Unit 14

Real Estate Financing

How to Maximize this Unit

❏ Have your book open to the Unit❏ Have your recorder (iPhone voice command

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❏ Follow the Timed Module, completing each task. You must complete to move forward.

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Chapter 14: Real Estate Financing

Many homes in the United States are bought with borrowed money, and a huge lending industry has been built to service the financial

requirements of homebuyers. It is important for the real estate professional to be knowledgeable about real estate financing

programs and products in order to provide quality service, especially when representing a buyer.

Chapter Objectives

● Describe the various aspects of housing affordability,● including mortgage terms, ability to pay, and investment and tax

considerations.● Describe the terms, conditions, and use of the promissory note.● Explain the elements and use of security instruments, and describe the

mortgage deed of trust and the roles, rights, and obligations of the parties involved.

● Describe the various types of real estate financing. ● Explain the distinction between a judicial foreclosure and a non-judicial

foreclosure, and the process involved in each.● Describe the various consumer protections related to homeownership.

❏ acceleration clause❏ adjustable-rate

mortgage (ARM)❏ alienation clause❏ amortized loan❏ assumption of

mortgage❏ balloon payment❏ beneficiary❏ Comprehensive Loss

Underwriting Exchange (CLUE)

❏ debt to income (DTI)❏ deed in lieu of

foreclosure❏ deed of

reconveyance❏ deed of trust❏ defeasance clause❏ deficiency judgment

❏ discount points❏ equity❏ foreclosure❏ growing-equity

mortgage❏ homeowners

insurance❏ hypothecation❏ index❏ interest❏ interest-only loan❏ lien theory❏ loan origination

fee❏ loan-to-value ratio

(LTV)❏ margin❏ mortgage❏ mortgagee❏ mortgagor

❏ negative amortization❏ negotiable instrument❏ note❏ novation❏ PITI (principal, interest, taxes, and

insurance)❏ prepayment penalty❏ promissory note❏ release deed❏ reverse mortgage❏ satisfaction of mortgage❏ short sale❏ straight loan❏ “subject to”❏ title theory❏ trustor❏ usury

Terms to Record

Housing Affordability

● Mortgage Terms● Ownership Expenses and Ability to Pay

○ PITI (principal, interest, taxes, and insurance)○ Debt-to-income ratio (DTI)

● Investment Considerations○ Tax deductions and benefits

Promissory Note

● Negotiable instrument● Interest

○ Usury● Loan Origination Fee● Discount Points● Prepayment Penalty

Security Instrument

● Mortgage loan● Hypothecation● Lien theory

Real Estate Financing

● Duties of the Borrower● Provisions for Default● Assignment of the Mortgage● Release of the Mortgage Lien or Deed of Trust

○ Defeasance clause○ Satisfaction of mortgage

● Tax and Insurance Reserves○ Flood insurance reserves

Real Estate Financing

● Buying “Subject to” or Assuming a Seller’s Mortgage or Deed of Trust○ Alienation clause

● Recording a Mortgage or Deed of Trust● Priority of Mortgage or Deed of Trust

Types of Loans

● Straight (interest-only)● Amortized● Adjustable-Rate Mortgage (ARM)● Growing-Equity Mortgage (GEM)● Balloon Payment Loan● Reverse Mortgage

Real Estate Financing

● Foreclosure● Judicial● Nonjudicial● Strict● Deed in Lieu of Foreclosure● Redemption● Deed to Purchaser at Sale● Deficiency Judgment● Short Sale

Consumer Protections

● Dodd-Frank Act● Homeowners Insurance● Coverage and claims● Comprehensive loss underwriting exchange (CLUE)● Federal Flood Insurance Program

Beyond the Unit...

● Read the Key Point Review in the Unit.● Read the quizzes and answers. Are you right or wrong? Why?● Go to QBank and customize a quiz on this Unit, selecting the

boxes on the bottom to show progress as you go, and to show explanations.

● Take the quiz- recording your thoughts and how you did.● Send us the recording for you to use as accountability.● Text us or email us any questions.

Unit 14 QuizA charge of three discount points on a $120,000

loan equals

a. $450.00b. $3600.00c. $4500.00d. $116,400.00

B. $3600.00

The borrower under a deed of trust is known as the

a. trustorb. trusteec. beneficiaryd. vendee

A. trustor

Which clause would give a lender the right to have all future installments become upon default

a. Escalationb. Defeasancec. Alienationd. Acceleration

D. Acceleration

Discount points on a mortgage are computed as a percentage of the

a. selling priceb. loan amountc. closing costsd. down payment

B. Loan amount

A junior lien may become first in priority if the original lender agrees to execute a

a. deed of trustb. subordination agreementc. second mortgage agreementd. call clause

B. Subordination agreement

Which of the following allows a mortgage to proceed to a foreclosure sale without going to court first?

a. Waiver of redemption rightsb. Power of salec. Alienation claused. Possession rights

B. Power of sale

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Kate Lanagan MacGregor | Instructor/Owner Kate@agentrising.com | 508-728-3648 | www.katelanaganmacgregor.com

Marie Greany | Dean of StudentsMarie@agentrising.com | 508-207-3186 | www.agentrising.com