section 16 unit 1: financing essentials:loans fees and mortgage insurance

His first mortgage will be for 80% of the $100,000 and his second will be for______ That, along with his 10% down payment, will cover the new home purchase without exceeding the 80% threshold for PMI.

10%

PMI automatically terminates when LTVR reaches 78%. Under what other circumstances may PMI be cancelled? Identify which statements are true and which are false. By borrower petition, when appraisal shows LTVR of 80% or less

true

PMI automatically terminates when LTVR reaches 78%. Under what other circumstances may PMI be cancelled? Identify which statements are true and which are false. When borrower reaches the mid-point of amortization

true

You're preparing to list a client's home, and you've got some comps that give you an estimated value of $265,000. Your clients have been in the home for seven years. They've put about $12,000 of improvements into the property, and have $130,000 left on their mortgage. Using these figures, how much equity do they have in the property?

$135,000

Which of the following two are possible loan origination fee percentages borrowers might expect to incur?

$3,350

A discount point is calculated at 1% of the loan amount. The lender is charging the borrower two points to buy down the interest rate on his loan. He's borrowing $250,000. What's the dollar value of the points the borrower will pay?

$5,000

Which of the following ratios are among those acceptable in a piggyback financing arrangement?

80/10/10

Charlie and Wendy are purchasing a property with a sales price of $350,000. They'll be financing $335,000. What is their LTVR?

95.7%

Piggyback financing is a legal way to avoid having to purchase private mortgage insurance. Which of the following statements are true about this type of financing and the concepts that make it work?

Conventional loans require PMI if the loan-to-value ratio is over 80%. The first mortgage in a piggyback loan must be 80% or less of the property's value. The second mortgage amount in a piggyback loan is the difference between the remaining balance owed and the amount of the down payment.

Steve's banker informed him he's been approved for a conventional loan, but since he'll have a 92% loan, he'll also have to carry _____.

PMI

Vince Parker is purchasing a home for $150,000. He puts 10% down on a conventional loan. Will he be required to obtain PMI or MIP?

PMI

A buydown usually results in a temporary reduction in interest rates. The buydown may be structured in many ways, but one method is a 3-2-1 buydown. Select the statements that are true of interest rates in a 3-2-1 buydown.

Reduced by 3% the first year, 2% the second year, and 1% the third year Returns to original interest rate in the fourth year

What's one reason a borrower may choose a piggyback (or split) loan?

To avoid paying private mortgage insurance

How long does the borrower have to pay private mortgage insurance?

Until the borrower reaches a 22% equity position

what is points in real estate?

a point is 1% of the loan amount. To calculate the amount a buyer will pay in points, we multiply the loan amount by the points (or the percentage):

Jacqueline found a ready, willing, and able buyer for her client's condo, with a sales price of $20,000 more than the asking price. However, the appraisal came in just under the asking price. Which number will the lender use to calculate the loan-to-value ratio?

the smaller number

true or false Borrowers will pay an upfront premium when they close on the loan and annual premiums for the life of the loan.

true

true or false MIP is required of all FHA borrowers.

true

Rhonda and her husband filed for bankruptcy five years ago. They want to purchase a new house but don't have the best credit score. They've decided to buy the home using an FHA loan. Which of these is a true statement?

A minimum down payment of 3.5% is required.

PMI automatically terminates when LTVR reaches 78%. Under what other circumstances may PMI be cancelled? Identify which statements are true and which are false. Borrower receives a home equity line of credit (HELOC) secured by the same property on which PMI is carried

false

true or false Borrowers may cancel MIP when they reach an LTVR of more than 80%.

false

what is the loan-to value formula?

loan to value= loan amount/property value x 100

Scott agrees. His first ________ will be for 80% of the $100,000 and his second will be for 10%.

mortgage

You're working with a buyer who's purchasing a home that appraised at $80,000. The buyer is obtaining a 90% loan, and the lender will charge a one-point origination fee at closing. How much will the loan origination fee be?

$720 $80,000 x .9 = $72,000 (loan amount), and 1% of $72,000 = $720

Which of the following two are possible loan origination fee percentages borrowers might expect to incur?

1% and 3%

After owning their home for five years, Charlie and Wendy have $125,000 in equity built up. How's equity calculated?

Appraised home value minus the amount of any indebtedness against the home

Private mortgage insurance protects the lender in case the borrower takes which of the following actions?

Defaults on the loan

Celia was obtaining a conventional loan, and she put $50,000 down as a down payment. Why might her lender also require her to obtain private mortgage insurance?

Her down payment of $50,000 isn't at least 20% of the purchase price.

The Bransons have a conventional loan for which they were required to obtain private mortgage insurance. Their local real estate market has been going like gangbusters, and their house is now appraised at twice their loan balance! Will their PMI be cancelled?

Maybe, but they'll have to petition their lender

What's the purpose of PMI?

To protect the lender in case of borrower default when the borrower has put down less than 20%

Steve just started a new career after graduating from college. He's had his eye on a two-bedroom bungalow listed at $325,000, and because Steve's real estate agent shared with him that there are several interested parties, he's decided to offer the full asking price, even though he only has $26,000 saved for a down payment. Steve's banker informed him he's been approved for a __________ loan

conventional

Match the percentage of funds to the source of financing to complete the 70/20/10 piggyback loan ratio and avoid paying PMI. 10%

down payment

Scott wants to buy a house that's $100,000. He knows he'll need to finance 90% of the total because he only has $10,000 for his_________

down payment

Match the percentage of funds to the source of financing to complete the 70/20/10 piggyback loan ratio and avoid paying PMI. 70%

first mortgage

what is equity in reference to property?

is the difference between a home's appraised value and the debt owed on it.

Scott's concerned about having to pay for private mortgage insurance, but his banker assures him he won't need to if he takes out a ___________.

piggy back loan

Scott's concerned about having to pay for _____________, but his banker assures him he won't need to if he takes out a piggyback loan.

private mortgage insurance

Match the percentage of funds to the source of financing to complete the 70/20/10 piggyback loan ratio and avoid paying PMI. 20%

second mortgage