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Chapter 11 ________________ Lending Practices © 2010 by Cengage Learning
© 2010 Cengage Learning o Term loan – interest payments only until due. o Amortized loan – regular equal payments for life of loan including both principal & interest. o Balloon loan – any loan that has a final payment larger than any of the previous. o Partially amortized loan – series of amortized payments with a balloon payment at maturity. Loans
© 2010 Cengage Learning Repaying a 6-year, $1,000 Loan
© 2010 by Cengage Learning 9% Interest per Year on the Loan
© 2010 by Cengage Learning Balance Owed Each Year of the Loan
© 2010 by Cengage Learning Amortization Table: Monthly Payment per $1,000 of Loan
© 2010 by Cengage Learning Balance Owing on a $1,000 Amortized Loan
© 2010 Cengage Learning The relationship between the amount the lender is willing to loan and the market value of the property. Market value = $100,000 Loan = $80,000 What is the loan-to-value ratio? 80% Loan-to-Value
© 2010 Cengage Learning Equity – the difference between the value of the property and outstanding debt. Points – one percent of the loan amount. Origination fee – fee lender charges for making loan usually stated in terms of a percentage of loan amount. Discount points – lender’s charge to raise the return on the loan usually stated as a percentage of the loan amount.
© 2010 Cengage Learning Insures loans UFMIP Anyone qualified Rate negotiable Points 3-5% down 97-95% L-T-V Guarantees loans Funding fee Veterans only Rate negotiable Points No down payment 100% L-T-V FHA VA VA / FHA Comparison
© 2010 Cengage Learning Owner occupied 1-4 family dwellings Refinancing allowed Assumption allowed (with approval) VA / FHA Similarities
© 2010 Cengage Learning VA ◦ FHA ◦ https://entp.hud.gov/idapp/html/hicostlook.cfm https://entp.hud.gov/idapp/html/hicostlook.cfm Conv ◦ n+Limits n+Limits Loan Limits Info
© 2010 Cengage Learning Private Mortgage Insurance PMI Insures lenders against losses Mortgage Insurance
© 2010 Cengage Learning Amortized loan Balloon loan Conventional loans Equity FHA Impound account Loan origination fee Loan-to-value ratio Maturity PITI PMI Point Principal UFMIP VA Key Terms
© 2012 Cengage Learning. Lending Practices Chapter 10.
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Key Terms: Mortgage: a document that makes property security for the repayment of debt Mortgagee: the party receiving the mortgage, the lender Mortgagor:
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CHAPTER 11 MORTGAGE MARKETS. The Unique Nature of Mortgage Markets Mortgage loans are secured by the pledge of real property as collateral. Mortgage loans.
CHAPTER 9 MORTGAGE MARKETS. Copyright© 2003 John Wiley and Sons, Inc. The Unique Nature of Mortgage Markets Mortgage loans are secured by the pledge of.
1 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 16 DEPOSITORY LENDERS IN THE PRIMARY MARKET Commercial.
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Objective 2.03 Analyze financial and legal aspects of home ownership.
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