Flashcards in Real Estate Finance Deck (222)
The first step in determining “how much house” the buyer can afford and which type of loan might be best; the buyer supplies information about their financial situation to the lender, who then provides a general estimate
Official process of being approved by a lender to borrow a specific amount at an interest rate within a small range; a mortgage application, credit report, and supporting financial documentation are required
Someone who brings together a borrower and a lender in order to create a mortgage
An entity or person who provides mortgage financing by using their own funds
A lender who offers loans using their own money at their own risk, generally on a smaller scale than mortgage brokers and bankers
When the lender collects information and an application from the buyer that will help determine the loan type and amount they will qualify for
The process of deciding the level of risk a lender would take on by offering a loan to a certain borrower for a specific property
The transferring of funds by the lender to a title company or escrow company so that they may be disbursed
The ongoing collection of monthly payments and maintenance of records by a loan servicer
Employment opportunity is the biggest factor for
residential real estate demand.
A housing bubble is created when property values
increase too quickly.
The use of a relatively small amount of money in order to get a much bigger loan for purchasing real estate
Method of estimating the value of a property by determining how much it would cost to completely replace it and then subtracting from that value to account for depreciation
Method of estimating the value of a property based on the amount of income it could produce for its owner
A loan that has been made according to the guidelines that will allow the loan to be sold on the secondary market
A loan that does not meet the guidelines to be sold on the secondary market
Mortgage Insurance Premium (MIP):
Required insurance to protect the lender in the event of borrower default on an FHA loan
Private Mortgage Insurance (PMI):
Insurance that protects the lender in the event of borrower default on a conventional loan
In hypothecation, the borrower maintains their
ownership of the asset and has free reign to use and enjoy it.
The secondary market is made up of:
Federal Home Loan Bank
Life insurance companies
A home mortgage gets passed on to a servicer for ongoing management. What exactly does that servicer do?
Collects the homeowner’s payments every month
Maintains the escrow account (if the borrower has to or chooses to have one) for annual expenses, like taxes and home insurance
Contacts the borrower about late payments or defaults
Answers questions the borrower may have about the loan
Mortgage servicing companies can even buy home insurance on the borrower’s behalf if they fail to attain or maintain coverage. This is called
force placed insurance, and it’s not ideal for the customer
FHA insurance requires an
upfront fee (called the Up-front Mortgage Insurance Premium, or UFMIP) in addition to a monthly fee.
The Texas Real Estate Commission (TREC) provides an addendum for the parties to negotiate seller
financing (the Seller Financing Addendum).
TREC provides an addendum to help the buyer and seller negotiate the terms of an
assumption (the Loan Assumption Addendum).
Private investors (lenders) may have higher interest rates or unusual terms compared to banks. This type of lending is called
"hard money" lending.
Types of credit lines include, but are not limited to:
Balloon Loans: Usually last for 3 to 15 years and are indexed against a Treasury index
Real Estate Loans: Secured by other real estate you own. Usually you can borrow up to 75% against the value of the property for a term of between 10 and 20 years
Short Term Loans: Secured loans for a term of one year or less
Asset Based Loans: Secured by your professional or perhaps your personal assets
Term Loans: Usually made by traditional lenders and secured for a fixed term that is at least partially determined by the investor’s income statements and projections
Equipment Loans: Secured by business equipment and against which you can usually borrow 60-80% of the value of the equipment for the projected life of the equipment
The purpose of the SAFE Act is to protect consumers across the country from
fraud by defining minimum licensing and registration standards for mortgage loan originators.
The economic phase in which market activity really picks up (businesses start hiring again, people are investing in real estate)