Transcript Document

Real Estate Principles
Ninth Edition
Real Estate:
An Introduction to the Profession
Ninth Edition
By Charles J. Jacobus
South-Western Publishing©2002
South-Western Publishing©2002
Chapter 11
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Lending Practices
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Loans
• Term loan – interest payments only until due.
• Amortized loan – regular equal payments for
life of loan including both principal & interest.
• 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.
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Repaying a 6-year, $1,000 Loan
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Carrying 9% Interest per Year
on the Loan
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Balance Owed During Each
Year of the Loan
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Amortization Table: Monthly
Payment per $1,000 of Loan
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Balance Owing on a $1,000
Amortized Loan
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Loan-to-Value
• The relationship between the amount the
lender is willing to loan and the market value
of the property
• Market value = $100,000
Loan = $80,000
What is the loan-to-value ratio?
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80%
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.
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VA and FHA in Comparison
FHA
VA
Insures loans
UFMIP
Anyone qualified
Rate negotiable
Points
3-5% down
97-95% L-T-V
Guarantees loans
Funding fee
Veterans only
Rate negotiable
Points
No down payment
100% L-T-V
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VA and FHA Similarities
• Owner-occupied
• 1-4 family dwellings
• Refinancing allowed
• Assumption allowed (with approval)
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Key Terms
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Amortized loan
Balloon loan
Conventional loans
Equity
FHA
Impound account
Loan origination fee
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Loan-to-value ratio
Maturity
PITI
Point
Principal
UFMIP
VA
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