Arizona Real Estate License Test Prep: Real estate Financing Vocabulary to Pass the Real Estate Exam
TYPES OF LOANS
A. FHA Loans: Insured by the Federal Housing Administration, HUD.
B. VA Loans: Guaranteed by the Department of Veteran’s Affairs.
C. Conventional Loans: Made by lending institutions but without government guarantee or insurance.
D. Purchase Money Loan: Seller carryback financing. The title is transferred, the seller becomes the lender and the buyer the borrower. Most often used when the borrower has an insufficient down payment.
E. Wraparound Loan: The seller remains liable for the existing loan and agrees to create a new loan for the buyer for a greater amount (includes the first loan) and at higher interest rate. Buyer takes on no liability for the existing loan.
F. Adjustable Rate Loan (ARM): Interest rate and payments change periodically during the life of the loan.
G. Graduated Payment Loan: Loan in which payments are lower in the early years but increase in intervals until the loan becomes fully amortized.
H. Blanket Loan: Loan secured with more than one property.
I. Package Loan: Loan includes items of personal property (refrigerator, range, etc.).
J. Open End Loan: Allows borrower to borrow more funds within the same loan. EXAMPLE: home equity line of credit (HELOC).
K. Construction (Interim) Loan: Funds are advanced in installments as construction progresses. Short term loan usually with interest payments only. The principal is due at the maturity of the debt.
L. Take-Out Loan: Normal long term financing replacing and paying off construction loan.
M. Gap Loan (Swing Loan, Bridge Loan):
1. Short term loan on existing property that is “for sale” to allow the owner to borrow funds for a down payment to buy another property.
2. Short term loan used to bridge the gap between the time a construction loan expires and a take-out loan is placed.
N. Reverse Annuity Loan (RAM): The lender makes monthly payments to the borrower. Annuity means payment.
O. Superior Loan: Loan which has highest priority.
P. Junior Loan: Loan which is lower in priority to another loan. Is in a different lien position. A second, third, etc.
Q. Non-Recourse Loan: Loan in which the borrower is not held personally liable for the debt.
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