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© OnCourse Learning Chapter 11: Lending Practices

Real estate principles_powerpoint_for_chapter_11

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© OnCourse Learning

Chapter 11: Lending Practices

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oTerm loan – interest payments only until due.

oAmortized loan – regular equal payments for life of loan including both principal & interest.

oBalloon loan – any loan that has a final payment larger than any of the previous.

oPartially amortized loan – series of amortized payments with a balloon payment at maturity.

Loans

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Repaying a 6-year, $1,000 Loan

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Repaying a 6 year $1,000 amortizedloan 9% Interest per Year

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Balance Owed Each Year of the Loan

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Amortization Table: Monthly Payment per $1,000 of Loan

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Balance Owing on a $1,000 Amortized Loan

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Budget MortgageBalloon LoanPartially Amortized LoanEarlier PayoffBiweekly payments

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LOAN AMORTIZATION

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• The relationship between the amount the lender is willing to loan and the market value of the property.

• Market value = $100,000 Loan = $80,000What is the loan-to-value ratio?

80%

Loan-to-Value

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EquityLoan PointsOrigination feeDiscount points

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LOAN TERMINOLOGY

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Insures loansUFMIP

Anyone qualifiedRate negotiable

Points3.5% down96.5% L-T-V

Guarantees loansFunding fee

Veterans onlyRate negotiable

PointsNo down payment

100% L-T-V

FHA VA

VA / FHA Comparison

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• Owner occupied• 1-4 family dwellings• Refinancing allowed• Assumption allowed•with approval

VA / FHA Similarities

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VA http://www.homeloans.va.gov/

FHA https://entp.hud.gov/idapp/html/hicostlook.cfm

Conv http://www.fanniemae.com/aboutfm/loanlimits.jhtml?p=Abo

ut+Fannie+Mae&s=Loan+Limits

Loan Limits Info

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Private Mortgage InsurancePMI ConvUFMIP FHAVA Loan GuaranteeInsures lenders against losses

Mortgage Insurance

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A federal agency under the U.S. Department of Agriculture.

Like the FHA, it came into existence due to the financial crises of the 1930s.

The RHSA offers programs to help purchase or operate farms.

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RURAL HOUSING SERVICES ADMINISTRATION

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VA Amortized loan

Balloon loanConventional

loansEquityFHAImpound or

reserve accountLoan origination

fee

Loan-to-value ratio

MaturityPITI paymentPMIPointPrincipalUFMIP

Key Terms

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