1. Chapter 11: Lending Practices
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2. Loans
oTerm loan – interest payments only until due.
oAmor tized loan – regular equal payments for life
of loan including both principal & interest.
oBalloon loan – any loan that has a final
payment larger than any of the previous.
oPar tially amor tized loan – series of amortized
payments with a balloon payment at maturity.
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3. Repaying a 6-year, $1,000 Loan
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4. Repaying a 6 year $1,000 amortized
loan 9% Interest per Year
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5. Balance Owed Each Year of the Loan
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6. Amortization Table: Monthly Payment per $1,000 of Loan
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7. Balance Owing on a $1,000 Amortized Loan
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8. LOAN AMORTIZATION
Budget Mortgage
Balloon Loan
Partially Amortized Loan
Earlier Payoff
Biweekly payments
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9. Loan-to-Value
• The relationship between the amount the lender is
willing to loan and the market value of the property.
• Market value = $100,000
Loan = $80,000
What is the loan-to-value ratio? 80%
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10. Equity
Loan Points
Origination fee
Discount points
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LOAN TERMINOLOGY

11. VA / FHA Comparison
FHA VA
Insures loans
UFMIP
Anyone qualified
Rate negotiable
Points
3.5% down
96.5% L-T-V
Guarantees loans
Funding fee
Veterans only
Rate negotiable
Points
No down payment
100% L-T-V
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12. VA / FHA Similarities
• Owner occupied
• 1-4 family dwellings
• Refinancing allowed
• Assumption allowed
•with approval
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13. VA
Loan Limits Info
 http://www.homeloans.va.gov/
FHA
 https://entp.hud.gov/idapp/html/hicostlook.cfm
Conv
 http://www.fanniemae.com/aboutfm/loanlimits.jhtml?p=About+Fan
nie+Mae&s=Loan+Limits
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14. Mortgage Insurance
Private Mortgage Insurance
PMI Conv
UFMIP FHA
VA Loan Guarantee
 Insures lenders against losses
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15. RURAL HOUSING SERVICES ADMINISTRATION
A federal agency under the U.S.
Department of Agriculture.
Like the FHA, it came into existence
due to the financial crises of the
1930s.
The RHSA offers programs to help
purchase or operate farms.
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16. Key Terms
VA Amortized loan
Balloon loan
Conventional loans
Equity
FHA
 Impound or reserve
account
Loan origination fee
Loan-to-value ratio
Maturity
PITI payment
PMI
Point
Principal
UFMIP
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