© OnCourse Learning Chapter 11 : Lending Practices

o Term loan – interest payments only until due. o Amortized loan – regular equal payments for life of loan including both principal & interest. o Balloon loan – any loan that has a final payment larger than any of the previous. o Partially amortized loan – series of amortized payments with a balloon payment at maturity. Loans © OnCourse Learning

Repaying a 6-year, $1,000 Loan © OnCourse Learning

Repaying a 6 year $1,000 amortized loan 9% Interest per Year © OnCourse Learning

Balance Owed Each Year of the Loan © OnCourse Learning

Amortization Table: Monthly Payment per $1,000 of Loan © OnCourse Learning

Balance Owing on a $1,000 Amortized Loan © OnCourse Learning

 Budget Mortgage  Balloon Loan  Partially Amortized Loan  Earlier Payoff  Biweekly payments © OnCourse Learning LOAN AMORTIZATION

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? 80% Loan-to-Value © OnCourse Learning

 Equity  Loan Points  Origination fee  Discount points © OnCourse Learning LOAN TERMINOLOGY

Insures loans UFMIP Anyone qualified Rate negotiable Points 3.5% down 96.5% L-T-V Guarantees loans Funding fee Veterans only Rate negotiable Points No down payment 100% L-T-V FHA VA VA / FHA Comparison © OnCourse Learning

Owner occupied 1-4 family dwellings Refinancing allowed Assumption allowed with approval VA / FHA Similarities © OnCourse Learning

 VA   FHA   Conv  nie+Mae&s=Loan+Limits nie+Mae&s=Loan+Limits Loan Limits Info © OnCourse Learning

 Private Mortgage Insurance  PMI Conv  UFMIP FHA  VA Loan Guarantee  Insures lenders against losses Mortgage Insurance © OnCourse Learning

 A federal agency under the U.S. Department of Agriculture.  Like the FHA, it came into existence due to the financial crises of the 1930s.  The RHSA offers programs to help purchase or operate farms. © OnCourse Learning RURAL HOUSING SERVICES ADMINISTRATION

 VA Amortized loan  Balloon loan  Conventional loans  Equity  FHA  Impound or reserve account  Loan origination fee  Loan-to-value ratio  Maturity  PITI payment  PMI  Point  Principal  UFMIP Key Terms © OnCourse Learning