CE Shop Financing set 2
VA Loans must be used to:
* Buy a home/condo unit in a VA-approved project * Build a home * Simultaneously purchase and improve a home * Improve a home * Buy a manufactured home and/or lot
Exceptions to vets paying funding fee on a VA loan
* Vets being compensation 4 srvc-rel disabilities *Vets w/retirement pay in lieu of disability $. * Spouses of vets died in srvc or from related disabil. * May also be waived in cases where the veteran makes a large down payment.
Funding fees range but there are some cases when it's lower, what are they?
0.5% for assuming a VA loan 0.5% refinancing 1% for purchasing a manufactured home
When and how does PMI Terminate?
1 - Automatic Termination -- 22% equity per 1998—the Homeowner's Protection Act. 2 - Borrower-Requested Termination -- ask at 80%the property value meets an 80% LTVR. 3 - Final Termination -- If borrowers are current on payments, the lender must terminate PMI one month after the loan reaches the midpoint of it's amortization schedule
If Vet has his loan assume how to prevent liability for the loan?
1 - Get release of liability from the new buyer; or 2 - Get Substitution of entitlement if buyer is a vet, which is notation of loan contract.
Maximum loan origination fee on a VA loan.
1 percent
Five things FHA did to help mortgage market
1- Qualifies buyers/ set basic standards 2 - Specific construction standards 3 - Introduced the long-term amortized loan. 4 - Req State Lic/Cert. Appraisers 4 FHA Loans 5 - FHA Stability opened global mkt 4 MBSs
FHA Premium for HECM loans
1.25% of the loan value Initial mortgage insurance premium fee, if applicable, will be between 0.5% and 2.5
Cash-Out Refinancing how much of equity
100 percent
Minimum credit score on FHA loan
580
What is a reverse 1031 exchange?
A reverse exchange is an option for an investor who has not sold the original property that is part of the 1031 exchange, but who has already purchased the replacement property to try to sell another property instead of the original property.
FHA program for Homeownership Voucher Assistance
Allows participants to use Housing Choice Voucher funds, which are normally used to pay rent, to help pay monthly homeownership expenses. Applicants must be first-time homeowners, have at least one employed family member, and meet minimum income requirements.
FHA Energy Efficient Mortgage loan program
Allows the borrower to incorporate the cost of adding energy efficient features to new or existing houses in combination with a 203(b) or 203(k) loan, or for 203(h) in connection with a disaster.
Savings and Loans Banks
Also called thrifts. S&Ls specialize in taking in savings deposits and then lending out through mortgages and other loans.Their primary source of business is real estate loans. They don't lend to businesses or commercial organizations. It may be easier to obtain a mortgage from them as opposed to a commercial bank.
What is direct endorsement?
An FHA program. Direct endorsement allows the lender to perform the property appraisal, evaluate the borrower's qualifications, and approve loans according to the FHA's guidelines, which streamlines the process.
What happens to the VA loan cap in 2020?
As of January 1, 2020, the VA loan cap is going away altogether. This change is part of the Blue Water Navy Vietnam Veterans Act that President Trump signed into law on June 25, 2019.
Are you a mortgagor or a mortgagee?
As the borrower I am the morgagor ... Remember the O in borrow. Remember two EE's Lender or Mortgagee!
Cash out financing on a VA loan qualifications?
Because the loan amount can exceed the current balance on the original VA loan, the borrower must go through the qualifying process again, including submission of a COE, income verification, and an appraisal with a new certificate of reasonable value.
What kind of RE loans do insurance companies make and % of assets in those?
But, for the most part, insurance companies will only loan on commercial properties. Most insurance companies have between 5% and 20% of their assets in commercial mortgages.
Compensating factors that the lender may consider when qualifying a borrower for a VA loan in addition to two radios include:
Excellent credit history (620 minimum on all loans) Minimal debt Long-term employment Significant liquid assets Large down payment New loan represents little or no increase in housing expense High residual income Low debt-to-income ratio Tax credits for child care Tax benefits of homeownership
What happens if there is a negative balance when owners of HECM loan dies?
FHA covers any negative balance after the sale of the home.
What does Title I of National Housing Act of 1934 Cover?
FHA programs related to: 1 - Property Improvements: SFH for alterations, repairs, and site improvements (such as a garage); multifamily, just alterations and improvements 2 - Manufactured Housing: for the home, lot, or both. Amts allowed are set and vary by location.
How does TCJA affect mortgage deductions on properties purchased before 2018?
For homes purchased before 2018, taxpayers are grandfathered in and may continue to deduct mortgage interest on acquisition costs of up to $1 million.
What are SALT taxes and how much can be deducted?
Homeowners can also deduct up to $10,000 for SALT taxes (state and local income taxes, which includes property taxes) each year.
reverse exchange
If your client finds and closes on an investment property and then decides to sell another property, he can do a tax deferral "backward." . You're still strapped to the 45- and 180-day deadlines, though, and it can get hairy
Mortgage Fraud that involves Property flipping
Illegal when a home is bought, appraised for more than it's worth, and sold within a short time frame. Kickbacks to the parties are commonplace.
Common examples of Partnership Between Mortgagees
MBSs REMICs-- RE investment conduits REMTs RE Mortgage Trusts REITs -- RE investment trusts
When and why do people form Partnership Between Mortgagees and Mortgagors
Major commercial real estate projects. Ownership is not equal: 5% to more than 50%. Makes the lender a partner and financier. Mortgagors can get lower interest rates
Can sellers subsidize a buyers down payment on an FHA loan
No
Land contract disadvantages to a buyer
No ownership until paid. Can sell and get equity mid-point Buyer can lose all if they don't make payments.
Does the VA insure loans?
No, it guarantees them.
Arm payment caps
Payment caps limit the amount the monthly payments can increase during any year.
What is predatory lending and how is it done?
Predatory lending is the practice of charging fees and interest much higher than necessary. It's done by: * Charging excessive and/or fake fees * Instructing borrowers to give false information * Charging higher interest rates for different races * Charging 5% over current subprime mkt rate
3 laws that address predatory lending and years effective
RESPA: 1974 TILA: , 1968 HOEPA: 1994 and updated 2014
What are some fees Vets can pay on VA loan
Real estate brokerage/transaction fees, termite report fees (unless it's a refi)
Residual Income qualification on a VA loan
Residual income is the amount of net income remaining—after deduction of debts, obligations, such as utility and phone bills, and monthly shelter expenses—to cover family living expenses, such as food, health care, clothing, and gasoline. The minimum amount of residual income a borrower must have is set forth according to geographic area and number of family members.
reverse annuity mortgage
Same as a reverse mortage
Piggy - Back Loan/Split Loan
Second loan to avoid pmi. The first mortgage in a piggyback loan must be 80% or less of the property's value. Lenders don't do them with less than 10 percent down.
FHA programs for Native Americans
Special loans for native Americans only. * To construct, acquire, refinance, or rehabilitate SFHs trust land/loc. in Indian/Native Alaskan area. * Loans to purchase/refinance, build, or rehabilitate property located on or off tribal lands. * Require an agreement with the tribal council in charge of the land where the property is located.
How much to Vets pay for funding fee, which is used to help keep VA program going?
The COE will also be used to determine whether the veteran pays the funding fee, and how much it is. The funding fee may be reduced if the veteran provides a down payment, and it will be waived completely if the veteran has 10% or higher VA disability.
Who qualifies for FHA Good Neighborhood program?
The Good Neighbor Next Door program offers specific FHA-foreclosed properties to owner-occupied individuals who are law enforcement officers, K-12 teachers, firefighters, or EMTs.
What's another name for the Homeowners Protection Act?
The PMI Act of 1998
TCJA tax deduction limits for home bought 2018-2025
The Tax Cuts and Jobs Act of 2017 (TCJA): owners can deduct the interest paid on their loan with limits based on acquition costs (sales price) $750,000 for married couples filing jointly, or $375,000 if the owners are married and filing separately.
Why are 1031 exchanges more difficult on properties that sold between October 17 and December 31
The law give 180 days from sale or the due date of your client's federal income tax return (April 15) for the tax year in which the relinquished property was sold--which ever is shorter. So Starting Oct 17, the 180 time frame grows shorter until the new year.
Growing Equity Mortgage
This is a fixed-rate mortgage where the monthly payments increase over time according to a set schedule. The interest rate remains the same, and there is no negative amortization; the first payment is a fully amortizing payment. As the payments increase, the amount above what would be a fully amortizing payment is applied directly to the principal balance. This reduces the life of the term and increases the interest savings for the borrower.
Wrap-Around Mortgage
This is a form of seller financing in which the seller's mortgage remains in place, but the seller is receiving payments from the new buyer and therefore financing the purchase. The mortgage payments the buyer makes are expected to be higher than the payments on the seller's original loan, so the seller isn't paying out of pocket. It's generally a relatively short-term arrangement (perhaps five years), made until the buyer is able to qualify for a conventional mortgage, and will then pay off the remaining principal to the seller.
Package Mortgage
This is a mortgage in which personal property is included with the real property in the sale. This might be used in the case of a furnished condominium, for instance, but it's more commonly used in commercial real estate where business assets are included as collateral.
Shared Equity Mortgage
This is used most often in commercial lending. The borrower agrees to the lender's participation in the net income from the commercial property or enterprise in order to obtain the loan. The lender may receive interest and a share of the owner's profits.
Debt-to-Income ratio to qualify for a VA loan
Total monthly debt payments (housing expense, installment debts [such as utilities], and other debt) against gross monthly income. Borrowers should come below a 41% ratio to qualify for a VA loan.
Blue Water Navy Vietnam Veterans Act.
Trump signed 2019 and effective 2020: * Eliminates VA loan lending limits * Ends funding fee differences vets and reserves * Exempts Purple Heart recipients from loan fees *Removes the loan limit for the Native American Direct Loan Program * Authorizes VA-designated appraisers to rely on third parties for appraisal-related information * Temporarily increases rates for certain loans by 0.15 to 0.30 percent
How long to get a new VA loan after filing bankruptcy or foreclosure?
Typically, s wait for two years before using a VA loan. This is a significant difference from the waiting requirement for a conventional loan, which is seven years. (The type of bankruptcy makes a difference.)
How much does the fed gov guarantee on a VA loan
Up to 25% of the loan (so makes no downpayment for homes up to $144k), enabling the lender to give borrowers more favorable terms; But there is also a secondary program that increases the cap that allows much higher depending are region...making zero down possible up to $417k and higher.
restoration of entitlement
Veterans who have used a VA home loan benefit and paid the loan off completely can borrow again under the program, with the same level of entitlement. They can also have another VA qualified person assume their loan, and then get a new one.
CRV
With a VA loan, this appraisal must be in the form of a certificate of reasonable value, and must be performed by a VA-assigned certified real estate appraiser. A CRV has a shelf life of only six months for resale properties, and 12 months for new construction.
Pledged Account Mortgage
With this type of graduated payment mortgage, the buyer deposits funds into a savings account held by the lender. This fund, plus any earned interest, is used to supplement mortgage payments. The purpose is to reduce payment amounts in the early years.
As it happens, the property that Sam bought didn't use his entire entitlement. He and his family found another property a year later and decided they'd like to move. However, he hadn't sold the first property yet. Is he allowed to use the remaining entitlement with a second loan
Yes, it's called partial entitlement. Due to the requirement for owner occupancy, Sam will need to sell his first home.
Does HOEPA apply to revolving credit
Yes. The Home Ownership and Equity Protection Act, is amendment to TILA, so it also applies to revolving credit. Req. consumer education and restricts fees on loans, etc.
How does the Blue Water Navy Vietnam Veterans Act affect NADL Program.
Yhe act removes the loan limit for the NADL Program. This is effective as of January 1, 2020.
What are partnership between two borrowers on a mulifamily property sometimes called
cooperative. They are a partnership between Partnership Among Mortgagors (i.e., the borrowers)
Straight-Line Mortgage
(Constant Amortization) With this type of mortgage, the amount applied to principal remains constant over the life of the loan. Each payment becomes lower as the loan balance is reduced with each payment.
What FHA programs does Title II National Housing Act of 1934 Cover?
* 1-4 -family homes * New home victims of disasters 100%/1st yr * Coop purchase. * Construction of multi-family renta/coop * Rehab home in an older, declining urban area * Single condo unit * Adjustable rate mortgages * Reverse mortgages age 62+ borrowrs
Rules for multiple properties in 1031
* 200% rule: may not exceed 200% of value of the relinquished property. * 95% rule: Must total at least 95% of the value of the relinquished property. * Three-property rule: Up to three properties are okay with no fair market value restrictions.
FHA Disaster Relief programs
* 203(h) program to replace 100% w/in 1yr * 90-day moratorium on foreclosures for homeownerstrying to repair or rebuild; Loan servicers are required to work with the homeowner on payments, including waiving late charges; lenders are also required to release homeowner insurance proceeds to the borrower.*
What can sellers subsidize on FHA loan
* 6% of the less or sales /appraised value (that's less) toward the buyer's closing costs, prepaid expenses, discount points, and other financing costs. * Permanent and temporary interest rate buydowns * Pay mortgage interest 4 fixed-rate mortgages * Mortgage payment protection insurance * All upfront mortgage insurance premium (UFMIP)*
Who qualifies for VA loan
* Active duty, Reserves, National Guard, surviving spouses, and some other government employees. * Factors to qualify: Length of service or service commitment, duty status, and character of service * Must be Honorably discharged EXCEPT if discharge occurred due to hardship, government's convenience, a reduction-in-force, certain medical conditions, or a service-connected disability.
What is a COE?
* Certificate of Eligibility -- a document provided by the VA stating VA loan eligibility, and amt allowed * Sometimes lenders can get after Vet applies. * Veterans may also order on VA benefits website.
Are buydowns allowed on a VA loan?
Buydowns are allowed only on VA fixed-rate (not adjustable) loans, and the fee for the buydown may be paid by seller, buyer, or family members. Qualification for the borrower is based on the first year's payment rate.
What are FHA loan limits
* FHA limits the loan amount it will insure based on the type of structure (e.g., single-family vs. multi-family) and median home prices in the area. * Set annually. * FHA sets Loans that exceed the FHA limit are considered jumbo, non-conforming loans, and they're not eligible for sale to Fannie Mae or Freddie Mac.
The difference between VA and FHA qualification requirements
* FHA loans use two types of qualifying ratios * VA Loans focus "residual income" along with a debt-to-income ratio.
FHA Second mortgage terms
* First + Second total still within maximum LTV ratio. * The borrower must qualify to make both payments. * No Toxic loan features: such as balloon payments maturing within five years, highly variable mortgage payments, and pre-payment penalties, are not allowed
2008 HERA Regs. on FHA reverse mort. loans
* HECM loan in a single transaction * Counseling * No lender req insur. other than homeowner * Origination fees no more than 2% of the maximum claim amount up to $200,000, and 1% of the maximum claim amount. * Added Coops
Terms required for second VA mortgage
* It's approved by the VA legal department * The first + second mortgage don't exceed the CRV * Second mortgage interest rate less or + to 1st. * No toxic loan features (short-term paybacks, pre-payment penalties, balloon payments)
Cooperative
* Mortgator partnership to own mulifamily props. * Sells stock exchange for proprietary lease rights of single units, such as apartments. * Cooperative ownership does have a few potential dangers. If units sit unsold or a single member of the cooperative defaults, then the whole partnership is in danger of defaulting on its mortgage. Yikes!
FHA rules for loan assumption
* Originated before December 1986: No req. for new borrower having to qualify. * Post 1986: borrower must pass a creditworthiness review before being allowed to assume the loan. * Investors may not assume FHA loans * Property must be owner occupied 4 loan term
Installment sales contract or an installment land contract (the terms are used interchangeably).
* Seller financing where buyer pays installments * Seller hold legal title until paid off * During this process, the seller retains legal title of * Buyer has equitable "rights" * Sellers avoid big cap gain in a single year
Who can assume a VA loan and how do they qualify?
Anyone can assume. For VA loans originated since March 1988, an assumption requires lender approval of the buyer's credit, which may (but doesn't always) let the seller off the hook if the buyer defaults
What are seller concessions on a VA loan?
Anything that a seller wouldn't typically pay in a transaction. For example: * VA funding fee * Prepaid property taxes and insurance * Gifts, such as a television set or microwave oven * Escrowed funds 4 temp. interest rate buydowns * Payoff of buyer's credit balances or judgments
What type of lending institution does not pay federal taxes?
Credit Union
HECM
HUD's Home Equity Conversion Mortgage: A HUD Insured Reverse Mortgage Program for people 62+
Boot
In a 1031 exchange, any cash your investor receives from the proceeds of the sale is taxable. EX: if buying a property but all gain does not go into the property. It doesn't mean there can't be a tax-deferred exchange, but the taxes on the boot are due and payable.
What kind of mortgage is the principal is paid at the end of the loan?
In a straight mortgage, the principal is paid at the end of the loan. This is in contrast to a straight-line mortgage, where the principal stays constant over the life of the loan.
Adjustable rate caps
Initial cap -- first interest rate adjustment Periodic cap - limits the amount the rate can adjust each period after the first one. Life time Cap - maximum amount above initial rate. Expressed: 2/2/5 (the initial, periodic, lifetime caps).
Home Equity Conversion Mortgage (FHA program)
Insurance of a reverse mortgage for homeowners age 62 and older who want to borrow against their home equity as a lump sum or on a monthly basis (for life or a specified term)
IRRR
Interest Rate Reduction Refinance (IRRR) program in VA loan. Streamlined process. The amount of the loan cannot be more than the outstanding balance of the loan to be refinanced, other than the amount of any closing costs that are refinanced. A 0.5% funding fee applies, but there are no requirements to submit a COE, no new appraisal, and no income or employment verification.
Partnership Among Mortgagees
Involves more than one mortgagee (lender) as owner of the finance instrument. Designed to finance large real estate projects. Each mortgagee puts up a share of the money and receives a commensurate portion of the mortgage payments.
FHA Streamline Refinance
It allows a borrower with an FHA loan to refinance without requiring a new appraisal, and the loan-to-value ratio is unlimited. Should be up to date on payments to qualify.
On a VA loan if a borrow finances the funding fee if ...
It does not put loan amount above the overall loan limit (what the buyer qualifies for). However it is allowed to exceed the certificate of reasonable value amount.
VA loans are mostly zero down, how does that mean they have higher default rates?
It doesn't; VA mortgages default at a lower rate than even prime loans, according to Fannie Mae and Freddie Mac requirements.
Silent second
Mortgage Fraud: A property buyer accepts a second mortgage without disclosing it to the original lender. Often used when a buyer can't afford the down payment on a home.
Equity skimming
Mortgage Fraud: An investor receives title to a property—often by using a straw buyer—doesn't make the mortgage payments, and usually rents out the home until foreclosure occurs.
False identity
Mortgage Fraud: Borrowers may use a stolen or fictitious identity to obtain a home loan.
Nominee loans/straw buyers
Mortgage Fraud: Concealing a buyer's identity by using another person's name and credit information to obtain a loan.
Undisclosed buyer rebate
Mortgage Fraud: The seller or another party provides funds that aren't included in the settlement statement. In order to be legal, rebates must be disclosed to the lender and must appear on the settlement statement.
convertible feature
Most ARMs include a feature that allows borrowers to convert the loan to a fixed-rate loan during a specific period of the mortgage. This is known as a convertible feature.
Good Neighbor Next Door FHA program
This program provides law enforcement officers, K-12 teachers, firefighters, and EMTs a deal on purchasing foreclosed FHA-insured properties in revitalization areas. Eligible buyers receive a 50% discount off list price with a down payment of only $100, provided the buyer lives in the property for three years.
How much can seller concessions be on a VA loan?
Up to 4% of the sales price. If a seller elects to pay any of the buyer's closing costs (not including prepaid items) or discount points for a permanent buydown of the interest rate for the buyer, those amounts are not included as part of the 4% seller concession limit. However, points paid on behalf of the buyer must be within reason in relation to the current market.
What closing fees may a Vet pay on a VA loan
Up to a 1% loan origination fee Discount points, if applicable VA funding fee "Reasonable and customary" charges for the appraisal, borrower's credit report, recording fees and/or taxes, taxes and/or assessments chargeable to borrower, initial deposit for tax and insurance escrow account, hazard insurance, including flood insurance, survey (if required), title examination, and title insurance
The Specially Adapted Housing (SAH)
VA Grant for disabled vet that can be used to: * Build specially adapted home on land to be acquired or owned. * Remodel an existing home to adapt * Pay the unpaid principal mortgage balance of an adapted home already acquired without the assistance of a VA grant. * Max grants in fiscal year 2016 is $73,768.
NADL
VA Program: Native American Direct Loan Program (NADL). The VA ACTUALLY LOANS THE MONEY! The NADL program, however, assists Native American veterans who are unable to find a lender willing to make a regular VA home loan due to a property's location on tribal land and the unique issues this creates. For purchasing or building on federal trust land. This is land where title is held by the federal government on behalf of a Native American tribe. The land is reserved for the tribe's use.
The Special Housing Adaptation (SHA)
VA grant, which is smaller, may be used to: * Adapt an existing home owned by vet for family or one they intent to purchase * Help a veteran purchase a home already adapted * The maximum dollar amount allowable for SHA grant in fiscal year 2016 is $14,754.
