Chapter 8
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.
The basic entitlement of a Department of Veteran's Affairs (DVA) loan under $144,000 is:
$36,000
What is a Certificate of Reasonable Value and what is it used for?
A Certificate of Reasonable Value (CRV) shows the value of a property in relation to its sales price. It is issued by an approved VA appraiser when a veteran is seeking a DVA loan.
What is the relationship of a junior loan to a senior or first loan?
A junior loan is "subordinate in right or lien priority" to an existing mortgage on the same property.
What kind of insurance does FHA require borrowers to pay?
As of 2006, the borrower must pay two insurance premiums. The first is the "upfront" Mortgage Insurance Premium (MIP) which is a percentage of the loan amount. The borrower can pay this one-time premium at closing or the charge could be financed with the loan. The second premium, called Mutual Mortgage Insurance (MMI) is a monthly premium that is paid with the monthly principal, interest, taxes and insurance payment. MMI premiums may be dropped when the remaining loan balance is 80 percent loan-to-value ratio or less.
What is the difference between the "assisted" and "unassisted" loans made available through the Texas Department of Housing and Community Affairs?
Assisted loans are first lien mortgage loans made available at an interest rate slightly above the current market interest rate and provide down payment and closing cost assistance. Unassisted loans are available at an interest rate slightly below the current market interest rate and do not include funds for down payment and closing cost assistance.
What are two ways a junior lender can protect itself from default?
By adding clauses to the financing instrument, such as: A provision that grants the junior lender the right to pay property taxes, insurance premiums and other charges if the borrower is not making these payments. A clause that allows the junior lender to pay funds for taxes and insurance into an escrow account and make any payments on the first loan to offset a possible default.
FHA and VA loans differ from conventional loans in what important way?
FHA and VA do not loan funds directly. FHA insures loans and VA guarantees loans, but the loans themselves are made by approved, qualified lenders.
Conventional loans have several advantages over government-backed loans. What are they?
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 seldom, if ever, can 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; however, government-backed loans have dollar limits that vary by agency. In the event of a loan refusal, borrowers have other lenders that they can make application 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.
Name four popular FHA loan programs.
Section 203(b)-Mortgage Insurance for One-Family to Four-Family Homes Section 234(c)-Mortgage Insurance for Condominium Units Section 245(a)-Growing Equity Mortgage Section 203(k)-Rehabilitation Home Loan
What does Direct Endorsement do?
Speeds up loan approval times by ensuring that underwriting is done directly for the FHA
Government-backed loans include those 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
Which is true regarding the FHA?
They insure loans
What are some disadvantage to conventional loans?
Typically conventional loans require higher down payments than government-backed loans require. Some conventional loans carry prepayment penalties, while government-backed loans do not.
The Texas Veterans Land Board (VLB) administers which of the following programs.
Veterans Housing Assistance Program
What three loan programs are offered by the Texas Veterans Land Board?
Veterans Housing Assistance Program Veterans Home Improvement Program Veterans Land Loan Program
The most common type of loan offer that buyers receive from banks is called:
a firm commitment
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 that first loans. For this reason, they will typically carry a higher interest rate.
Unassisted loans
available at an interest rate slightly below the current market interest rate and do not include funds for down payment and closing cost assistance.
two categories of loans available to buyers in the marketplace
conventional loans and government-backed loans
Assisted loans
first lien mortgage loans made available at an interest rate slightly above the current market interest rate and provide down payment and closing cost assistance.