Texas Principles of Real Estate 2: Exam Study Guide:Texas Principles of Real Estate 2 Exam Study Guide: Latest Updated Solution

Explain the difference between a balloon mortgage and term mortgage. (AnsBalloon is interest only to defer the principal until final payment is to be made. Term is fixed for length and generally has an amortization set over the life of the loan. Explain the concept of negative amortization and why it is risky for borrowers. (AnsOccurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due. Identify at least three participants in the secondary mortgage market. (AnsFannie Mae, Freddie Mac, Ginnie Mae Mortgage Banker (AnsA person whose principal business in the originating, financing, closing, selling and servicing of loans secured by the real property for institutional lenders on a contractual basis.Mortgage Broker (Ans- A broker who arranges a mortgage loan between a lender and a borrower for a fee. Balloon Payment (AnsA mortgage in which the scheduled payment will not amortize the loan over the mortgage term; therefore, for the debt to be fully satisfied, a final payment called a balloon payment, larger than the uniform payments, is required. Term mortgage (AnsA mortgage that requires the mortgagor to pay interest only during the mortgage term, with the principal due at the end of the term. Negative Amortization (AnsOccurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.Conventional Loan (AnsA mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.