Sources of Mortgage Funds

Question 1

Typical residential loans

Answer 1

Conventional (less, not gov backed)
Federal Housing Administration
Veteran’s Administration
USDA Rural Housing

Question 2

Conventional loan

Answer 2

“Typical”
FRM
Balloon note
ARM

Question 3

What is the maximum LTV that many conventional lenders prefer?

Answer 3

Put down 20%, get 80% LTV

Question 4

LTV

Answer 4

Loan-to-value

Question 5

Can a conventional mortgage have higher LTVs?

Answer 5

Yes, between 80-97%

Question 6

What is Private Mortgage Insurance (PMI) for?

Answer 6

The amount you go over 80% LTV

Adds extra to your monthly payment

Question 7

When do we pay PMI?

Answer 7

When borrowing more than 80%, meaning you put down less than 20%

Question 8

How do people avoid PMI?

Answer 8

Put 20% down
Get a 2nd mortgage (higher rate)
Get government backed mortgage

Question 9

What is the Federal Housing Administration part of?

Answer 9

The U.S. Department of Housing and Urban Development

Question 10

Does the FHA lend money?

Answer 10

No, but if a loan is approved and the lender defaults they will pay it all back

Question 11

Who obtains FHA loans?

Answer 11

First-time homebuyers
Lesser credit buyers
High debt ratio buyers
Buyers with little cash

Question 12

Maximum FHA loan amount

Answer 12

$271,050 in Alabama

Question 13

How much do FHA borrowers invest?

Answer 13

3.5%

Question 14

Why are government loans more expensive?

Answer 14

Have to pay an upfront premium of 1% of the loan for mortgage insurance (can be amortized)

Question 15

What are other amounts the borrower might have to pay?

Answer 15

1. 35% - 1.55% of the loan amount each year for mortgage insurance
   - to pay for mortgage defaults

Question 16

Does the Veterans Administration lend money?

Answer 16

No, they guarantee the loans of qualified veterans

Question 17

What must the borrower have/do to qualify with VA?

Answer 17

Have a Certificate of Eligibility
Pay a funding fee up front
(1.25% - 3.30%)
-this is to make up for losses

Question 18

What determines the VA funding fee?

Answer 18

How much down payment you have

How many times you’ve gotten a VA loan

Question 19

What LTV can veterans borrow under the program and what is the max loan amount?

Answer 19

100%

$417,000

Question 20

What veterans don’t have to pay the funding fee?

Answer 20

Disabled from war

Widows of veterans

Question 21

What type of people get USDA loans and what locations?

Answer 21

People in rural areas, poor

Want to keep locations there

Question 22

What will the government do for people with USDA loans compared to other types?
(rural development)

Answer 22

Will pay part of (subsidy) and

Forbearance (stop payments if unemployed)

Question 23

Maximum loan amount

Answer 23

Based on income

Funding fee 2% up front + .4% per year

Question 24

“Guarantee programs”

Answer 24

USDA and VA

Question 25

What LTV can be borrowed under USDA and what is the max loan term?

Answer 25

100% 38-40 year loans (30 is normal) = lower pmt

Question 26

Typical commercial loans

Answer 26

Conventional loans from commercial banks

Question 27

Commercial mortgage backed security (CMBS)

Answer 27

A securitized commercial loan, means it is sold from the bank to investors

Question 28

Balloon note

Answer 28

Short term note kept at the bank

Question 29

What is typical amortization for commercial loans?

Answer 29

25 years

Question 30

Small Business Administration Commercial loans (SBA)

Answer 30

Guarantee programs for banks | One note with more down than CDC

Question 31

SBA typical percentages

Answer 31

85% up to $150,000 | 75% from $150,000 to $5,000,000

Question 32

Amortization under SBA (business loans)

Answer 32

Real estate amortized up to 25 years | Equipment amortized up to 10 years

Question 33

Costs/penalties of SBA commercial loans (and amounts)

Answer 33

Low closing costs- no points, bonus/application fees High prepayment penalties- included on 15 or > years 5% 1st, 3% 2nd, 1% 3rd forward

Question 34

SBA guaranty and servicing fee

Answer 34

Guaranty: 2% - 3.75% Servicing: .55% per year on outstanding balance

Question 35

Certified Development Company (CDC) loan

Answer 35

``` two notes, less down than SBA Economic development (np) ```

Question 36

What % on mortgages will CDC's give?

Answer 36

50% senior mortgage (bank) 40% junior mortgage (CDC-SBA guarantee) 10% down payment or equity --basically, bank will make you a first mortgage for 50% LTV, then they will make you a 40% junior mortgage, then you have to have 10% down

Question 37

Farm credit

Answer 37

Provides LT loans on rural acreage

Question 38

How much on land will farm credit loan and why does that matter?

Answer 38

90%, it is a higher loan amount than the bank will give | 34 retail branches in AL