Real Estate Finance Champions Study
Guide
VA loan requirements - CORRECT ANSWER-· Must be honorably discharged
· Must meet service requirements
· Time frame of service; number of days active duty
· Must obtain certificate of eligibility
Loan terminology - origination, funding, underwriting, servicing - CORRECT
ANSWER-· Origination: Process of creating a new mortgage loan; includes steps
to attract and qualify a borrower
· Funding: Process of transferring funds to a title or escrow company for
disbursement
· Underwriting: Process of evaluating a borrower's loan application to determine
the risk involved for the lender
· Servicing: Collecting monthly payments, maintaining records of payments and
balances, collecting and paying taxes and insurance, remitting funds to the note
holder, and following up on delinquencies
VA loan terminology - guaranteed, qualification, eligibility, entitlement -
CORRECT ANSWER-· Guaranteed: Partial guarantee on the loan protects the
lender against loss if the payments are not made
· Qualification: Based upon residual income and debt to income ratio
· Eligibility: The Veteran's entitlement to VA home loan benefits under the law,
based on military service
· Entitlement: The dollar amount the VA will guarantee on each VA home loan
and helps to determine how much a veteran can borrow before needing a down
payment
Primary market vs secondary market - CORRECT ANSWER-· Primary - where
borrowers and mortgage lenders come together to create and negotiate terms of
mortgage transactions
· Secondary - exists for the purchase and sale of existing mortgages to investors;
designed to provide greater liquidity to the residential real estate market by
providing for a steady supply of funds from investors
, Front and back qualifying ratios and calculations - CORRECT ANSWER-· 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). In conventional lending, a
front ratio of 28% means that the house payment (PITI) cannot exceed 28% of
the borrower's gross monthly income.
o 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.
o 36% × gross monthly income = Max. PITI and debts per month
Loan originator registration system - CORRECT ANSWER-· Nationwide
Mortgage Licensing System and Registry (NMLSR)
FHA loan program administrators - CORRECT ANSWER-· Part of HUD
· Started in 1965
· Operates from self-generated income
Fair Housing Rules and protected categories - CORRECT ANSWER-· Race
· Color
· National origin
· Sex
· Religion
· Families with children
· Disabilities
The elements in the PITI payment - CORRECT ANSWER-· Principal
· Interest
· Taxes
· Insurance
FHA loan advantages vs VA - CORRECT ANSWER-· FHA loan advantages
o Qualifying ratios are slightly more lenient allowing borrowers to have more debt
and still qualify.
Guide
VA loan requirements - CORRECT ANSWER-· Must be honorably discharged
· Must meet service requirements
· Time frame of service; number of days active duty
· Must obtain certificate of eligibility
Loan terminology - origination, funding, underwriting, servicing - CORRECT
ANSWER-· Origination: Process of creating a new mortgage loan; includes steps
to attract and qualify a borrower
· Funding: Process of transferring funds to a title or escrow company for
disbursement
· Underwriting: Process of evaluating a borrower's loan application to determine
the risk involved for the lender
· Servicing: Collecting monthly payments, maintaining records of payments and
balances, collecting and paying taxes and insurance, remitting funds to the note
holder, and following up on delinquencies
VA loan terminology - guaranteed, qualification, eligibility, entitlement -
CORRECT ANSWER-· Guaranteed: Partial guarantee on the loan protects the
lender against loss if the payments are not made
· Qualification: Based upon residual income and debt to income ratio
· Eligibility: The Veteran's entitlement to VA home loan benefits under the law,
based on military service
· Entitlement: The dollar amount the VA will guarantee on each VA home loan
and helps to determine how much a veteran can borrow before needing a down
payment
Primary market vs secondary market - CORRECT ANSWER-· Primary - where
borrowers and mortgage lenders come together to create and negotiate terms of
mortgage transactions
· Secondary - exists for the purchase and sale of existing mortgages to investors;
designed to provide greater liquidity to the residential real estate market by
providing for a steady supply of funds from investors
, Front and back qualifying ratios and calculations - CORRECT ANSWER-· 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). In conventional lending, a
front ratio of 28% means that the house payment (PITI) cannot exceed 28% of
the borrower's gross monthly income.
o 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.
o 36% × gross monthly income = Max. PITI and debts per month
Loan originator registration system - CORRECT ANSWER-· Nationwide
Mortgage Licensing System and Registry (NMLSR)
FHA loan program administrators - CORRECT ANSWER-· Part of HUD
· Started in 1965
· Operates from self-generated income
Fair Housing Rules and protected categories - CORRECT ANSWER-· Race
· Color
· National origin
· Sex
· Religion
· Families with children
· Disabilities
The elements in the PITI payment - CORRECT ANSWER-· Principal
· Interest
· Taxes
· Insurance
FHA loan advantages vs VA - CORRECT ANSWER-· FHA loan advantages
o Qualifying ratios are slightly more lenient allowing borrowers to have more debt
and still qualify.
