Real Estate Section 4
Truth in Lending
Federal Law that requires disclosure of APR
Market Data Approach
Uses comps, adjustments are made for area/location, financing, & physical characteristics
Cost Approach
Replacement and Reproduction costs
Income Approach
Uses the NOI and Cap rate
Developers use
Blanket Mortgages with partial release clauses to allow them to sell off one at a time without having to pay off the full development loan
Tax assessor's
Parcels numbers and/or the property address are not a formal legal description. use metes and bounds, plats map, etc.
Balloon Payment
A lump sum principal balance that is due at the end of a loan term. The borrower pays much smaller monthly payments until the balloon payment is due.
The Three Approaches to value:
All of the Above
Accelerator clause
assume a borrower with a five year mortgage loan fails to make a payment in the third year. The terms of the loan include an acceleration clause;
which states the borrower must repay the remaining balance if one payment is missed
Underwriter or underwriting department
The one who makes the final decision on a loan approval
Leverage
Borrowing as much as possible
Qualifying ratios are used by
Lenders as a qualifying tool for residential mortgages.
FHA currently only allows
Assumptions if the borrower does a full qualified assumption.
Mortgage contingency clause/addendum
make the earnest money refundable if you dont get approved
Substitution
Concept that a property's value is set by acquiring a similar property
functional obsolescence
Old fixtures that still work
VA
Does not require a down payment
Tax Prorations (before July 1)
Calculate days, divide bill by 365, multiply by # of days. If Seller owes then Buyer gets a credit
Insufficient payment
to pay one month's interest payment results in negative amortization
Formula for Intangible Tax
1.50 per five hundred ($3.00 per thousand) based upon the amount of loan.
Example: A property financed for $550,000.00 would incur a $1,650.00 State of Georgia Intangibles Tax. The tax must be paid within 90 days from the date of instrument.
Prepaid Interest calculation
take your annual interest rate and divide it by 365 days. Then take that number and multiply it by your home loan amount
Transfer Tax Calculation
based upon the property's sale price at the rate of $1 for the first $1,000 or fractional part of $1,000 and at the rate of 10 cents for each additional $100 or fractional part of $100
Interest only *Aka straight mortgage and Term Note*
type of mortgage in which the mortgagor (the borrower) is required to pay only the interest on the loan for a certain period
September closing
Taxes show on a closing disclosure as credit to seller and debit to buyer
How to calculate the loan amount
add up the total interest charges for the life of your loan and combine that amount with any loan fees you paid
How to calculate a Gross Rent Multiplier
Sales price divided by rent equals GRM; rent of new property times GRM equals new property sales price
How to calculate accrued interest for the seller
Principal x Rate x Time
Promissory note structure
Where there are equal and regular monthly payments over a set number of years resulting in a full payoff is the definition of amortization
Special purpose, unique, or new properties are appraised by the
Cost Approach
PMI is required of Conventional Loans greater than
80%
Liquidity
When real estate sells quickly and at (or close to) its market value
The HECM is the FHA's
reverse mortgage program
Reverse mortgage program
Enables you to withdraw a portion of your home's equity to use for home maintenance, repairs, or general living expenses
HECM
Home Equity Conversion Mortgages
Reverse mortgages are designed for older adults who already own a home,
They've either paid it off completely or have significant equity—at least 50% of the property's value