Notes days 22 24
Notes days 22 24 FIRE 378
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This 4 page Class Notes was uploaded by Matheus Aching on Monday September 28, 2015. The Class Notes belongs to FIRE 378 at St. Cloud State University taught by Dr. mooney in Summer 2015. Since its upload, it has received 21 views. For similar materials see Real estate principles in Human Development at St. Cloud State University.
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Date Created: 09/28/15
REAL ESTATE RE FINANCING Mortgage compose of 2 paper document security instrument and a note debt instrument promise to pay 0 Mortgagor is the borrower o Mortgagee is the lender Theories Title convey the title of the property to the mortgagee lender until debt is satisfy Lien gives the lender the right to rely on the property as a security for the debt obligation Can be exercised only in the event of the default of the note Note content Interest rate 0 Can be fixed or variable 0 Actual interest charged per month is the annual stated contract interest rate divided by 12 multiplied by the beginningofmonth balance 0 Payment due on the fist day of the next month 0 Definite term of maturity usually in years 0 Term for amortization determines the payment and the schedule of interest and principal payment 0 Term to maturity determine when the entire remaining balance on the loan must be paid in full balloon loan Principle amount Monthly payment 0 Have the same monthly payment throughout and the payment is just sufficient to cover interest due plus enough principal reduction to bring about full repayment When payment is due Late fees 0 Significant issue on debt contracts Where payable Document content Covenants promises o Repay the debt 0 Insurance 0 Pay RE taxes 0 Maintain property in a reasonable condition 0 Obtain lender s authorization Clauses Acceleration 0 Enables lender to declare the entire loan balance due and payable DueonSale Alienation o Gives the lender the right to accelerate the loan requiring the borrower to pay it off Defeasance Mortgage assumption new borrower assumes responsibility for the mortgage Has to qualify for the mortgage Buy subject to the mortgage new borrower takes over the payment but no the responsibility of the mortgage Default Failure to meet the requirements of the note constitutes in default Foreclosure Ultimate resource of the lender court supervised process of terminating all claims of ownership by the borrower and all liens inferior to the foreclosing lien Strict foreclosure 0 Lender still has the title so just repossession of property Iudicial foreclosure 0 Lengthy process Nonjudicial foreclosure 0 Mortgagee lender conducts sale of property 1 Foreclosure notice has to be post 6 weeks prior 2 Notice of default at least 4 weeks before sheriffs sale 3 Equitable redemption mortgagor rights to stop foreclosure by producing the amount due and paying the cost of the foreclosure process 4 Sheriff s sale sells property to the highest bidder sheriff s certificate of sales 1025 down payment 5 Statutory right of redemption if property is not sold in the sheriff s sale another chance for mortgagor to pay off the amount due typically 6 months to 1 year REO RE owned by the bank Types of Mortgage Federal Housing Administration FHA insured 0 Covers any lender loss after conveyance of title of the property to the US Department of Housing and Urban Development HUD o Allows a high loanto value ratio 965 requiring only that the borrower contributes 35 of the lesser of actual sales price or appraised value as a cash down payment for an owneroccupied residence 0 2 premiums I UFMIP upfront mortgage insurance premium I Mortgage insurance premium MIP Veterans Affairs VA guaranteed 0 O 0 Guaranteed loans help veterans obtain home mortgage loans with favorable terms which not otherwise qualify Protects lender against default loss up to a maximum percentage of the loan amount Minimal down payment of 0 Max long value ratio LV of 100 Conventional Mortgage 0 O O 0 Any standard home loan that is not insured or guaranteed by an agency of the US government Max LV ratio of 80 Min down payment of 20 The larger the down payment the lower the risk of default Insured conventional or Private mortgage insurance PMI O O O O O O O 0 Protect a lender against losses due to default on the loan Does not protect against legal threat to the lender s mortgage claim or physical hazards Insures only a portion of the loan only the 10 15 top portion PMI will reimburse the lender for a loss up to 1015 of the loan amount Max LV ration of 9095 Looks like FHA with conventional mortgage Adjustable Rate Mortgage ARM 0 Interest rate is adjustable periodically to re ect market conditions Blanket Mortgage 0 One or more pieces of real property used as security for the same debt 0 Popular with builders and developers who buy land than subdivide them to create many individual parcels to be sold separately Package Mortgage 0 Both real and personal property used as securities for the same debt 0 The loan that finances the purchase of a home also finances the purchase of personal property Contract for Deed or Land contract A sales agreement in which the actual delivery of the deed conveying ownership will not occur until after the buyer takes possession of the property Allows seller to finance the sale through installment payments and to have resources to the property in case of default by the buyer Cancellation is quick because it dos not have to pass the title back since the owner has it Construction Loan Short term financing o The money is advance incrementally during construction because it is a risk loan 0 Lenders charge higher interest rates on construction loans Purchase Money Mortgage 0 A mortgage loan where the seller lends all or part of the purchase price of a property to the buyer and the loan is secured by a mortgage 0 Created simultaneously with conveyance of ownership Wraparound mortgage 0 Add mortgage to another mortgage 0 EX 200000 sales price 120000 fist mortgage at 45 Buyer has 20000 available for down payment 180000 wraparound at 65 60000 is the seller s money because stills owes 120000 to the lender on the 1St mortgage 60000 0065 3900 180000 0065 11700 120000 002 2400 120000 0045 5400 W 6300 Or Interest earned by the seller 2 630060000 105 Buyer pays to the seller and seller pays the lender Secondary Markets Household savings Commercial banks Mortgage gt Capital Markets FNMA FHLMC Savings GNMA Buy at a discount Mortgage bankers make money by Origination fees Servicing fees