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Fixed rate
Adjustable rate
Walk out knowing what kind of bells and whistles you can throw on a loan to make a normal
mortgage that people use to buy property,
Specifically Principal residence, residential properties.
Chapter 1:
Types of Estates:
What is a freehold estate?
Which of the following is a possessory estate as opposed to non-possessory estate?
Would a possessory estate be a fee simple estate or life estate?
Fee simple estate is the most basic form of estate.
Leasehold Estates: Which is what you have when you have a lease with someone
Title Assurance: Assure you have good claim to the property that is being conveyed from the
seller to the buyer.
Alternative:
Title Insurance: is a financial transaction, that protects you from any loss from the title not
being CLEAN. For example, LEAN on the property that doesn’t get recorded. You buy the
property, then lean holder comes asking for money.
What is a Lean? Claim to the property. Usually the lender. Interest in the property.
Deeds: General Warranty Deed: the best you can do in terms of having complete ownership
interest in the property. Given to someone claiming that whoever is doing the granting has
good title and right to convey property to person receiving. Can be encumbrances on title but
they will be noted.
Quitclaim Deed: You make the conveyance as is, you have the same knowledge of property and
grantor makes grants to grantee without insurances, warranties, or assurance.
Mechanics Liens: Occurs when work is done on the property that goes unpaid. The mechanic
that is doing the work, can put a lien on the property equal to the unpaid bill.
Eminent Domain:
Chapter 2:
Purchase money mortgage: Mortgage on the property that secures the loan that is used to
purchase the property. The mortgage is for the money that was used to purchase it.
Mortgage is the document that names the property as collateral (security) against the loan
Frannie Mae, Freddie Mac: Owned by private citizens and operate independently. Purchase
mortgages in the secondary market. After the loan is made, banks buy loans from each other. If
there is sufficient activity in the secondary market, more banks are willing to lend.
Have their own standards which are called conforming loans. Other loans are known as
conventional.
Important Clauses:
Subordination Clause:
Foreclosure:
Bankruptcy
Chapter 7: Liquidation: Individuals and businesses. Worst case scenario
Chapter 4:
What makes an interest rate what it is? The market makes it. If you are a risky borrower, you
are gonna end up with a higher interest rate
No calculations on test.
Chapter 5: ARMS: 5-1 arm, means same interest rate for 5 years then every year after the rate
adjusts.
ARM is Less risky from lenders point of view. Interest rate closer to what market rates are.
ARM has lower interest rates then fixed rate loans. Risk shifts from lender to borrower. It is a
form of risk shifting.
Chapter 6: Marginal cost of borrowing, if you borrow 80,000 at 5% or 90000 at 6% that one
percent in interest rate increases the cost of borrowing.
Loan Constants
Additional Financing Concepts:
REITS:
Why do you invest in them? Investors are attracted to REITS because of their high dividends.
They pay high dividends, because they get to deduct their dividends from the income to not be
taxed. Business wants to become a REIT because of the way they are taxed. 75% of the
companies assets must be in real estate. 75% of the income must come from real estate. You
must pay 90% of its taxable income in the form of shareholder dividends.
Legislation behind REITS, created in 1960 wasn’t till 1999 REIT modernization act that got
everything going because it allows for a taxable REIT subsidiary. Turning point in the history of
REITS. Which means they can operate and manage property in ways they weren’t allowed to
previously.
REITS are less volatile, the income for a REIT is highly predictable.