Residential and Commercial Financing Flashcards

A borrower's debt-to-income (DTI) ratio is 48%. Which loan program is most likely to allow this ratio for a conventional mortgage?

Answer: Fannie Mae with DU approval and compensating factors

Fannie Mae's Desktop Underwriter (DU) can approve DTIs above 45% when strong compensating factors are present.

In commercial real estate lending, what does the term 'recourse' mean?

Answer: The borrower is personally liable for the debt beyond the collateral

A recourse loan allows the lender to pursue the borrower's personal assets if the collateral is insufficient to cover the debt after foreclosure.

Which of the following best describes a 'blanket mortgage' in commercial financing?

Answer: A mortgage covering multiple properties under a single loan

A blanket mortgage uses multiple properties as collateral under one loan, commonly used by developers and investors.

What is the primary difference between a fixed-rate mortgage and a hybrid ARM?

Answer: Hybrid ARMs have an initial fixed period before converting to adjustable rates

A hybrid ARM (e.g., 5/1 ARM) offers a fixed rate for an initial period then adjusts periodically based on an index.

A commercial property generates $180,000 NOI and is valued at $2,000,000. What is the capitalization rate?

Answer: 9.0%

Cap rate = NOI ÷ Property Value = $180,000 ÷ $2,000,000 = 9.0%.

Under the Home Mortgage Disclosure Act (HMDA), which data point must lenders report regarding loan pricing?

Answer: Rate spread between the loan APR and the Average Prime Offer Rate (APOR)

HMDA requires reporting the rate spread (APR minus APOR) for higher-priced loans to monitor fair lending compliance.

Which loan type is specifically designed for the purchase and renovation of a single-family property using one loan?

Answer: Both A and C

Both FHA 203(k) and Fannie Mae HomeStyle Renovation Mortgage combine purchase and renovation costs into a single loan.