Champions School of Real Estate Real Estate Finance| 48 questions and answers.

VA Loan Requirements Veterans who were honorably discharged AND who meet the service requirements are eligible for VA home loan benefits. Eligibility is additionally determined by the time frame in which the veteran served and the number of days of active duty. The veteran must obtain a certificate of eligibility (COE). Origination The process of creating a new mortgage loan, including all steps taken by a lender to attract and qualify a borrower, Mortgage Broker Typically functions as a middleman between the borrower and the lender, negotiating, selling, or arranging loans to be delivered to larger investors. Mortgage Banker Entities that provide their funds to provide mortgage financing, as opposed to commercial banks/savings associations. Correspondent Lender Usually smaller in scale than mortgage bankers or brokers, these lend- ers typically extend loans with their funds, at their own risk. Processing Once the application is complete, the file moves into the _____________ phase. "build a file" that will be used to make an underwriting decision Application information verification Collect information on the borrower and the property including Credit reports Underwriting The detailed process of evaluating a borrower's loan application to determine the risk involved for the lender is defined as underwriting. •in-depth analysis of the borrower's credit history •examination of the value and quality of the subject property •reviewed by a well trained professional who analyzes the creditworthiness of the borrower and renders a decision on the loan request Closing The consummation of a contractual real estate transaction in which all appropriate documents are signed, and the proceeds of the mortgage loan are then disbursed by the lender Funding The process of transferring funds to a title or escrow company for disbursement Servicing Collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance (and managing escrow and impound funds), remitting funds to the note holder, and following up on delinquencies ????? 3. VA loan terminology - guaranteed, qualification, eligibility, entitlement - page 195 Secondary Mortgage Market exists for the purchase & sale of existing mortgages to investors. It is designed to provide greater liquidity to the residential real estate market by providing for a steady supply of funds from investors. •loan originators can sell their loans and thus recover cash for originating more loans •not for lending money •mortgage notes are purchased as investments to earn a return, called a yield Primary Mortgage Market where borrowers and mortgage lenders come together to create and negotiate terms of a mortgage transaction Front End Ratio used to qualify a borrower for a loan based upon the proposed house payment and his or her gross monthly income (GMI). The house payment is the monthly payment of principal, interest, taxes, and insurance (PITI). In conventional lending, a front ratio of 28% means that the house payment (PITI) cannot exceed 28% of the borrower's gross monthly income. 28% × gross monthly income = Max. monthly house payment Back End Ratio the ratio of the borrower's total recurring monthly debts, including such obligations as the house payment, payments on all installment debts, monthly payments on all junior liens, alimony, car lease payments, and other recurring payment obligations. In conventional lending, it is usually 36%. Both ratios must be satisfied. The income of the borrower is also critical, and the lender will verify all sources of income and evaluate both their reliability and longevity. 36% × gross monthly income = Max. PITI and debts per month Loan originator registration system - page 38 ??? 7. FHA loan program administrators - page 181 ??? Race, Color, National Origin, Sex, Religion, Families with Children & Disabilities Federal Fair Housing protected categories Divide loan amount by 1000 then multiply by the factor How to calculate the monthly principal and interest payment PITI Principal, Interest, Taxes, Insurance FHA, VA & USDA Government loans are divided into three categories: FHA, VA, and USDA FHA ________ loans are fully insured by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development (HUD) VA The Department of Veterans Affairs partially guarantees ________ loans. USDA Somewhat like FHA loans, ________ Rural Development loans are fully insured by the United States Department of Agriculture. FHA Loans • Fully-amortized loans • Downpayment as low as 3.5% • Low interest rates • Mandatory collection of taxes and hazard insurance premiums in an escrow account Lender The FHA is a mortgage insurance program that protects the __________ from loss in the event of default by the borrower by insuring the full amount of the loan. FHA loans advantages 1. Qualifying ratios are slightly more lenient allowing borrowers to have more debt and still qualify. 2. LTVs are very high, allowing buyers with little money for a down payment to purchase a property. Points on these loans can be paid by either the buyer or the seller. 4 FHA Loan Programs • 203b Fixed Rate Program. 10 to 30-year terms • 203k Purchase and Rehabilitation Program • 251 Adjustable Program - Available as 1, 3, 5, 7, 10-year adjustable rate. • 234c Condominium Program FHA 203b Loan Program • Low downpayment requirements, as low as 3.5% • Limited lender fees • Limited to owner-occupants • Applications must be submitted through an FHA-approved lender. 2 Types of FHA 203(k) loans Limited 203k Full 203k 4 C's of Good Lending • Character • Capacity • Capital (down payment) • Collateral 3 types of Loan Originators • Mortgage Broker • Mortgage Banker • Correspondent Lender Correspondent Lender Generally a smaller lender that takes apps and underwrites and funds loans either with its own money or from a line of credit with a larger lender and, immediately upon closing, sells the loans to wholesale lenders under previously agreed-upon terms. Mortgage Broker A person (middle man) who brings together the user of capital (borrower) and the supplier of capital (lender). For this service, a finder's fee is usually paid by the borrower or lender. Mortgage Banker Big bank selling traditional mortgage loans MDCS Minimum Decision Credit Score 1934 When was Fannie Mae created? Themselves Who funds FHA? 10 years Whats is the lifespan of a $20 bill? Rate determined by individual bank What is the prime rate Rural housing section 502 direct loan program What is the name of the single family direct home loan? 1934 When did Congress crest the Federal Housing Administration