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Real Estate Test 2 > Sources of Mortgage Funds > Flashcards

Sources of Mortgage Funds Flashcards

1
Q

Typical residential loans

A

Conventional (less, not gov backed)
Federal Housing Administration
Veteran’s Administration
USDA Rural Housing

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2
Q

Conventional loan

A

“Typical”
FRM
Balloon note
ARM

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3
Q

What is the maximum LTV that many conventional lenders prefer?

A

Put down 20%, get 80% LTV

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4
Q

LTV

A

Loan-to-value

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5
Q

Can a conventional mortgage have higher LTVs?

A

Yes, between 80-97%

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6
Q

What is Private Mortgage Insurance (PMI) for?

A

The amount you go over 80% LTV

Adds extra to your monthly payment

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7
Q

When do we pay PMI?

A

When borrowing more than 80%, meaning you put down less than 20%

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8
Q

How do people avoid PMI?

A

Put 20% down
Get a 2nd mortgage (higher rate)
Get government backed mortgage

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9
Q

What is the Federal Housing Administration part of?

A

The U.S. Department of Housing and Urban Development

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10
Q

Does the FHA lend money?

A

No, but if a loan is approved and the lender defaults they will pay it all back

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11
Q

Who obtains FHA loans?

A

First-time homebuyers
Lesser credit buyers
High debt ratio buyers
Buyers with little cash

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12
Q

Maximum FHA loan amount

A

$271,050 in Alabama

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13
Q

How much do FHA borrowers invest?

A

3.5%

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14
Q

Why are government loans more expensive?

A

Have to pay an upfront premium of 1% of the loan for mortgage insurance (can be amortized)

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15
Q

What are other amounts the borrower might have to pay?

A
  1. 35% - 1.55% of the loan amount each year for mortgage insurance
    - to pay for mortgage defaults
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16
Q

Does the Veterans Administration lend money?

A

No, they guarantee the loans of qualified veterans

17
Q

What must the borrower have/do to qualify with VA?

A

Have a Certificate of Eligibility
Pay a funding fee up front
(1.25% - 3.30%)
-this is to make up for losses

18
Q

What determines the VA funding fee?

A

How much down payment you have

How many times you’ve gotten a VA loan

19
Q

What LTV can veterans borrow under the program and what is the max loan amount?

A

100%

$417,000

20
Q

What veterans don’t have to pay the funding fee?

A

Disabled from war

Widows of veterans

21
Q

What type of people get USDA loans and what locations?

A

People in rural areas, poor

Want to keep locations there

22
Q

What will the government do for people with USDA loans compared to other types?
(rural development)

A

Will pay part of (subsidy) and

Forbearance (stop payments if unemployed)

23
Q

Maximum loan amount

A

Based on income

Funding fee 2% up front + .4% per year

24
Q

“Guarantee programs”

A

USDA and VA

25
Q

What LTV can be borrowed under USDA and what is the max loan term?

A

100%
38-40 year loans
(30 is normal) = lower pmt

26
Q

Typical commercial loans

A

Conventional loans from commercial banks

27
Q

Commercial mortgage backed security (CMBS)

A

A securitized commercial loan, means it is sold from the bank to investors

28
Q

Balloon note

A

Short term note kept at the bank

29
Q

What is typical amortization for commercial loans?

A

25 years

30
Q

Small Business Administration Commercial loans (SBA)

A

Guarantee programs for banks

One note with more down than CDC

31
Q

SBA typical percentages

A

85% up to $150,000

75% from $150,000 to $5,000,000

32
Q

Amortization under SBA (business loans)

A

Real estate amortized up to 25 years

Equipment amortized up to 10 years

33
Q

Costs/penalties of SBA commercial loans (and amounts)

A

Low closing costs- no points, bonus/application fees

High prepayment penalties- included on 15 or > years
5% 1st, 3% 2nd, 1% 3rd forward

34
Q

SBA guaranty and servicing fee

A

Guaranty: 2% - 3.75%
Servicing: .55% per year on outstanding balance

35
Q

Certified Development Company (CDC) loan

A 
two notes, less down than SBA
Economic development (np)
36
Q

What % on mortgages will CDC’s give?

A

50% senior mortgage (bank)
40% junior mortgage (CDC-SBA guarantee)
10% down payment or equity

–basically, bank will make you a first mortgage for 50% LTV, then they will make you a 40% junior mortgage, then you have to have 10% down

37
Q

Farm credit

A

Provides LT loans on rural acreage

38
Q

How much on land will farm credit loan and why does that matter?

A

90%, it is a higher loan amount than the bank will give

34 retail branches in AL

Real Estate Test 2 (6 decks)

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