
being purchased
-good= 80% or less
Question:
15. mortgage
Answer:
-"Permanent" loans (long term’5 to 30 yrs)
-Paid monthly (period) in arrears (end of period)
Question:
16. types of payment -Fully amortizing loan (aka level payment loan ["LPL']) terms for mortgage
loans
Answer:
-Partially amortizing "balloon" loan’two terms: (1) longer amortization duration
(used to calculate payment) and (2) shorter maturity duration (when remaining loan balance paid)
-Interest only "bullet" loan (non-amortizing ’all principal paid in single lump sum
upon maturity)
-Regardless of type ’"current interest" for period paid
