Unit 8: Government Loans
A couple wants to use the husband's VA eligibility to obtain a VA loan in order to purchase a $250,000 house with no money down. The lender will use qualifying ratios of
41 only.
The answer is $267,100. $106,025 - $39,250 = $66,775 × 4 = $267,100 maximum loan amount.
Home Equity Conversion Mortgage program.
If the maximum amount for a VA loan is $424,100 and the veteran is borrowing $423,000, will the veteran be able to finance the 2.15% funding fee as part of the loan?
No, the funding fee plus the loan amount exceeds $424,100.
What is the PITI on an FHA loan with a price of $150,000 and interest rate of 6% for a 30-year term, annual taxes of taxes of $1,800, and an annual hazard insurance premium of $700?
The answer is $1,194.56. $150,000 × 96.5% = $144,750 × 1.75% = $2,533.13 + $144,750 = $147,283.
The 3.5% required to meet the minimum down payment for borrowers using FHA financing is acceptable from all sources EXCEPT
The answer is the seller. The seller cannot contribute toward the FHA down payment requirement, but can contribute towards closing costs.
In which scenario can a veteran's entitlement be restored if the loan has been repaid but the property is still owned by the veteran?
The answer is the veteran uses the one-time-only provision. The certificate of eligibility will be stamped "one-time use." The veteran may be applying for a refinance loan that will pay off the VA loan or is interested in purchasing another property while still owning the original one.
All of the following statements regarding FHA mortgage insurance are true EXCEPT
The answer is there is no up-front mortgage insurance premium for condominiums. Up-front mortgage insurance is charged on all FHA loans, including those for condominiums.
Before a VA loan will be approved, there must be a formal estimate of the value of the property, which is called
a certificate of reasonable value.
A veteran can ask the VA for a substitution of entitlement if the home is sold to
another qualified veteran willing to assume the loan.
The answer is senior citizens. Senior citizens can take advantage of the HECM program for reverse mortgages. Firefighters are also eligible for the Good Neighbor program.
has been relieved from all obligations on the loan.
The FHA maximum loan limit for a geographic area is determined annually based on a percentage of the
median house price up to set maximum limits.
In order for a veteran to receive a release of liability from a purchaser using the novation technique, the new purchaser must
meet the credit requirements of the originating lender.
Under the direct endorsement program, an FHA-approved lender will be required to
qualify the borrower and underwrite the loan.
General requirements for the restoration of entitlement requires the veteran to
sell the property and pay the loan in full.
An FHA section 203(k) loan would provide a loan for
the purchase and rehabilitation of a property.
The direct endorsement program allows a lender to
underwrite FHA loans without sending them to FHA.
Lenders are willing to make low-down-payment FHA loans because the FHA
The answer is insures the entire loan amount. FHA insures 100% of the loan amount, which eliminates the lender's risk.
New provisions added to the FHA Home Equity Conversion Mortgage (HECM) include all of the following EXCEPT
The answer is no initial disbursement is allowed. Based on projected losses to the HECM portfolio, an initial disbursement on a HECM loan is now limited to 60% of the principal limit (plus an additional 10% in some cases.)
The answer is $2,533.13. $150,000 × 96.5% = 144,750 × 1.75% = $2,533.13.
The answer is no initial disbursement is allowed. Based on projected losses to the HECM portfolio, an initial disbursement on a HECM loan is now limited to 60% of the principal limit (plus an additional 10% in some cases.)
If a veteran is approved for a novation, the entitlement will
The answer is not be restored until the loan is repaid. A novation releases the veteran's liability for the loan but does not restore eligibility for the maximum guarantee amount.
A purchaser assumes a VA loan and agrees to provide a full release of liability for the veteran in case of default on the loan that is accepted by the lender. This is called a
The answer is novation. Novation means starting over with new parties on the loan.
One of the requirements of an FHA loan is a funding fee used to support the program. This fee is charged to the buyer at closing by
The answer is payment of a mortgage insurance premium. The lender will collect the mortgage insurance premium from the borrower(s) for FHA. All FHA loans require mortgage insurance premiums (called MIP).
The FHA Good Neighbor Next Door sales program has been expanded to include all of the following EXCEPT
The answer is senior citizens. Senior citizens can take advantage of the HECM program for reverse mortgages. Firefighters are also eligible for the Good Neighbor program.
What percentage of the sales price can the seller provide for closing costs on an FHA loan?
The answer is six. The seller may contribute up to 6% of the sales price for the borrower to cover discount points and other allowable closing costs.
What is the PITI on an FHA loan with a price of $149,750 and an interest rate of 6% for a 30-year term, annual taxes of $1,800, and an annual hazard insurance premium of $800?
The answer is $1,201.25. $149,750 × 96.5% = $144,508 x 1.75% = $2,528.89 + 144,508 = $147,036.89 final loan amount.
A borrower purchasing a home using FHA financing is making the minimum investment of 3.5% to purchase a home priced at $150,000. What is the amount of the up-front MIP premium based on 1.75%?
The answer is $2,533.13. $150,000 × 96.5% = 144,750 × 1.75% = $2,533.13.
A veteran is retiring and wants to purchase a home using a VA loan. She used a previous entitlement of $46,000 in 1989 when purchasing her first home. Based on a guarantee of $106,025, she was able to use her remaining eligibility to obtain a VA loan with no money down in the amount of
The answer is $240,100. $106,025 - 46,000 = $60,025 × 4 = $240,100.
A veteran used $43,000 of his entitlement when purchasing his first home. If he has a guarantee of $106,025, what loan amount can he obtain without making a down payment?
The answer is $252,100. $106,025 - $43,000 = $63,025 × 4 = $252,100.
What would be the maximum loan amount to maintain a zero down payment for a veteran who has used $39,250 of entitlement with a county loan limit of $424,100 and current entitlement of $106,025?
The answer is $267,100. $106,025 - $39,250 = $66,775 × 4 = $267,100 maximum loan amount.
What would be the maximum loan amount to maintain a zero down payment for a veteran who has used $36,000 of entitlement with a county loan limit of $417,000 and current entitlement of $104,250?
The answer is $273,000. $104,250 - $36,000 = $68,250 × 4 = $273,000.
A buyer wants to purchase a house listed for sale at $90,000. According to FHA guidelines, the minimum down payment required is
The answer is $3,150. FHA mortgage loans require a minimum down payment of 3.5% of the sales price. $90,000 × 0.035 = $3,150.
When using the FHA 203(k) program, the minimum amount for the rehab costs must be at LEAST
The answer is $5,000. This amount makes it cost-effective for lenders participating in this program because an escrow account is set up and administered after closing.
A borrower interested in purchasing a home priced at $150,000 with an FHA-insured mortgage loan would be required to make a down payment of
The answer is $5,250. $150,000 × 3.5% = $5,250.
The borrower is considering purchasing a home listed at $180,000 and has decided to make an offer of $175,000 using FHA financing. The amount of the down payment would be
The answer is $6,125. The down payment is calculated off of the offer amount of $175,000 × 3.5%.
With a loan guarantee of $104,250, a veteran wishing to purchase a home in Alaska would be eligible for a mortgage loan of
The answer is $625,500. Alaska is categorized as a high-cost area, so an additional 50% is added to the loan limit. 4 × $104,250 = $417,000 × 50% = $208,500 + 417,000 = $625,500.
If a veteran's total monthly housing expense plus other long-term debts is $2,400, approximately how much annual income will be needed to qualify for a VA loan?
The answer is $70,243.90. The veteran's monthly payments cannot exceed 41% of the month's total gross income. $2,400 ÷ 41% = $5,853.66 × 12 = $70,243.90 (round up to $70,234).
The mainstay of the FHA single-family insurance program that allows the borrower to invest only 3.5% as a down payment and requires any appraisal-required repairs to be completed before closing is the
The answer is FHA 203(b) program. The 203(b) and 203(k) programs require only 3.5% down, but if the 203(b) appraisal indicates needed repairs, they have to be completed before closing. The FHA 203(b) program is the most common Title II program for purchasing single-family homes.
A borrower is purchasing a home using FHA financing. Because the home requires repairs and the seller is not willing to fix the home before closing, the borrower should apply for an
The answer is FHA 203(k). This program allows the purchaser to complete repairs after closing, based on bids and appraisal requirements.
A husband and wife who are both 65 years old may be interested in an FHA senior housing program called the
The answer is Home Equity Conversion Mortgage program. FHA's mortgage insurance makes HUD's Home Equity Conversion Mortgage (HECM) reverse mortgage program less expensive and more attractive for homeowners 62 and older who wish to borrow against the equity in their home. Eligible homeowners may receive a percentage of the value of the equity in the home in a lump sum, on a monthly basis (either for life or for a fixed term), or as a line of credit. Repayment of the loan plus interest and other fees is not due until the surviving homeowner leaves the home.
The category of loans insured by HUD to private lenders against loss on property improvements they make is called
The answer is Title I loans. Loans under the Title 1 program can be large and small and are provided through participating lenders.
The category of loans insured by HUD to private lenders for the purchase of homes and multifamily properties is identified as
The answer is Title II loans. Title II loans include financing for Section 203 for one- to four-family properties and Section 207 for multifamily projects.
A veteran is willing to allow his VA loan to be assumed, but wishes to regain his ability to obtain another VA loan. He must ask the borrower to provide him with
The answer is a substitution of entitlement. Only another veteran with a certificate of eligibility can substitute the seller's entitlement when assuming a VA loan by providing a substitution of entitlement.
When a property is awarded to a veteran's spouse as a result of a divorce, entitlement can be restored if the ex-spouse is a veteran who substitutes her entitlement or the
The answer is ex-spouse who was awarded the house refinances. The veteran is still liable for the property.
A novation of a VA loan would indicate that the veteran
The answer is has been relieved from all obligations on the loan. In cases in which a veteran's loan is assumed by a purchaser who is not a veteran, the VA will not allow the seller-veteran to regain maximum entitlement. The purchaser, however, can agree to assume the veteran's liability to reimburse the VA in case of default, and the buyer and the seller can then petition the VA to release the veteran from all obligations. This full substitution technique is called novation.
FHA was created to
The answer is insure lenders against default. FHA offers higher loan-to-value ratios than conventional loans and also insures lenders against loss if the borrower defaults.
The FHA has many variations of the basic Section 203 one- to four-family home loan program. The one that may be of help to victims of a natural disaster is
The answer is the 203(h). This program has 100% financing available; it must be filed within one year after presidential declaration of a disaster. The Energy Efficient Mortgage (EEM) can also be used along with the 203(h).
