Real Estate Financing

1
Real Estate Financing

• Practice

2
Overview of the Real Estate Financing Market

• Federal Reserve System
• reserve requirements
• discount rates
• Primary mortgage market
• Secondary mortgage market
• FNMA Fannie Mae
• GNMA Ginnie Mae
• FHLMC Freddie Mac

3
Financing Techniques

• Straight loan (term loan) interest only and
  then principal in full at the end of the term
• Balloon payment loan partially amortized and
  then has a balloon
• Amortized loans (normal type of loan)

4

• ARM
• index
• margin
• rate cap and payment cap
• adjustment period
• conversion option
• Growing equity mortgage (GEM)
• Reverse annuity mortgage (RAM) more commonly
  called a reverse mortgage

5
Loan Programs

• Conventional loans (versus non-conventional)
• See book for underwriting guidelines
• Private mortgage insurance (PMI)
• FHA Loans (Insured)
• up-front FHA insurance premium
• FHA housing quality standards
• must be appraised by FHA approved appraiser

6

• VA Loans (Guaranteed)
• see book for details
• certificate of eligibility is crucial

7
Other Financing Techniques

• Purchase-money mortgage Package loan includes
  personal property
• Blanket loan includes multiple parcels
• Wraparound loan
• Open-end loan
• Construction loan
• Sale-and-leaseback
• Buydown
• Home equity loan

8
Financing Legislation

• Truth-in-Lending Act and Regulation Z
• see book for details
• Equal Credit Opportunity Act
• see book for details
• Community Reinvestment Act
• see book for details
• Real Estate Settlement Procedures Act (RESPA)

9
Computerized Loan Origination and Automated
Underwriting

• Heres how it works . . . . .