978-0324787504 Chapter 11 Lecture Notes

subject Type Homework Help
subject Pages 4
subject Words 968
subject Authors Charles J. Jacobus

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1 Chapter 11
CHAPTER 11: Lending Practices
I. Term Loans 

A. Interest only 

B. Pay off at Maturity 
C. Loan Renewal
II. Amortized Loans
A. Repayment Methods 
B. Monthly Payments repayment methods.
C. Loan Size
D. Change of Maturity Date
III. Variations of Amortized Loans
A. Budget Mortgage
B. Balloon Loan
C. Partially Amortized Loan
D. Earlier Payoff
1. 15-Year Loan 

2. Biweekly Payment  !"
3. Existing Loans
IV. Key Lending Terms
A. Loan-to-Value Ratio
B. Equity 

C. Loan Points 
1. Origination Fee
2. Discount Points
V. Discuss FHA Insurance Programs
A. Current FHA Coverage
B. Assumability
C. Mortgage Insurance
D. Floating Interest Rates #$%

E. Other FHA programs
F. Loan Qualification
G. Construction Regulations 
VI. Discuss the Department of Veterans Affairs
loan programs
A. No Down Payment &

B. VA Certificates 
C. Financial Liability
D. Funding Fee
E. Interest Rates
'&
""(&
#$%)%
Chapter 11 2
Page Ref.
Hard Soft
back back Topic Teaching Tips
169 173 Opening Remarks Local Distinction: Start this chapter by stressing that it is filled
with useful practical information that every real estate agent must
possess if he/she expects to survive in the "real world." Encourage
the students to briefly share lending practical experiences.
170 174 Term Loans Stress: Term loans are interest-only loans (until maturity), and
are quite common in the real estate business in the form of
construction loans. This type of loan was most common during
the 1920s and these were the loans which were foreclosed in the
1930s. Clearly, a better method of repayment was needed to
encourage lots of home buying.
170 174 Amortized Loans Local Distinction: The Latin root word for amortization is mortis,
which means death. To amortize a loan means to kill it [principal]
off. Amortized loans were the FHA's answer to the pitfalls of term
loans.
171 175 Monthly Payments Class Activity: Use this exercise as a basis for understanding
Table 11: l.
Have your students compute the loan payments for $90,000 for 30
years:
at 8% = $660.60
at 10% = $790.20
at *+,-.*/!
at 14% = $1,066.50
Discuss how interest rates affect one's ability to qualify for a home
loan.
173 177 Change in Summary: Discuss the practical reasoning of why home loans do
Maturity Date not extend beyond 30 years:
1. Greater interest costs
2. Life expectancy of construction materials used
173 178 Budget Mortgage Local Distinction: Discuss the rationale behind PITI. Survey
your class to see if anyone pays only monthly P&I. If so, what
type of loan do they have and how long have they had it?
Experience has shown that most people who are not required to
pay monthly T&I are either
1. more experienced borrowers.
2. borrowing from a relatively small lending institution.
3. acquiring their loan prior to the late 1960s.
174 178 Partially Amortized Examples: Seller financed loans are usually partially amortized.
Loan This is especially true of a "seller's second."
3 Chapter 11
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Local Distinction: 

 !%
:*"

Stress;6
<&
&
ExpandingtheText;0

%<
=>
?@(?
2;A

&;
 '
B4
C(
* '

(+
Local Distinction: 2
DE1%"&??
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Stress;#$%<F70=
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Local Distinction: %&#$%
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=;
G%;

&
>
*A;monthly payment

-!!!!+ !H=-94/!>
AI*&interest 

H=- 49!"-94/!J /!,
- 9!
0K7-!!!!,- 49!>
9'H=(K7
>
'H=>
/'"&H=*/

C>
3'""H=
>
4'discount points H=

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