08 - Government Loans
Texas veterans may secure a loan of up to
$150,000 for a 30-year fixed rate mortgage on a tract of land that is one acre or more.
How much is the basic entitlement of a VA loan?
$36,000 is the basic entitlement of a VA loan.
Monthly Gross Income X Debt Ratio
= Monthly Housing Expense + Monthly Debt Obligations 36% - 43%
List 3 requirements of a VLB Home Loan
A VLB Home Loan may be used to purchase a home that meets these requirements: It must be the veteran's primary residence. It must be located in Texas. It must be a single-family attached or detached home, townhome, or condominium. Duplexes or other multi-family units must have been constructed at least five years prior to the closing date of the loan. New homes must have either ENERGY STAR certification or Home Energy Rating Score (HERS) Index of 75 or less.
Credit scoring
A computer-based method of assigning a numerical value to an applicant's credit used to create a statistical prediction of a borrower's likelihood of defaulting on a loan
The most common type of loan offer that buyers receive from banks is called:
A firm commitment
Mutual Mortgage Insurance (MMI)
A monthly insurance premium that is paid with the monthly principal, interest, taxes, and insurance payment.
Junior loan
A mortgage - second mortgage or second trust deed - that is "subordinate in right or lien priority" to an existing mortgage on the same property. Junior loans contain more risk than first loans. For this reason, they typically carry a higher interest rate
Funding fee
A percentage of the loan amount charged for the privilege of obtaining a VA loan
What type of mortgage is one that meets the "ability-to-repay" requirements?
A qualified mortgage is one that meets the "ability-to-repay" requirements
Mortgage payment expense to effective income
A ratio the lender calculates by dividing the total mortgage payment by the borrower's gross monthly income
Total fixed payment to effective income
A ration the lender calculates by dividing the total mortgage payment plus all recurring monthly revolving and installment debt divided by the borrower's gross monthly income.
Mortgage Insurance Premium (MIP)
An upfront insurance premium which is a percentage of the loan amount.
The Texas Department of Housing and Community Affairs (TDHCA) offers mortgage loan funds and down payment assistance to eligible first-time homebuyers in the form of two types of loans.
Assisted loans are first lien mortgage loans made available at an interest rate slightly above the current market interest rate. They provide down payment and closing cost assistance. Unassisted loans are available at an interest rate slightly below the current market interest rate. They do not include funds for down payment and closing cost assistance.
By definition, what type of mortgage - second mortgage or second trust deed - is "subordinate in right or lien priority" to an existing mortgage on the same property?
By definition, a junior loan is a mortgage - second mortgage or second trust deed - that is "subordinate in right or lien priority" to an existing mortgage on the same property. Junior loans contain more risk than first loans.
Debt ratio
Calculation that considers all of the monthly obligations of the income ratio plus any additional monthly payments the applicant must make for other debts.
Conventional loans also have their disadvantages.
Conventional loans typically require higher down payments than government-backed loans require. Some conventional loans carry prepayment penalties, while government-backed loans do not.
Texas Department of Housing and Community Affairs (TDHCA)
Department that offers mortgage loan funds and down payment assistance to eligible first-time homebuyers.
Certificate of Reasonable Value (CRV)
Document issued by an approved VA appraiser showing the value of the property to be equal to or greater than the sales price
Certificate of Eligibility
Documentation showing the amount of entitlement available to a veteran
What is the purpose of FHA mortgage insurance?
FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans.
Monthly Housing Expense
Monthly Gross Income X Income Ratio =
Qualified Mortgage
Mortgage that meets the "ability-to-repay" requirements, which provides the lender certain legal protections in case the borrower fails to repay the loan
Release of liability
Official documentation from the original lender that will relieve the veteran from any further liability for the loan when it has been assumed. The veteran would remain personally liable for any deficiency if they do not obtain the release
Federal Housing Administration (FHA)
Overseen by HUD, FHA provides low-down-payment loans to qualified buyers.
Conventional loans have several advantages over government-backed loans.
Processing a conventional loan usually takes less time. Loan approval from a conventional lender can take 30 days or less, while approval on a government-backed loan can rarely be done in less than 30 days. Conventional loans typically have fewer forms, and processing can be more flexible than government-backed loans. There is usually no legal limit on loan amounts with conventional loans, but government-backed loans have dollar limits that vary by agency. In the event of a loan refusal, borrowers have other lenders that they can apply to. There is only one of each government agency type, so if the loan is refused by a particular agency, there are no alternative lenders available. Conventional lenders are much more flexible. Many offer a variety of loans with attractive provisions.
Direct Endorsement (DE) Program
Program that allows approved lenders of FHA-insured loans to underwrite directly for FHA.
Texas Veterans Land Board (VLB) Veterans Housing Assistance Program
Program to help Texas veterans purchase a home with a low-interest rate loan and little or no money down
VLB Veterans Land Loan Program
Program which gives Texas veterans the opportunity to borrow money to purchase land at below-market interest rates while only requiring minimum 5% down payment.
FHA mortgage insurance
Protection for lenders against losses that result from homeowners defaulting on their mortgage loans. A lender bears less risk because FHA will pay a claim to the lender in the event of a homeowner's default
Income ratio
Ratio which establishes borrowing capacity by limiting the percentage of gross income a borrower may spend on housing costs. Also called the housing expense ratio
What is the most commonly used type of loan for the FHA single-family program?
Section 203(b) of the National Housing Act is the most commonly used FHA single-family program.
What type of mortgages allow an individual to purchase or refinance and rehabilitate a home at least one year old?
Section 203(k) mortgages allow an individual to purchase or refinance and rehabilitate a home at least one year old.
Texas Veterans Land Board (VLB)
Texas board which provides veterans with other financing alternatives in the form of special assistance programs for home purchases, home improvements, and land purchases.
Government-backed loans include loans offered by
The Federal Housing Administration (FHA) The Department of Veterans Affairs (DVA) - sometimes simply referred to as VA Texas Veterans Land Board Program (TVLB) Other state, county or city-backed subsidized loan programs
The Smiths are getting an FHA loan on a property with a sales price of $300,000. What is the minimum down payment they have to take to closing?
The Smiths are getting an FHA loan on a property with a sales price of $300,000. $10,500 is the minimum down payment they have to take to closing.
What Texas Homebuyer program requires manufactured housing to be permanently affixed to a foundation (FHA, VA loans only)?
The Texas First Time Homebuyer Program program requires manufactured housing to be permanently affixed to a foundation (FHA, VA loans only).
What is a percentage of the loan amount charged for the privilege of obtaining a VA loan?
The VA Funding Fee is a percentage of the loan amount charged for the privilege of obtaining a VA loan.
Are FHA loans high or low loan-to-value ratio mortgages?
The loans FHA provides are high loan-to-value ratio loans, so FHA insures the loans in order to make them available to higher-risk individuals.
The maximum FHA loan amount allowed varies by?
The maximum loan amount allowed varies by geographic area.
Entitlement
The maximum number of dollars that the VA will pay if the lender suffers a loss
Which is true about the amount of closing costs that the seller is permitted to pay with a VA loan?
The seller can pay 100% of the closing costs.
Texas Veterans Home Improvement Program (VHIP)
VLB program which provides below-market interest rate loans to qualified Texas Veterans for home repairs and improvements to their existing homes.
The Texas Veterans Land Board (VLB) administers the following programs:
Veterans Housing Assistance Program Texas Veterans Home Improvement Program Veterans Land Loan Program
When the buyer doesn't have the cash to cover the down payment, they may ask the seller to carry a portion of the sale price in the form of what type of loan?
When the buyer doesn't have the cash to cover the down payment, they may ask the seller to carry a portion of the sale price in the form of a junior loan.
Loan commitment
Written notice from the lender of the agreement to lend to borrower under specific terms
The funding fee is
a percentage of the loan amount charged for the privilege of obtaining a VA loan.
Section 203(k) mortgages allow
an individual to purchase or refinance and rehabilitate a home at least one-year old
A Qualified Mortgage
is one that meets the "ability-to-repay" requirements
junior loan is a
mortgage - second mortgage or second trust deed - that is "subordinate in right or lien priority" to an existing mortgage on the same property. Junior loans contain more risk that first loans.
FHA mortgage insurance
provides lenders with protection against losses that result from homeowners defaulting on their mortgage loans.
When the buyer doesn't have the cash to cover the down payment,
they may ask the seller to carry a portion of the sale price in the form of a junior loan.
The maximum FHA loan amount
varies by geographic area. The amount is based on a percentage of median house prices for the area, with a ceiling calculated as a percentage of the current conforming loan limits