© 2012 Cengage Learning

Types of Financing Chapter 13

© 2012 Cengage Learning In This Chapter You will look at the almost endless array of mortgage rates and accompanying fees used in today’s finance market.

© 2012 Cengage Learning Adjustable Rate Mortgage Interest rate Margin Adjustment period Interest rate cap Payment cap Negative amortization Disclosures What to look for?

© 2012 Cengage Learning Other Financing Methods Graduated Payment Mortgage Equity Sharing “Rich Uncle” Financing Package Mortgage Blanket Mortgage

© 2012 Cengage Learning More Financing Methods Reverse Mortgage Construction Loan / Interim Loan Blended-Rate Loan Equity Mortgage

© 2012 Cengage Learning Affordable Housing Loans Underwriting standards are modified to recognize different forms of credit responsibility. Consumer education. Low down payment.

© 2012 Cengage Learning More Financing Methods Conventional Loan (97%) The Nehemiah Program

© 2012 Cengage Learning Seller Financing The current owner of the property agrees to accept part of the purchase price in the form of a loan (promissory note and mortgage or deed of trust) also becoming the lender in the transaction.

© 2012 Cengage Learning Wraparound Mortgage BuyerSeller $20,000 Debt $60,000 Debt 1 st Lender (Includes wrapped $20,000)

© 2012 Cengage Learning Financing Techniques Subordination Contract for Deed Option Creative Financing Rental Land Leases

© 2012 Cengage Learning Investing in Mortgages Individuals can invest in mortgages Individuals can purchase junior mortgages Higher yields available

© 2012 Cengage Learning Key Terms ARM Affordable Housing Loan Asset Blanket mortgage Construction loan Equity sharing GPM Negative amortization Option Package mortgage Reverse mortgage Seller Financing Wraparound mortgage