Chapter 13 Section 2

Question 1

FHA loans

Answer 1

-FHA does not make loans, it insures loans made by approved local lenders
-FHA insures the lender 100%

Question 2

requirements for qualification for FHA

Answer 2

-appraisal
-assumption (subject to rate change)
-not exceed 31% HER and 43% TOR
-standard LTV ratio for FHA is 96.5%
-FHA requires FICO of at least 580 and down payment of at least 3.5% (credit score of 500 to 579 are required to provide 10% down)

Question 3

calculating the borrower’s maximum loan amount

Answer 3

-if closing costs are not financed, the borrower’s maximum loan amount can be determined by multiplying the lesser of the purchase amount or appraised value by the maximum LTV ratio (96.5%)
-FHA insured loans are underwritten in $50 increments, if a mortgage calculation results in an odd amount, the loan amount will be rounded down to the next lower increment

Question 4

up front mortgage insurance premium (UFMIP)

Answer 4

-paid at the time of closing of the loan, although all or a portion of the mortgage insurance may be financed
-UFMIP is 1.75% of the mortgage amount in most cases

Question 5

annual mortgage insurance premium (AMIP)

Answer 5

-must be paid as a percentage of the annual outstanding loan balance divided up into 12 monthly payments
-if at the point of origination, the LTV is 90% or less, the AMIP will not be required after 11 years

Question 6

prepayment

Answer 6

-FHA insured mortgage loans must provide the borrower with the right of repayment without penalty

Question 7

adjustable rate mortgage

Answer 7

-1, 3, and 5 year adjustable rate-mortgage (ARM) loans are available with interest rates that cannot change by more than 1% per year after the fixed-rate period with a max rate increase over the life of the loan of no more than 5%
-7 and 10 year loans cannot change more than 2% per year or more than 6% over the life of the loan

Question 8

VA guaranteed loans

Answer 8

-guarantees permanent long-term mortgage loans that are originated by VA approved lenders for owner-occupied residences
-if mortgage money is not available, the VA will loan money directly to a veteran

Question 9

VA eligibility

Answer 9

-veteran must serve a specified minimum amount of time to be eligible and honorably discharged
-current eligibility period is 90 days

Question 10

VA funding fee

Answer 10

-veteran may be required by the lender to pay a funding fee, similar to an origination fee that is charged in connection with a conventional mortgage loan

Question 11

VA entitlement

Answer 11

-the amount available for use on a loan
-lenders will generally loan up to 4 times a veteran’s available entitlement without a down payment

Question 12

VA qualifying ratios

Answer 12

-borrower must not exceed a TOR of 41%

Question 13

VA interest rate

Answer 13

-negotiation between lender and borrower

Question 14

VA maximum loan amount

Answer 14

-VA does not set a maximum loan amount, but the amount of the mortgage loan may not exceed the lesser of the sales price or appraised value of the property

Question 15

VA prepayment

Answer 15

-no prepayment penalty for VA loans

Question 16

VA down payment

Answer 16

-VA loans do not normally require a down payment
-VA loan amount is 100% of the purchase price if the purchase price does not exceed the maximum loan amount
-most conventional lenders require a down payment from 20 to 25% if the loan is not insured

Question 17

private mortgage insurance (PMI)

Answer 17

-federal lending regulators usually require this insurance when the loan amount exceeds 80% of the value of the property
-with PMI, a conventional borrower may obtain a loan up to 95% of the value of the property
-Homeowners protection act of 1998 requires automatic cancellation of PMI by the lender when the LTV ratio is 78% or less of the property’s original value
-HPA also provides the borrower with the right to request cancellation of PM when a mortgage has been paid down to 80% of its original appraised value or purchase price, whichever is less
-borrower also has the right to accelerate cancellation date by making additional payments that brings LTV down

Question 18

Usury

Answer 18

-F.S 687 limits the interest rate that may be charged for a loan
-lenders may not charge an interest rate of more than 18% on loan amounts up to $500,000 or an interest rate of more than 25% on loan amounts above $500,000