ALABAMA REAL ESTATE FINALS SET QUESTIONS
AND ANSWERS SET A+
✔✔Mortgage Insurance for Conventional Loans - ✔✔Private Mortgage Insurance (PMI)
PMI automatically terminates when borrower is current on payments and has at least
22% equity based on actual loan reduction.
If appreciation is to be factored in, borrower must get an appraisal.
✔✔Mortgage Insurance for FHA Loans - ✔✔Mortgage Insurance Premium (MIP)
MIP is for the life of the loan.
✔✔Purchase Money Mortgage - ✔✔A type of seller financing where the seller
CONVEYS TITLE to a buyer and holds a mortgage as security.
Seller "lends" the buyer money to purchase the property by agreeing to wait for cash to
be paid over a period of time.
A mortgage is given by the buyer (MORTGAGOR) to the seller (MORTGAGEE).
✔✔Land Contract (also called Installment Contract or Contract for Deed, etc.) - ✔✔A
type of seller financing where NO TITLE PASSES until the buyer finishes making all
payments.
Buyer has NO MORTGAGE, only EQUITABLE INTEREST/TITLE.
Buyer also carries insurance, pays property taxes, and performs maintenance on
property.
,✔✔Straight (Term) Loan - ✔✔Borrower pays ONLY INTEREST for the term of the loan,
then pays the ENTIRE PRINCIPAL (including the last month's interest) at the end of the
loan.
✔✔Balloon Payment Loan - ✔✔Payments are PARTIALLY AMORTIZED. Entirety of
remaining principal (and last month's interest) is paid at the end of the loan.
✔✔Amortized Loan - ✔✔Paid off slowly over time in equal payments (principal +
interest) until the balance is zero.
✔✔Adjustable Rate Mortgage (ARM) - ✔✔Interest rate changes according to a standard
index.
Two components of an ARM are:
-Index
-Margin (profit)
✔✔Growing Equity Mortgage (GEM) - ✔✔Monthly payments increase annually, and
increased amount is applied directly to the principal.
Also known as a rapid-payoff mortgage.
✔✔Reverse-Annuity Mortgage (RAM) - ✔✔Payments are made to the BORROWER by
the LENDER.
Interest rate is fixed. Aimed at the elderly. Property is sold after death.
✔✔Open-End Mortgage - ✔✔Allows for additional borrowing without rewriting the
mortgage or incurring additional costs.
Example: Home Equity Line of Credit
✔✔Buy-Down Mortgage - ✔✔Borrower buys down the interest rate on a mortgage buy
paying discount points (1%).
✔✔Public Land Use Controls - ✔✔-Zoning Laws
-Building Codes
-Environmental Protection Laws
✔✔Private Land Use Controls - ✔✔-Deed Restrictions
-Subdivision Covenants (CC&R's)
, ✔✔Urban and Regional Planning - ✔✔Purpose is to create orderly growth for the
welfare of the people otherwise haphazard growth occurs.
Enabling Legislation provides the legal basis for this long-range planning.
✔✔Non-Conforming Use - ✔✔Preexisting use of property is different from new zoning
code for that area.
Limitations to Non-Conforming Use:
-Abandonment of nonconforming use.
-Cannot expand (repairs only).
-May not be transferred to a new owner.
-Cannot change from one nonconforming use to another.
✔✔Variance - ✔✔Permanent exception to the zoning law (owner petitions appropriate
authorities).
✔✔Conditional Use Permit - ✔✔Owner wants a use for property that varies from zoning
law but use is in best interest of the public (daycare center, school, country club, etc.)
✔✔Building Codes - ✔✔Regulate:
-Construction materials
-Electrical wiring
-Fire and safety standards
-Sanitary equipment facilities
✔✔Title - ✔✔Title is the (intangible) ownership of land and bundle of rights associated
with ownership.
✔✔Deed - ✔✔Piece of (tangible) paper that proves "who has title."
✔✔______ requires that all deeds be in writing. - ✔✔Statute of Frauds
✔✔Four types of "Transfer of Title" - ✔✔-Voluntary Alienation
-By Will
-By Descent
-Involuntary Transfer
✔✔Owner of property voluntarily transferring or conveying title by either making a gift or
selling a property. - ✔✔Voluntary Alienation
AND ANSWERS SET A+
✔✔Mortgage Insurance for Conventional Loans - ✔✔Private Mortgage Insurance (PMI)
PMI automatically terminates when borrower is current on payments and has at least
22% equity based on actual loan reduction.
If appreciation is to be factored in, borrower must get an appraisal.
✔✔Mortgage Insurance for FHA Loans - ✔✔Mortgage Insurance Premium (MIP)
MIP is for the life of the loan.
✔✔Purchase Money Mortgage - ✔✔A type of seller financing where the seller
CONVEYS TITLE to a buyer and holds a mortgage as security.
Seller "lends" the buyer money to purchase the property by agreeing to wait for cash to
be paid over a period of time.
A mortgage is given by the buyer (MORTGAGOR) to the seller (MORTGAGEE).
✔✔Land Contract (also called Installment Contract or Contract for Deed, etc.) - ✔✔A
type of seller financing where NO TITLE PASSES until the buyer finishes making all
payments.
Buyer has NO MORTGAGE, only EQUITABLE INTEREST/TITLE.
Buyer also carries insurance, pays property taxes, and performs maintenance on
property.
,✔✔Straight (Term) Loan - ✔✔Borrower pays ONLY INTEREST for the term of the loan,
then pays the ENTIRE PRINCIPAL (including the last month's interest) at the end of the
loan.
✔✔Balloon Payment Loan - ✔✔Payments are PARTIALLY AMORTIZED. Entirety of
remaining principal (and last month's interest) is paid at the end of the loan.
✔✔Amortized Loan - ✔✔Paid off slowly over time in equal payments (principal +
interest) until the balance is zero.
✔✔Adjustable Rate Mortgage (ARM) - ✔✔Interest rate changes according to a standard
index.
Two components of an ARM are:
-Index
-Margin (profit)
✔✔Growing Equity Mortgage (GEM) - ✔✔Monthly payments increase annually, and
increased amount is applied directly to the principal.
Also known as a rapid-payoff mortgage.
✔✔Reverse-Annuity Mortgage (RAM) - ✔✔Payments are made to the BORROWER by
the LENDER.
Interest rate is fixed. Aimed at the elderly. Property is sold after death.
✔✔Open-End Mortgage - ✔✔Allows for additional borrowing without rewriting the
mortgage or incurring additional costs.
Example: Home Equity Line of Credit
✔✔Buy-Down Mortgage - ✔✔Borrower buys down the interest rate on a mortgage buy
paying discount points (1%).
✔✔Public Land Use Controls - ✔✔-Zoning Laws
-Building Codes
-Environmental Protection Laws
✔✔Private Land Use Controls - ✔✔-Deed Restrictions
-Subdivision Covenants (CC&R's)
, ✔✔Urban and Regional Planning - ✔✔Purpose is to create orderly growth for the
welfare of the people otherwise haphazard growth occurs.
Enabling Legislation provides the legal basis for this long-range planning.
✔✔Non-Conforming Use - ✔✔Preexisting use of property is different from new zoning
code for that area.
Limitations to Non-Conforming Use:
-Abandonment of nonconforming use.
-Cannot expand (repairs only).
-May not be transferred to a new owner.
-Cannot change from one nonconforming use to another.
✔✔Variance - ✔✔Permanent exception to the zoning law (owner petitions appropriate
authorities).
✔✔Conditional Use Permit - ✔✔Owner wants a use for property that varies from zoning
law but use is in best interest of the public (daycare center, school, country club, etc.)
✔✔Building Codes - ✔✔Regulate:
-Construction materials
-Electrical wiring
-Fire and safety standards
-Sanitary equipment facilities
✔✔Title - ✔✔Title is the (intangible) ownership of land and bundle of rights associated
with ownership.
✔✔Deed - ✔✔Piece of (tangible) paper that proves "who has title."
✔✔______ requires that all deeds be in writing. - ✔✔Statute of Frauds
✔✔Four types of "Transfer of Title" - ✔✔-Voluntary Alienation
-By Will
-By Descent
-Involuntary Transfer
✔✔Owner of property voluntarily transferring or conveying title by either making a gift or
selling a property. - ✔✔Voluntary Alienation
