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Chapter 10 Lending Practices

_______________________________________. Chapter 10 Lending Practices. Term loan – interest payments only until due. Amortized loan – regular equal payments for life of loan including both principal & interest. Budget Mortgage – principal + interest + taxes + insurance

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Chapter 10 Lending Practices

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  1. _______________________________________ Chapter 10Lending Practices

  2. Term loan – interest payments only until due. Amortized loan – regular equal payments for life of loan including both principal & interest. Budget Mortgage – principal + interest + taxes + insurance Balloon loan – any loan that has a final payment larger than any of the previous. Partially amortized loan – series of amortized payments with a balloon payment at maturity. Loans

  3. Repaying a 6-year, $1,000 Loan

  4. Carrying 9% Interest per Yearon the Loan

  5. Balance Owed During EachYear of the Loan

  6. Amortization Table: MonthlyPayment per $1,000 of Loan

  7. Balance Owing on a $1,000Amortized Loan

  8. The relationship between the amount the lender is willing to loan and the market value of the property Market value = $100,000 Loan = $80,000What is the loan-to-value ratio? Loan-to-Value 80%

  9. 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.

  10. VA and FHA in Comparison FHA VA 1944 Guarantees loans Funding fee Veterans only Rate negotiable Points No down payment 100% L-T-V 1934 Insures loans UFMIPAnyone qualified Rate negotiable Points 3-5% down 97-95% L-T-V

  11. VA and FHA Similarities • Owner-occupied • 1-4 family dwellings • Refinancing allowed • Assumption allowed (with approval)

  12. FHA http://www.hud.gov DVA http://www.homeloans.va.gov/veteran.htm Conventional http://www.ourbroker.com/limits.htm Want to know more?

  13. PMI insures only the top 20% to 25% of a loan Insures lenders against foreclosure losses if the principal of the loan is 80% or less of the current fair market value of the home, the borrower may have the right to cancel the insurance Private Mortgage Insurance

  14. offers programs to help purchase or operate farms Rural Housing ServicesAdministration

  15. 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

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