1. Real Estate Principles Tenth Edition
An Introduction to the Profession
Tenth Edition

2. Chapter 11 Lending Practices
______________________________

3. 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.

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

5. 9% Interest per Year on the Loan

6. Balance Owed Each Year of the Loan

7. Amortization Table: Monthly Payment per $1,000 of Loan

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

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

10. 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.

11. UFMIP Anyone qualified
VA / FHA 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

12. VA / FHA Similarities Owner occupied 1-4 family dwellings
Refinancing allowed
Assumption allowed (with approval)

13. Loan Limits Info VA FHA Conv http://www.homeloans.va.gov/
Conv

14. Mortgage Insurance Private Mortgage Insurance PMI
Insures lenders against losses

15. Key Terms Amortized loan Balloon loan Conventional loans Equity FHA
Impound account
Loan origination fee
Loan-to-value ratio
Maturity
PITI
PMI
Point
Principal
UFMIP VA