© 2008 by South-Western, Cengage Learning Chapter 11 Chapter 11 Charles J. Jacobus Thomas E....

© 2008 by South-Western, Cengage Learning

Chapter 11Chapter 11

Charles J.Jacobus

Thomas E.Gillett


Georgia Real Estate Georgia Real Estate An Introduction to the ProfessionAn Introduction to the Profession

Seventh EditionSeventh Edition

Chapter 11Chapter 11

Lending PracticesLending Practices


LoansLoans

Term loanInterest payments only

until due.

Renewal

Amortized loan Regular equal payments for

life of loan including both principal & interest.


Repaying a 6-year, $1,000 Loan


9% Interest per Year on the Loan9% Interest per Year on the Loan


Balance Owed Each Year of the LoanBalance Owed Each Year of the Loan


Amortization TableAmortization Table

Monthly Payment per $1,000 of loan.Monthly Payment per $1,000 of loan.


LoansLoans


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


Loan Balance TableLoan Balance Table

Balance owing on a $1,000 amortized loan.


Earlier PayoffEarlier Payoff

15 Year Loan

Bi-weekly Payment

Existing Loans


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%


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.


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


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


FHAFHA

Floating Interest Rates

Loan Qualification

Established loan application review

Debt for 10 months or more


FHAFHA

Minimum requirements in building standards

Maintain value

Construction Regulations


VAVA

No Down Payment

Maximum guarantee 25% of conforming loan limit

Lenders typically lend 4 times guarantee


VAVA

Certificate of eligibility Proves qualification Amount of guarantee

CRV Estimated value by VA

Owner occupancy


VAVA

Financial Liability Responsible for any

loss due to default

Funding Fee

Interest Rates1% Origination Fees

Assumptions


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


VA / FHA SimilaritiesVA / FHA Similarities

Owner occupied

1-4 family dwellings

Refinancing allowed

Assumption allowed (with approval)


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


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


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 11 Chapter 11 Charles J. Jacobus Thomas E....

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