DAY 10 — Loans & Mortgages

What is a mortgage?

Loan used to buy real estate

What is a fixed-rate loan?

Interest stays same for entire loan term

What is an adjustable-rate mortgage (ARM)?

Interest changes periodically based on index

What is a conventional loan?

a mortgage not backed by the federal government

FHA loan = ?

FHA loan is a government-backed mortgage insured by the Federal Housing Administration

USDA loan = ?

A USDA loan is a government-backed, -down-payment mortgage designed for low- to moderate-income homebuyers purchasing homes in designated rural and suburban areas.

VA loan = ?

A VA loan is a -down payment mortgage option designed for veterans, service members, and eligible surviving spouses, partially guaranteed by the U.S. Department of Veterans Affairs (VA).

What is principal?

Amount borrowed

What is interest?

Cost to borrow money

What is PMI?

Private mortgage insurance, required if <20% down

How to calculate monthly payment?

Principal + interest + taxes + insurance

Loan $200,000, 5% interest, 30 years, monthly principal & interest?

Use mortgage formula or calculator (practice on test)

Loan-to-value (LTV) = ?

Loan amount ÷ property value × 100

90% LTV on $250,000 house → loan amount?

$250,000 × 0.9 = $225,000

What is amortization?

Paying off loan gradually with principal + interest

What is negative amortization?

Loan balance increases instead of decreasing

What is balloon payment?

Large payment due at end of loan

What is interest-only loan?

Only interest paid, principal unchanged

What loan topics are commonly tested on the real estate exam?

Payments, loan-to-value (LTV), interest, and loan types

What does a typical monthly mortgage payment include?

Principal, interest, taxes, and insurance (PITI)