BU - Mortgage Financing Flashcards
Mortgage Types
Conventional
VA
Federal Housing Administration (FHA)
United States Department of Agriculture (USDA)
Conventional Loan
Down Payment: 3-20% Terms: 15-30 years Insurance: Down payment <20% Fixed or Adjustable: Either Funding Fees: None
VA Loan
Down Payment: 0% Terms: 15-30 years Insurance: none Fixed or Adjustable: Either Funding Fees: 2.3-3.6% waived for disabled vets
FHA Loans
Down Payment: 3.5-20% Terms: 15-30 years Insurance: always for 11 years or life of loan Fixed or Adjustable: Either Funding Fees: none
USDA Loan
Down Payment: 0% Terms: 15-30 years Insurance: none Fixed or Adjustable: Fixed only Funding Fees: 1% fee upfront, annual fee of .35%
Origination points on a loan is what rate?
1% of the borrowed amount per point
PITI stands for…
Principal
Interest
Tax
Insurance (homeowners & PMI)
Housing Ratio
Front end ratio or mortgage debt service ratio
Housing Ratio = PITI / Gross household Income
Housing Ratio Target
equal or less than 28% gross income
Total Debt Ratio
back end ratio or debt repayment ratio
Total Debt Ratio = (PITI + Monthly consumer debt) / gross household income
Total Debt Ratio Target
equal to or less than 36% of gross income
Debt Ratio Forumla
Debt Ratio = Monthly Consumer debt (not housing) / monthly NET household income
Debt Ratio Target
equal to or less than 20% of Net household income
Consumer Debt (non-housing) includes:
Auto loans
student loans
credit cards
unsecure loan
Adjustable Rate Mortgages (ARMs) have certain components that borrowers should be aware of, including:
The index to which the loan movements are tied.
The margin on the loan.
The interest rate caps which govern just how much the rate can change at any given adjustment period, and
The initial rate (start rate) that the loan offers at inception.
