Lesson 3: Loan to Vale Ratio + Equity

• What do lenders use loan-to-value ratio for?

  To determine the loanable amount of a given property
• Value in loan to value ratio is

  Lesser of either appraised value or sales price
• Ex: Down payment: 10%, Loan: 90% -> 90/10 loan or 9:10 loan to value ratio
• Equity: Amount of value a homeowner has in a property after any debts are taken into account
• Equity equation formula: home appraised value - loan debt = equity
• "upside down": despite paying mortgage for several years, there's no equity to person's home, and they may owe more than it's worth
• Point: percentage of the loan amount lenders charge to borrowers. It includes origination fees and discount points
• buy downs: when buyer obtains lower interest rate by buying down the interest rate at the time loan was made either temporarily (first 1-3 years) or permanently (life of loan)
• amortization: paying off loan over time
• What numbers do you need to use amortization chart?

  Interest rate and term (15 years, 30 years, etc)
• How is the monthly principal and interest payment calculated using an amortization chart?

  (loan amount/$1000) X factor from amortization chart
• How is interest paid per month calculated?

  principal x interest rate / 12
• How is the amount of a loan payment that's applied to principal calculated?

  Monthly principal and interest payment - interest paid per month
• How do you calculate the new principal balance?

  Original principle - amount of payment applied to principal
• How do you calculate total interest paid?

  Monthly principal and interest payment x total number of payments - original loan amount
• Loan fees higher than 3% do NOT qualify as mortgages
• Example: $250,000 (home cost) x 0.9 (90% loan) = 225,000 (loan amount) x 0.02% (2% fee) = ?

  4,500 loan fee
• Buydown Advantage - can help borrower qualify for larger loan because it keeps housing payments low for first few years
• To calculate the amount a buyer will pay in points:?

  Loan amount x points = points amount
• home grant: aka gift, money that doesn't have to be paid back as long as buyer meets certain requirements (owning/living in home for certain period)
• Who grants payments or funds for closing costs?

  State specific housing finance agencies (HFAs), or nonprofit organizations
• "silent second": money is either a grant or loan has deferred payments
• What program deals with second mortgage grants and deferred loans??

  Silent second down payment assistance program, have low interest rates/free interest
• When does a fraudulent "silent second" mortgage occur?

  When borrower takes second mortgage on property without informing lender holding first
• Mortgage credit certificate (MCCs) - allow qualified buyers to claim some mortgage interest they paid as credit on tax return (=more money available right away for home buying), have $2,000 maximum
• How to qualify for down payment assistance?

  household income, home sales price limit, property location, credit score, cash reserve requirements, homeownership history and education, home MUST be primary residence (single, townhome, condo, or manufactured)
• U.S Department of Housing and Urban Development (HUD) - provides grants to state and local organizations through various programs
• Federal Housing Administration (FHA) - use website for down payment grants and and down payment assistance programs
• National Council of State Housing Agencies (NCSHA) - offers state by state listing of housing finance agencies (HFAs). Each HFA will offer HUD approved counselors and online educational courses
• U.S Department of Agriculture (USDA) Rural Development Programs - provides funding to low and moderate income families living in eligible rural areas
• Department of Veterans Affair (VA) - Service to military personnel, veterans, and eligible surviving spouse, VA provides home loan guarantee benefit, zero down payment offer and housing programs