Chapter 9 Advanced Financing Techniques

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New Jersey Real Estate for Salespersons and Brokers

By Marcia Darvin SpadaThomson/South-Western

Copyright, 2006

Chapter 9 Advanced Financing Techniques

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Chapter 9

Advanced Financing Techniques

Chapter 9 Advanced Financing Techniques

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Chapter 9 Key Terms Bridge loan/gap

financing Graduated payment

mortgage Home equity loan Loan-to-value ratio Open-end mortgage Package mortgage Pledge account

mortgage

PITI Purchase money

mortgage Reverse annuity

mortgage Shared appreciation

mortgage Underwriting Wraparound

mortgage

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Special types of mortgages

Special

Mortgages

Graduated

paymentPackage

Shared

appreciation

Reverse

annuity

Pledged

account

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Junior Financing

Home equity loan

Gap financingOpen-end mortgage

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Lender’s Criteria for Granting a Loan

o Investment quality

of the property

o Loan-to-value ratio

o Borrower’s ability

to repay loan

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Loan-to-Value Ratio

Ratio of loan amount to property value

Loan ÷value = ratio

Example:

Loan = $144,000Value = $160,000

144,000 = 90%160,000

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Qualifying Ratios

Monthly HousingExpense

Total Obligations

Fixed rate conventional loan

28% 36%

Adjustable rate Conventional loan

28 % 36%

FHA loans 29% 41%

VA loans None 41%

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Monthly Mortgage Payment

P = Principal

I = Interest

T = Taxes

I = Insurance

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Mortgage Loan Origination

Loan

Approval

Underwriting-Documentation

review

Loan processing-

Application review

Uniform Residential Loan

Application Form