LESSON 3: PARTIES, PROPERTIES, FINANCING Flashcards
How many days after the buyer receives the Exception Documents, the Commitment, and the Survey does the buyer need to make objections?
The buyer typically has a specified number of days to raise objections, which should be outlined in the contract.
Is the property in a Mandatory Home Owner’s Association?
Check if the property is part of a mandatory HOA (Homeowners Association).
Has the buyer received and reviewed the Seller’s Disclosure Notice? If not, when?
Confirm whether the buyer has reviewed the Seller’s Disclosure Notice, and if not, determine when it will be provided.
Was the property built before 1978?
Determine if the property was constructed before 1978, which may affect certain disclosures and requirements.
Are there any specific treatments or repairs the buyer wants to ask to be included in the offer price?
Clarify if the buyer requests specific repairs or treatments as part of the offer price.
When do the parties plan to close?
Specify the intended closing date for the transaction.
Will possession be at closing and funding, or is a temporary lease needed?
Decide whether possession will occur at closing or if a temporary lease is required.
Are there any factual statements or business details that need to be added to Special Provisions?
Identify if there are any important facts or business details to include in the Special Provisions section.
Is the seller willing to pay any of the buyer’s closing costs?
Determine if the seller is willing to contribute to the buyer’s closing costs.
Where and how do the parties want any notices regarding the contract to be sent?
Confirm the method and address for sending any notices related to the contract.
What is the title of each form used?
The form title indicates its intended use (e.g., resale property, one-to-four family residential properties, etc.).
Why is the date in the right-hand corner of the form important?
The date shows when TREC approved the form, ensuring that the current form is used.
What does the TREC number indicate?
The TREC number shows the version of the form (e.g., 20-16 for the One to Four Family Residential Contract).
Why is it important to use the legal names of the parties in the contract?
To ensure accuracy, legal documents must reflect the correct legal names and marital status of the parties involved.
What should be considered for the seller’s name and property details?
Verify the seller’s name using original documents (e.g., title policy, deed) and ensure the correct legal description of the property.
What should be noted regarding the buyer’s identification?
The buyer must provide identification at closing, and their legal name must be used in the offer.
How should marital status be noted in Texas contracts?
In Texas, specify the marital status of parties, such as “Sue Smith, an unmarried person” or “Jim Johnson and wife Susan Johnson.”
What is the “interest not to exceed” in a mortgage?
It refers to the maximum interest rate for a loan. For fixed-rate mortgages, the interest rate remains the same for the entire term. For adjustable-rate mortgages (ARMs), the interest adjusts after a certain period, such as one year, and adjustment caps should be described in the Special Provisions.
What is the Third Party Financing Addendum?
The Third Party Financing Addendum describes both Buyer Approval and Property Approval. Both approvals are needed for full loan approval.
What happens if the buyer’s financing is not approved under the Third Party Financing Addendum?
If the buyer’s financing is not approved, the buyer can terminate the contract and receive a refund of earnest money within the agreed number of days. After this period, the financing contingency no longer applies, and if the loan fails after this date due to the buyer’s fault, the buyer will be in default.
What is a Conventional Loan?
A Conventional Loan is a mortgage that is not government-backed. It typically requires a 20% down payment, but private mortgage insurance (PMI) can be purchased to allow a smaller down payment.
What is the Texas Veterans Loan program?
The Texas Veterans Loan program provides veterans who reside in Texas with lower interest rates, lower closing costs, easier approval processes, and no mortgage insurance.
What are FHA Loans?
FHA Loans are insured by the Federal Housing Administration, require lower down payments, and have more flexible lending standards. Borrowers with FHA loans pay for mortgage insurance to protect the lender.
What are VA Loans?
VA Loans are guaranteed by the U.S. Department of Veteran Affairs, offering veterans no down payment and low or no mortgage insurance. The money comes from private lenders, and veterans in Texas can also access the Texas Veterans Loan program.
What are USDA Loans?
USDA Loans are mortgages for borrowers in rural and suburban areas and are government-guaranteed. These loans require no down payment and no mortgage insurance.
What is a Reverse Mortgage?
A Reverse Mortgage is for homeowners over 62, where they receive funds without monthly payments. The loan balance increases over time, and the property passes to heirs after the borrower’s death. It is a non-recourse loan.
How is Mortgage Insurance different from Mortgage Life Insurance?
Mortgage Insurance protects lenders against borrower default, while Mortgage Life Insurance pays off the loan if the borrower dies.
What is Private Mortgage Insurance (PMI)?
PMI is required for most conventional loans when the down payment is less than 20% of the property value. PMI can be paid monthly, annually, or as a lump sum.
What is Borrower Paid Private Mortgage Insurance (BPMI)?
BPMI is a type of PMI where the borrower covers the cost of mortgage insurance to protect the lender for high Loan-To-Value (LTV) mortgages. It can be cancelled when the loan balance reaches 78% of the original value.
What is Lender Paid Private Mortgage Insurance (LPMI)?
LPMI is paid by the lender and built into the mortgage interest rate. This results in a lower monthly mortgage payment, but cannot be cancelled unless the loan is refinanced.
What are Mortgage Insurance Policies (Contracts)?
These policies outline the terms and conditions of mortgage insurance coverage for individual loans, including exclusions and requirements for default notices and claims settlement.
What is the significance of the Master Policy in mortgage insurance?
The Master Policy governs the terms of mortgage insurance, including coverage, exclusions, and conditions for default. It may include provisions for arbitration, misrepresentation, and default notifications.
What is the automatic cancellation of mortgage insurance for primary or vacation homes?
Mortgage insurance will be cancelled automatically when the LTV reaches 78% or the midpoint of the mortgage term (e.g., 15 years for a 30-year mortgage), whichever comes first.
How long does it take to reach 78% LTV for a 10% down payment?
It takes 81 months for a 10% down payment at a 4.0% interest rate to reach 78% LTV.
What is the FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration, offering lower down-payment requirements and more flexible qualification standards.
What is the minimum credit score for an FHA loan?
A borrower needs a minimum credit score of 580 for a 3.5% down payment, and 500-579 for a 10% down payment.
How do FHA Mortgage Insurance Premiums (MIP) work?
FHA MIP includes an upfront premium (1.75% of the loan size) and an annual premium, which is added to the mortgage and paid as part of monthly payments.
What is the FHA Upfront Mortgage Insurance Premium (UFMIP)?
The UFMIP is 1.75% of the loan size and is added to the mortgage loan balance rather than paid in cash.
How is FHA Annual Mortgage Insurance Premium calculated?
The annual MIP is a percentage of the loan amount and depends on loan size and when the loan was taken. It is included in the monthly mortgage payment.
What are the FHA Annual MIP rates from 2008 to 2015?
Rates ranged from 0.50% in 2008 to 1.35% in 2013. For loans exceeding $625,500, an additional 0.25% was added.
How can FHA mortgage insurance be canceled for loans before June 3, 2013?
MIP cancels automatically when the loan reaches 78% LTV and 60 months of MIP payments for a 30-year term, or 78% LTV for a 15-year term.
What happens if you have an FHA loan after June 3, 2013?
For FHA loans after this date, annual MIP does not cancel and remains for the duration of the loan term.
What alternatives to an FHA loan exist?
VA loans are an alternative for military borrowers, as they don’t require mortgage insurance and have favorable terms.
How do FHA loans differ from VA loans?
FHA loans require MIP, while VA loans do not, but VA loans require a one-time funding fee and a guarantee against loss in case of foreclosure.
What happens if the buyer’s credit documentation is not delivered within the specified time in Paragraph B?
The seller may terminate the contract by notice to the buyer at any time before all required credit documentation is furnished, and the earnest money will be paid to the seller.
What happens if the seller finds the buyer’s credit documentation unacceptable after delivery?
The seller can terminate the contract by notice to the buyer within 7 days after the expiration of the time for delivery or its actual delivery, whichever is later, and the earnest money will be refunded to the buyer.
What happens if the seller does not terminate the contract within the specified time regarding the buyer’s credit?
The seller will be deemed to have approved the buyer’s creditworthiness.
What are the typical closing costs for obtaining a reverse mortgage?
- Counseling fee (around $125), 2. Origination fee (varies by lender), 3. Third-party fees (appraisal, title insurance, etc.), 4. Initial Mortgage Insurance Premium (IMIP) (calculated based on principal limit usage)
What are the ongoing costs associated with a reverse mortgage?
- Annual mortgage insurance (1.25% of loan balance), 2. Servicing fees (typically around $30/month, if charged)
Who is responsible for paying property taxes and homeowner’s insurance on a reverse mortgage?
The homeowner is responsible for paying property taxes and homeowner’s insurance, as there are no escrow accounts in reverse mortgages.
What is the HECM for Purchase program?
It allows elderly borrowers to purchase a new principal residence using reverse mortgage proceeds in a single transaction, available to Texas veterans and other qualifying individuals.
When does the HECM reverse mortgage become due and payable?
The mortgage is due upon the last borrower’s death, sale of the home, or failure to live in the home for more than 12 months, or if the borrower fails to pay property taxes or insurance.
What is a Non-Recourse loan in the context of a reverse mortgage?
A Non-Recourse loan means that the borrower has no personal liability; the lender’s only recourse is the property itself. If there is a deficiency after foreclosure, the lender cannot pursue the borrower.
What loan programs does the Texas Veterans Land Board offer?
Texas veterans can use the program to buy land with only a 5% down payment and at below-market rates. Veterans with disabilities and unmarried surviving spouses may qualify for discounted interest rates.
What are the eligibility requirements for Texas Veterans Land Board loans?
Loans are available to Texas veterans (veterans living in Texas, regardless of service location). Interest rates are competitive, with no private mortgage insurance and no prepayment penalties.
What types of properties can Texas veterans buy with a Texas Veteran Loan?
Texas veterans can purchase personal homes but not investment properties, second homes, or refinances.
What is the typical loan amount for a Texas Veteran Loan?
The loan amount can go up to $417,000.
What is the funding fee and interest rate for veterans with a service-connected disability under the Texas Veteran Loan?
Veterans with a 30% or greater service-connected disability receive an additional 0.5% interest rate discount, and the VA funding fee is waived.
Who can lend money for mortgages?
Lenders include banks, savings and loans, credit unions, and mortgage companies.
What is the role of mortgage insurers?
Mortgage insurers like FHA, VA, and PMI provide insurance but do not lend money. FHA insures the loan for the borrower, while PMI and VA provide guarantees.
What types of mortgages are commonly assumable?
FHA insured loans, VA loans, USDA loans, and some adjustable-rate mortgages.
What is the consent of the lender in mortgage assumption?
To assume an existing mortgage loan, consent from the lender is typically required. Transfer of property without lender consent is known as a “sale subject to” the existing loan.
What are the exceptions to lender consent for mortgage assumption?
- VA loans dated before March 1, 1988, 2. FHA loans executed before December 1, 1986
What is the restriction on assumption for conventional mortgages?
Most conventional mortgages include a due-on-sale clause, requiring full payment if the property is transferred without lender consent.
What is the Texas Affordable Housing Specialist (TAHS) certification?
A certification for real estate agents to help first-time and underserved homebuyers, requiring 12 CE hours, including the mandatory United Texas course.
What are some elective courses for the TAHS certification?
Courses include “Help for Homebuyers,” “Making Texans Homeowners for Life,” “Manufactured Housing Today,” “FHA Lending for Workforce Housing,” and “Employer Assisted Housing.”
