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© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 1 1 CHAPTER EIGHT UNDERWRITING AND FINANCING RESIDENTIAL PROPERTIES
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 2 2 Underwriting Default Risk Underwriting Is the process of evaluating a borrower’s loan request in terms of potential profitability and risk. Two methods are used namely: Payment-to-income ratio (MPs on the loan amount plus other housing expenses divided by borrower’s income) Loan-to-value ratio (amount of loan requested divided by property’s value).
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 3 3 Affordability Ratios Payment to income PITI/ gross income equals or is less than 28% Total obligations to income PITI plus other obligations/ gross income equals or is less than 36% Percentages vary with kind of loan program
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 4 4 The Underwriting Process- Income Employment Working spouse Rentals Child support Commissions Self employment Bonuses Dividends or interest Retirement annuity Social security Public assistance Borrower assets Credit history Estimated housing expense Other obligations and debt
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 5 5 Closing Costs- Financing Costs are one-time costs associated with buying a property or obtaining a loan Costs incurred include as below: Next slide
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 6 6 Closing Costs- Financing Loan application Credit report fee Loan origination Attorney fees Appraisal fees Fees for survey Loan documentation fees Discount points Prepaid interest
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 7 7 Closing Costs- other Property taxes, proration and escrow accounts Mortgage insurance (default) Hazard insurance Title insurance Pest inspection Real estate commissions Statutory costs
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 8 8 Chapter Ends here!!
Business Math, Eighth Edition Cleaves/Hobbs © 2009 Pearson Education, Inc. Upper Saddle River, NJ All Rights Reserved 15.1 Mortgage Payments Find.
Home Buying Process Financial Options. Objectives Define the Four “Cs” of the Loan Process Determine How Much You Can Afford for a House Calculate Front-End/Back-End.
Chapter 9. Learning Objectives (part 1 of 2) Explain the advantages of pre- qualification Describe the different types of mortgages available Ascertain.
UNDERWRITING AND FINANCING RESIDENTIAL PROPERTIES Chapter Objectives
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W ELCOME TO U NIT 8 Mortgages Finding the Monthly Mortgage Payment The amortization of a loan is when the repayment of a loan in equal installments, are.
© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved McGraw-Hill/Irwin Slide 1 CHAPTER EIGHT UNDERWRITING AND FINANCING RESIDENTIAL PROPERTIES.
Welcome Home Buying 101. Home Buying 101 Home Buying 101 Presented by NASA Federal Credit Union Bert Aguilera Mortgage Consultant NMLS # (301) ,
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© OnCourse Learning. All Rights Reserved. Closing the Real Estate Transaction Learning Objectives List the preliminaries to closing List the items.
McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved CHAPTER4CHAPTER4 CHAPTER4CHAPTER4 Fixed Rate Mortgage Loans: Part 2.
Topic 4 Financing Strategies. Topic 4: Financing Strategies Learning Objectives – (a) Analyze the various sources of borrowing available to a client and.
Chapter 8 Underwriting The Residential Mortgage Loan
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Florida Real Estate Principles, Practices & Law 38th Edition Linda L. Crawford Copyright © 2015 Kaplan, Inc. All rights reserved.
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