real estate finance - full book (500 pgs)

Common characteristics include a fixed interest rate

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Unformatted text preview: the interest rate are fixed when the loan originates. Available only to owner–occupants, only for single–family dwellings, and can be assumed. 9-46 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 9: FIXED RATE MORTGAGE AND ALTERNATIVE MORTGAGE INSTRUMENTS These programs are designed primarily for younger buyers whose incomes are expected to rise as the monthly payments increase. FIVE DIFFERENT GPM PLANS Percentage of monthly payment increase 2 ½% each year 5% each year 7 ½% each year 2% each year 3% each year During the first 5 years 5 years 5 years 10 years 10 years Plan I Plan II Plan III Plan IV Plan V While five optional plans exist, the most popular one is a five–year plan–Plan III. Initial payments are not large enough to cover all the interest due, so the shortfall is added to principal, with consequent negative amortization. Monthly payment amounts are increased 7.5% per year, with the effect that positive amortization begins to appear during the fifth year, after which the payments are increased to the point that full amortization occurs during the subsequent 25 years. All GPMs, whether FHA or conventional, follow this pattern. These loans have not been used for some time, particularly during periods when 30– year, fixed rate loans are easily available. RESIDENTIAL LEASE–PURCHASE AGREEMENTS. Like the delayed sale in the land contract, various lease arrangements can be used to finance or otherwise ease a sale. This device is used mainly when financing is difficult to obtain. It is utilized to take advantage of the possibility that better financing may be available at a later date. The lease agreement and sales contract are drawn up simultaneously, with a delayed closing date on the sales contract. The sales price is specified, and an agreement to purchase on or before some stated date. The “locked–in” purchase price benefits the lessee/buyer. There is nearly always a payment of a deposit toward a down payment. Payment of monthly rental payments by lessee/buyer covers the underlying mortgage. Dyn...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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