Financing Strategies

Question 1

Predatory loans

Answer 1

Should be avoided on CFP

These are payday loans and car title loans and have VERY HIGH INTEREST rates

Question 2

Qualification for mortgage

Answer 2

PITI / Monthly gross income <= 28%

PITI + all other debts / Monthly gross income <= 36%

Question 3

Calculate home equity

Answer 3

Home equity = FMV of property - mortgage balance

Question 4

Home equity loan vs Home equity line of credit

Answer 4

• Home equity loan:
  
  • Rate is usually fixed
  • Term is fixed (over remaining life of mortgage)
  • Deducitble for buy, build, improve of primary home
• HELOC
  
  • Rate is usually varaiable
  • Term is typically variable
  • Tax dedutible for buy, build, improve of primary home

Question 5

Reverse Mortgage

Answer 5

• Allows elder client to withdraw portion of home’s equity
• Following must be met for qualification:
  
  • At least 62 years old
  • Own property outright OR have paid down considerable amount of the mortgage
  • Occupy the residence of primary residence
  • Have no federal debt delinquencies
  • Be able to make on time payments over the long term as property taxes, HOA fees, and insurance costs increase
  • Complete course thorough HECM counselor