Real Estate notes 2024 (21)

*Ex problems on Ch 5 quiz - Correct Ans - A financial term used by lenders to express the ratio - Loan to Value on a Mortgage is determined by using the purchase price or the Appraised value or Contract price, whichever is less VA Mortgage (Veterans Administration Loan) * Guaranteed by federal gov - Correct Ans - Offer long-term financing to eligible American veteran or their surviving spouses (provided they do not remarry). Intention of VA loan is to supply home financing to eligible veterans in areas where private financing is not generally available & to help veterans purchase properties with NO down payment. Downside: There are closing costs Fixed rate Mortgage * Less risk and preferred among long term homeowners - Correct Ans - Interests Rate is fixed for the life of the loan (Principle+ Interest payment will be the same every month) Note: u can do fixed rate for amortization terms (10 to 30yr fixed rate loan)- Longer the term = higher interest rate & monthly payments is less compared to a 10 yr fixed loan bc with a 10yr u are paying it faster * As an agent its best to have ur client verify the monthly mortgage payment they can comfortably afford to pay & inform them on possible future changes that can affect their financial situation Adjustable Rate mortgage (ARM) * best suited for people who move frequently * " How long are they planning to live in their home for?"- ARM - Correct Ans - Mortgage loan with interest rate on the note periodically adjusted based on an index that reflects cost to lender of borrowing on the credit markets- (only up to 10 to 30yrs) - Considering ARMS look at: Start Rate, Annual Cap, Lifetime Cap, Margin Popular ARM's: 10/1 ARM: fixed for 10 yrs then adjusts every year 7/1 ARM: fixed for 7 yrs then adjusts every year 5/1 ARM: fixed for 5 yrs then adjusts every year 3/1 ARM: fixed for 3 yrs then adjusts every year CAP & MARGIN determine how much adjustable mortgage rate will be (typical margin is 2.75%)
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