© 2008 by south-western, cengage learning chapter 11 chapter 11 charles j. jacobus thomas e....
TRANSCRIPT
© 2008 by South-Western, Cengage Learning
Chapter 11Chapter 11
Charles J.Jacobus
Thomas E.Gillett
© 2008 by South-Western, Cengage Learning
Georgia Real Estate Georgia Real Estate An Introduction to the ProfessionAn Introduction to the Profession
Seventh EditionSeventh Edition
Chapter 11Chapter 11
Lending PracticesLending Practices
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LoansLoans
Term loanInterest payments only
until due.
Renewal
Amortized loan Regular equal payments for
life of loan including both principal & interest.
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Repaying a 6-year, $1,000 Loan
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9% Interest per Year on the Loan9% Interest per Year on the Loan
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Balance Owed Each Year of the LoanBalance Owed Each Year of the Loan
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Amortization TableAmortization Table
Monthly Payment per $1,000 of loan.Monthly Payment per $1,000 of loan.
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LoansLoans
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LoansLoans
Balloon loan Any loan that has a final payment larger than any of the previous.
Partially amortized loanSeries of amortized payments with a balloon at maturity
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Loan Balance TableLoan Balance Table
Balance owing on a $1,000 amortized loan.
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Earlier PayoffEarlier Payoff
15 Year Loan
Bi-weekly Payment
Existing Loans
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Loan-to-ValueLoan-to-Value
Relationship between the amount of the loan and market value of the property.
Market Value = $100,000 Loan Amount = $80,000 What is the loan to value ratio?
$80,000$80,000
$100,000$100,000= 80%= 80%
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Equity – difference between the value of the property and outstanding debt.
Points – 1% of the loan amount.Origination fee – fee lender charges for making loan usually stated in terms of a percentage of loan amount.
Discount points – lender’s charge to raise the return on the loan usually stated as a percentage of the loan amount.
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FHAFHA
Insures Lenders against lossRequired qualification of buyer
Current FHA CoverageLoans up to $50,000 – 98.75%Loans over $50,000 – 97.75%Maximum Coverage
2007 SFR Georgia Maximum Loan: $252,850
Must be owner occupied
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FHAFHA
AssumabilityLoans originated after December 15, 1978 require qualification
Mortgage Insurance1.5% Up front
1/2 of 1% annual loan balance
Eliminated at 78% LTVR
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FHAFHA
Floating Interest Rates
Loan Qualification
Established loan application review
Debt for 10 months or more
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FHAFHA
Minimum requirements in building standards
Maintain value
Construction Regulations
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VAVA
No Down Payment
Maximum guarantee 25% of conforming loan limit
Lenders typically lend 4 times guarantee
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VAVA
Certificate of eligibility Proves qualification Amount of guarantee
CRV Estimated value by VA
Owner occupancy
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VAVA
Financial Liability Responsible for any
loss due to default
Funding Fee
Interest Rates1% Origination Fees
Assumptions
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VA / FHA ComparisonVA / FHA Comparison
Insures loansUFMIP
Anyone qualifiedRate negotiable
Points3% down97% L-T-V
Guarantees loansFunding fee
Veterans onlyRate negotiable
PointsNo down payment
100% L-T-V
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VA / FHA SimilaritiesVA / FHA Similarities
Owner occupied
1-4 family dwellings
Refinancing allowed
Assumption allowed (with approval)
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Loan Limits InfoLoan Limits Info
VAhttp://www.homeloans.va.gov/
FHAhttps://entp.hud.gov/idapp/html/hicostlook.cfm
Convhttp://www.fanniemae.com/aboutfm/loanlimits.jhtml?p=About+Fannie+Mae&s=Loan+Limits
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Mortgage InsuranceMortgage Insurance
Private Mortgage Insurance (PMI)Insures Lenders against foreclosure losses
Inures the top 20% to 25%
Fee: less than 1% up to 2% or greater
Cancellation78% of original value
Equity is 80% of popery value
May refuse to cancel with poor payment record
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Key TermsKey Terms
Amortized loan
Balloon loan
Conventional loans
Equity
FHA
Impound account
Loan origination fee
Loan-to-value ratio
Maturity
PITI
PMI
Point
Principal
UFMIP
VA
© 2008 by South-Western, Cengage Learning Chapter 14 Chapter 14 Charles J. Jacobus Thomas E. Gillett
© 2008 by South-Western, Cengage Learning Chapter 25 Chapter 25 Charles J. Jacobus Thomas E. Gillett