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New York Real Estate for Brokers, 5th e. By Marcia Darvin Spada Cengage Learning. Chapter 3. Real Estate Finance II. Chapter 3 Key Terms. Adjustable rate mortgage (ARM) Amortized mortgage Bridge loan Buydown Construction loan Conventional loans Convertible mortgage

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New york real estate for brokers 5th e

New York Real Estate for Brokers, 5th e

By Marcia Darvin Spada

Cengage Learning

Chapter 3 Real Estate Finance II


Chapter 3

Chapter 3

Real Estate

Finance II

Chapter 3 Real Estate Finance II


Chapter 3 key terms
Chapter 3 Key Terms

Adjustable rate mortgage (ARM)

Amortized mortgage

Bridge loan

Buydown

Construction loan

Conventional loans

Convertible mortgage

Department of Veteran Affairs (VA)

Depression

Disintermediation

Federal Housing Administration (FHA)

Gap financing

Ground lease

Home equity loan

Inflation

Chapter 3 Real Estate Finance II


Chapter 3 key terms continued
Chapter 3 Key Terms (continued)

Installment land contract (contract for deed)

Mortgagee/mortgagor

Primary mortgage market

Recession

Redlining

Release clause

Sale leaseback

Secondary mortgage market

Stagflation

State of New York Mortgage Agency (SONYMA)

Subordinate lease

Underwriting

Usury

Chapter 3 Real Estate Finance II


Mortgagor and mortgagee
Mortgagor and Mortgagee

Theborrowergives a

mortgage to the

lender

Mortgagor

Thelender receives a mortgage from the borrower

Mortgagee

Chapter 3 Real Estate Finance II


Mortgage clauses
Mortgage Clauses

Chapter 3 Real Estate Finance II


Monthly mortgage payment
Monthly Mortgage Payment

P= Principal

I = Interest

T = Taxes

I = Insurance

Chapter 3 Real Estate Finance II


Lender s criteria for granting a loan
Lender’s Criteria for Granting a Loan

Investment quality of the property

Loan-to-value ratio

Borrower’s ability to repay loan

Chapter 3 Real Estate Finance II


Loan to value ratio
Loan-to-Value Ratio

Ratio of loan amount to property value

Loan ÷value = ratio

Example:

Loan = $144,000

Value = $160,000

144,000 = 90%

160,000

Chapter 3 Real Estate Finance II


Qualifying ratios
Qualifying Ratios

Chapter 3 Real Estate Finance II


Mortgage loan origination
Mortgage Loan Origination

Chapter 3 Real Estate Finance II


Conventional and government loans
Conventional and Government Loans

Conventional loan

No participation by a government agency

Government loan

Guaranteed, insured or funded by a government agency

Chapter 3 Real Estate Finance II


Types of mortgages
Types of Mortgages

FHA-insured loans

VA Guaranteed loans

Rural Housing Service

State of New York Mortgage Association (SONYMA)

Chapter 3 Real Estate Finance II


Mortgages
Mortgages

Chapter 3 Real Estate Finance II


Other mortgages
Other Mortgages

Chapter 3 Real Estate Finance II


Special types of mortgages
Special Types of Mortgages

Chapter 3 Real Estate Finance II


Construction mortgage
Construction Mortgage

Short term loan

Disbursed in stages

Interest not charged until the money has been disbursed

When project is complete, converted to permanent long-term loan called take-outor end loan

Chapter 3 Real Estate Finance II


Sale leaseback
Sale Leaseback

Chapter 3 Real Estate Finance II


How to secure fha financing
How to Secure FHA Financing

  • FHA does not make mortgage loans

  • FHA-insured loans protects lenders against financial loss

  • Buyer pays for this insurance protection by paying an upfront mortgage insurance premium

  • FHA does not set maximum sales price, only a maximum loan amount

  • FHA insured mortgages require mortgage insurance

Chapter 3 Real Estate Finance II


Fha mortgage
FHA Mortgage

  • Advantages

    • Credit criteria for a borrower are not as strict

    • Borrower’s allowable costs can be partially wrapped into loan

    • 100% of down payment and closing costs can be gifted

    • Loans are assumable

  • Disadvantages

  • With a 30-year FHA loan, and a down payment of more than 5% of the loan amount, the upfront mortgage insurance premium (MIP) is 2.25 percent of the loan amount in addition to the 1.10 percent annual renewal premium that a borrower pays for the life of the loan

    • FHA limits the amount that can be borrowed

Chapter 3 Real Estate Finance II


The primary and secondary mortgage market
The Primary and Secondary Mortgage Market

Chapter 3 Real Estate Finance II


Secondary mortgage market organizations
Secondary Mortgage Market Organizations

Chapter 3 Real Estate Finance II


Truth in lending act
Truth-in-Lending Act

Disclosure

Cooling off period

Advertising (Regulation Z)

Penalties

Chapter 3 Real Estate Finance II


Lending discrimination laws
Lending Discrimination Laws

Chapter 3 Real Estate Finance II


The economy and how it affects the real estate market

Interest

rates/indices

Affordability

of property

for buyers

The

Economy

Valuation

of

Seller’s

property

Stock

Market

The Economy and How it Affects the Real Estate Market

Employment

Chapter 3 Real Estate Finance II


Predatory lending practices what is it
Predatory Lending Practices-What is it?

  • High-cost (subprime loans) include conventional first mortgages that have an interest rate of more than 8 percent and junior mortgages that have an interest rate of more than 9 percent

  • High-cost loans also include conventional loans for more than $50,000 when the points and fees exceed 5 percent of the loan

Chapter 3 Real Estate Finance II


Predatory lending
Predatory Lending

  • Lender may target certain ethnic group

  • Takes advantage of consumer

  • Lender makes unaffordable loans based on assets of borrower, not ability to repay

  • Induces refinancing

  • (flipping)

  • Fraud regarding true nature of loan obligation

Chapter 3 Real Estate Finance II


Flipping
Flipping

  • Real estate investors or speculators believe that they can turn quick profits by buying the property at a certain price and then immediately selling the property at a higher price

  • Flipping may be a problem because it can drive up prices

  • The investor attempts to buy low and sell high

Chapter 3 Real Estate Finance II


Subprime loans
Subprime Loans

  • Borrowers considered subprime if they have a less-than-perfect credit report

  • Subprime lenders

    • Companies that provide loans to home-buyers who do not have good credit histories or who are risky candidates for loans because of their incomes

Chapter 3 Real Estate Finance II


New york anti predatory lending law
New York Anti-Predatory Lending Law

  • Places many restrictions on high-cost (subprime) loans that are first or junior (second) mortgages

  • Loans covered under New York Law

    • Maximum indebtedness of $300,000

    • For family or personal reasons

    • Applies to one- to four-unit property that is the borrower’s personal residence

Chapter 3 Real Estate Finance II


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