real estate finance - full book (500 pgs)

Both fha and conventional lenders base their loans on

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Unformatted text preview: + MMI. The monthly amounts paid toward taxes, insurance, and MMI are deposited in an impound account, also called an escrow account. There is no maximum purchase price. The buyer can pay more than the FHA appraisal. However, the loan will be based on the FHA appraisal if it is lower than the purchase price. The interest rates and discount points are completely negotiable between the lender and the borrower. The borrower must occupy the property. FHA appraisals (called “unconditional commitments”) are good for six months on existing property and one year on new construction. The FHA uses independent fee appraisers who are “FHA qualified.” Dynasty School (www.dynastySchool.com) 5-27 REAL ESTATE FINANCE The FHA requires that existing property must have no evidence of termite infestation. Certification must be obtained from a recognized termite inspection company. Borrowers must pay two mortgage insurance premiums. The first is identified by the initials MIP. It is an up–front fee measured by 1.5% of the loan amount in the case of a 30–year loan. It may be paid in cash through escrow, or it can be financed by adding it to the loan amount. The second, MMI, is paid monthly, measured by ½% (.5%) divided by 12, computed on the average annual loan balance, with this premium dropping slightly each year. For 15–year loans, the up–front fees are lower, and monthly MMI drops to .25%. If the borrower attends a qualified homeowner education class the up–front fees can be lowered further. MMI premiums may be dropped when the remaining loan balance is 80% LTV or less. Due to the complexity and constantly changing rules, it is suggested that you check with local lenders for the latest insurance premium charges at the time the loan is applied for. Direct Endorsement – A previous disadvantage was the length of time it took to approve an FHA loan. However, many lenders now have “direct endorsement” approval, which means the lender can underwrite the loans and do the FHA processing in–house. It should be noted, as explained...
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