Book : California Real Estate Practice [Third Edition] By Robert L. Herd and Bruce A. Southstone
Chapter 7 : Real Estae Financing
Class Discussion Topics
1. Assume you are a borrower with only a 5 percent down payment and so-so credit. You are also a veteran. Obtain information from two different lenders about conventional 95 percent financing and VA financing and analyze both to see which is the better loan for you.
2. Using a front-end ratio of 35 percent and a back-end ratio of 40 percent, qualify a buyer who earns $100,000 per year for a thirty-year loan of $450,000 at 6.25 percent interest. Assume taxes of $5,000 per year and insurance at $850 per year. The buyer has a $525 monthly car payment with eighteen payments left and pays a minimum of $320 a month on credit cards.
3. Explain the process in which primary lenders make loans and then get the money back to re-loan.
4. Explain the differences between Cal Vet loans, VA loans, and FHA loans. What security documents are used for each, and what function does each agency play in the loan process?
5. What issues does an appraiser analyze when making a value judgment of a subject property against three comparables? How could each issue, such as location and condition, affect the value of the subject property?
Chapter 7 Quiz
1. A reverse mortgage refers to what type of loan?
a. A loan that gets smaller with each payment.
b. A mortgage that has simple interest.
c. A loan that pays like an annuity and has compound interest.
d. An interest-only loan.
2. An adjustable-rate loan index is 5 percent at the time the loan is made. The margin for the loan is 2 percent. With a 5 percent lifetime cap, what is the highest the interest rate could go?
a. 6 percent
b. 7 percent
c. 7.5 percent
d. 12 percent
3. A lender who believes interest rates will soon be rising significantly will be most interested in what type of loan?
a. Thirty-year fixed-rate loan
b. Adjustable-rate loan
c. Fifteen-year fixed-rate loan
d. Renegotiable-rate mortgage
4. What kind of loan covers more than one property?
a. Subordinated loan
b. Adjustable-rate loan
c. Blanket loan
d. Land loan
5. A convertible ARM is a loan that can be changed to
a. another qualified borrower.
b. a different property.
c. a fixed-rate loan.
d. an adjustable trust deed.
6. What is the underlying security for a loan?
a. Property
b. Borrower's character
c. Borrower's ability to repay
d. Borrower's net worth
7. What is the lender's margin under an ARM?
a. The difference between the index interest rate and the rate charged by the lender.
b. The difference between the points paid by the borrower and the points paid by the lender when it sells the loan to FNMA.
c. The spread created by FRMC.
d. The lender's net profit on the loan.
8. A buyer who works for a large corporation says she will be transferred in two years. What is the best loan for her?
a. A non-assumable loan
b. A balloon payment mortgage
c. A fixed-rate loan
d. A loan with no prepayment fee
9. Which loan type is most likely to meet all the criteria of Question 8?
a. Reverse mortgage
b. Fixed-rate mortgage
c. VA-guaranteed loan
d. Adjustable-rate mortgage
10. Under an ABA, a broker would need to disclose in writing to a client her ownership in a(n)
a. travel agency.
b. auto insurance company.
c. electrical contracting company.
d. property insurance company.