Mrs. Jones (not her real name), 55 years old, came to a musculoske.docx

Mrs. Jones (not her real name), 55 years old, came to a
musculoskeletal specialist seeking advice for a 3-year history of
progressively worsening pain in both knees. Her knees were
stiff for about 20 minutes when she arose in the morning and for
a few minutes after getting up from a chair during the day. She
had difficulty walking > 30 minutes because of pain, and her
symptoms were exacerbated by kneeling, squatting, or
descending stairs. Although sitting, resting, and reclining
relieved her pain, she became stiff if she stayed in one position
for too long. Her symptoms were worse on humid or cold days,
and she occasionally felt as if one of her knees would “give
out.”
Mrs. Jones was slightly obese, and physical examination of the
lower extremities revealed mild genu varum, which suggested
medial compartment involvement. Her gait was mildly antalgic,
and passive range of motion of both knees indicated palpable
crepitus. She was unable to flex or extend her knees completely.
While a physically active osteoarthritis patient commonly has a
maximum flexion < 130°(compare with normal maximum
flexion of 140° to 150°), this patient’s was>< 120°. in addition,
in patients with severe osteoarthritis, it is not uncommon to
have a partial><'10°) loss of extension. Mrs. jones had 8° loss
of>
Patellar facet tenderness was determined by palpation. There
was tenderness over the joint line and patellofemoral crepitus,
which is common in patients with osteoarthritis of the knee.
There was moderate warmth and soft-tissue swelling. Patellar
tilt was determined clinically and, with the knee in full
extension, patellar glide was measured by assessing how far the
patella translated medially and laterally. Mrs. Jones exhibited
moderately severe decreased patellar glide both medially and
laterally.
Knee stability was determined in the coronal (varus/valgus) and
sagittal (anteroposterior) planes. Patients with medial

inflammation and a varus deformity commonly have medial
pseudolaxity, which is a sensation of valgus laxity as the varus
deformity is manually corrected with the patient supine and the
leg extended. As expected, Mrs. Jones presented with medial
pseudolaxity with mild instability. In addition, patients may
have increased tibial translation on both Lachman’s testing and
anterior drawer
testing, and a positive pivot shift maneuver, indicating a
chronic anterior cruciate ligament insufficiency, which can lead
to osteoarthritis. However, the examination indicated that this
patient had none of these findings.
Examination of Mrs. Jones’s hands revealed enlargement of
some of the proximal interphalangeal joints (Bouchard’s nodes)
and some of the distal interphalangeal joints (Heberden’s
nodes). There was a squaring at the bases of both thumbs at the
carpometacarpal joints. The feet demonstrated similar
deformities, with enlargement and reduced dorsiflexion of the
first metatarsophalangeal joints. Upon further questioning, the
patient admitted experiencing occasional pain and stiffness in
these joints.
Because of the prevalence of atherosclerosis in the older
population, a thorough neurovascular examination was
performed on this patient. Her distal pulses were intact, as was
sensation, and there was no evidence of cyanosis, clubbing, or
edema. The examination showed no signs of neurovascular
compromise. Had any of these findings been evident, a complete
vascular workup would have been obtained, including blood
work, to look for indications of a hypercoaguable state. If either
neurovascular compromise or evidence of coronary artery
disease had been found, then the risk-benefit ratio of
prescribing a cyclooxygenase (COX)-2 inhibitor would have
been weighed.
Mrs. Jones’s hip and back were examined thoroughly, as well,
to rule out any contribution to the knee symptoms. She had full
range of motion (ROM) of the lumbosacral, and all motions
were pain free. Her hip examination showed decreased internal

ROM, but motions were pain free and symmetric. These
findings indicate that neither hips nor back was contributing to
this patient’s symptoms. However, she had a leg length
discrepancy, with her right leg being 0.5 cm shorter than her
left. Leg length discrepancy can contribute to a patient’s
symptoms and affect the treatment plan.
In cases where such a discrepancy is contributing to a patient’s
symptoms, both surgical and nonsurgical interventions can be
considered. With Mrs. Jones, the difference was < 5 cm, so
correction was not necessary.
radiographs showed osteophytes, joint space narrowing, and
subchondral bone sclerosis in both of her joints.
Please generate a case study report for non-pharmacological
interventions designed to assist Mrs. Jones in her rehabilitation.
© 2018 Rockwell Publishing
Financing Residential Real Estate
Lesson 12:
VA-Guaranteed Loans
*
Introduction
This lesson will cover:characteristics of VA loanseligibility
requirementsVA guarantyVA loan amountsunderwriting

guidelines for VA loans
*
Introduction
VA loan program was established to help veterans finance
purchase of their homes:Affordable loansAdvantages
Note: In these slides, we’ll use “veteran” as a shorthand to
include current service members along with those who have
completed service.
*
Characteristics of VA Loans
VA-guaranteed loan: made by institutional lender, but portion
of loan is guaranteed by Department of Veterans
Affairs.Protects lender against losses from default.
*

VA loans may be used to finance purchase or construction of
one- to four-unit residence. Can’t be used for investor
loans.Veteran must occupy home.Loan may also be used for
refinancing.
*
Characteristics of VA LoansNo downpayment required (100%
financing).No maximum loan amount set by VA.No maximum
income limits.Less stringent qualifying standards.Can be fixed-
rate loan or ARM.No mortgage insurance required.No reserves
after closing required.
*
Characteristics of VA Loans1% of amount financed to cover
cost
of making loan only; no other origination fees.Limit on credit
report and underwriting fees.Seller must pay real estate agent’s

commission, and any escrow or mortgage broker fee.
*
Characteristics of VA LoansNo prepayment penalties.Can be
assumed by creditworthy buyer, veteran or non-
veteran.Forbearance for veterans in financial crisis.
*
Funding fee: amount borrowers must pay VA to defray costs of
loan program.Instead of mortgage insurance
premium.Percentage of loan amount.Paid at closing or financed
with loan amount.
Funding fee
*

Regular military veteran: funding fee is 2.15% of loan amount,
unless veteran makes downpayment of 5% of
more:Downpayment > 5% but < 10%: funding fee is 1.5%
Downpayment 10% or more, funding fee is 1.25%Fees slightly
higher for Reserves or National Guard members
Funding fee
*
Some exempt from funding fee requirement.Veterans entitled to
receive VA compensation for service-related
disabilities.Surviving spouses of veterans who died in service or
from service-related disabilities.
Funding fee
*
Seller concessions can’t total more than 4% of property’s
appraised value. Includes: payment of buyer’s funding fee,
prepayment of buyer’s property taxes and insurance, buydown,

andgifts of household items (furniture, etc.)
Seller concessions
*
Eligibility for VA Loans
Eligibility for VA loans based on length of active duty service
in U.S. armed forces.Minimum requirement:24 months
continuous active duty, orfull period vet was called to duty
(min. 90 - 181 days)depends on whether service was during
wartime or peacetime period Check with VA to determine
eligibility.
*
Veterans discharged for service-connected disability: no
minimum service period.
Disabled veterans
*

Dishonorable discharge prevents eligibility.Veterans whose
discharge was neither honorable nor dishonorable are eligible.
Dishonorable discharge
*
Reserves or National Guard for at least six years:eligible for
VA loanno minimum active duty service requirement
Reserves or National Guard
*
Certificate of Eligibility: issued by VA; required to apply for
VA loan.Can be obtained online or through mail.
Certificate of Eligibility

*
Surviving spouse may be eligible if veteran:died on active
dutydied of service-related injurieswas listed as missing in
actionis prisoner of war
Eligibility of spouse
*
Summary
Characteristics and EligibilityVA-guaranteed loanOwner-
occupancy requirementForbearanceFunding feeMinimum service
requirementCertificate of Eligibility
VA Guaranty
Essential feature of VA loans is that they’re guaranteed by U.S.
government.Significantly reduces lender’s risk of loss
if borrower defaults.

*
VA Guaranty
Guaranty amount: portion of loan covered by VA guaranty.
Guaranty amount for loan depends on:loan amountmaximum
guaranty amount in county where home is located
Guaranty amount
*
Maximum Guaranty Amount
VA maximum guaranty tied to conforming loan limits for
conventional loans.Increases automatically when conforming
loan limits increase.Higher maximums in counties designated as
high-cost.
Conforming loan limits
*

Maximum Guaranty Amount
Maximum VA guaranty in most areas:25% of Federal Housing
Finance Agency conforming loan limit for one-unit residence
FHFA’s current conforming loan limit for one-unit residence:
$453,100. So maximum VA guaranty amount in most areas is
25% of $453,100, or $113,275.
Maximum in most areas
*
VA Guaranty
Guaranty amount available in particular transaction depends on
loan amount.
Guaranty based on loan amount
*
VA Guaranty
Loan amountGuaranty amount
Up to $45,000: 50% of loan amount
$45,001–$56,250:$22,500

$56,251–$144,000:40% of loan amount,
up to $36,000
$144,001–$453,100:25% of loan amount
Over $453,100:25% of loan amount,
up to county max
Guaranty based on loan amount
*
VA Guaranty
Entitlement: guaranty amount available for particular veteran to
use.Doesn’t expire.Available until used by veteran or eligible
surviving spouse.
Guaranty entitlement
*
VA Guaranty
Restoration of entitlement:restored if veteran sells home and
repays loanavailable again for veteran to userestored if loan
paid off when veteran refinancesrestored entitlement applied to
new loan

Restoration of entitlement
*
VA Guaranty
Paying off loan without selling home:can use restored
entitlement to purchase another homeonly allowed to do this
oncemust occupy new home (owner-occupancy requirement)
Restoration of entitlement
*
VA Guaranty
Veteran’s entitlement not automatically restored after
assumption unless assumptor/buyer:is eligible veteranhas
entitlement equal to or greater than loan’s guaranty
amountagrees to substitute own entitlement for original
borrower’ssubstitution of entitlement requested from VA
Substitution of entitlement
*

VA Guaranty
For VA loan assumed by non-veteran: full entitlement can’t be
restored.
Veteran may still have remaining entitlement. Also called
partial entitlement.Can be used to obtain another VA loan.
Remaining entitlement
*
VA Guaranty
Co-ownership:if both borrowers are eligible veterans, maximum
guaranty is not increasedif veteran and non-veteran (who aren’t
married) buy house, guaranty only covers veteran’s portion of
loan
Entitlement and co-ownership
*
Summary

VA GuarantyGuaranty amountMaximum guaranty
amountEntitlementRestoration of entitlementRemaining
entitlementSubstitution of entitlement
VA Loan Amounts
VA doesn’t set maximum loan amount. Loan generally can’t
exceed appraised value of property.VA-approved appraiser
appraises property, VA issues Notice of Value (NOV).Sales
price exceeds appraised value: borrower must make up
difference out of own funds.
Loan amount can’t exceed value
*
VA Loan Amounts
Lender’s 25% rule may effectively impose a loan limit:guaranty
amount must equal at least 25% of loan amountVA loan for
more than 4 times guaranty amount requires
downpaymentguaranty + downpayment must equal at least 25%
of price.
Lender’s 25% rule
*

VA Loan Amounts
Sales price: $485,000
Maximum VA guaranty in county: $113,275
Loan above $453,100 needs downpayment
$485,000 Sales price
x .25
$121,250 25% of price
- 113,275 Guaranty
$7,975 Downpayment required
Making downpayment
*
VA Loan Amounts
Example, cont’d:
$485,000 Sales price
- 7,975 Downpayment
$477,025 Loan amount
Making downpayment

*
VA Loan Amounts
Veteran can finance part or all of downpayment required by
lender if:combined loans don’t exceed NOVbuyer qualifies for
combined paymentssecond loan is assumable by creditworthy
buyer
Secondary financing
*
Underwriting Guidelines
Most VA underwriting guidelines resemble those used in
conventional loans.
*
Underwriter reviews the applicant’s credit report and credit
scores.

Application can be rejected on poor credit reputation alone.
No VA minimum credit score, however.
Credit reputation
*
Two methods of income analysis for VA loans:income ratio
methodresidual income method
Applicant must qualify under both tests.
Income
*
VA uses debt to income ratio to analyze income of loan
applicant.Ratio generally can’t exceed 41% unless there are
compensating factors.Debt includes PITI, credit cards, and other
obligations with more than 10 payments left.
Income ratio analysis

*
Residual income analysis: second method used to qualify loan
applicant (also called cash flow analysis).
Gross monthly income
- taxes, recurring obligations,
- monthly shelter expense
= Residual income
Residual income analysis
*
Vet’s residual income or cash flow must satisfy minimum
requirement.
Minimum requirement varies according to:region of the
countryfamily sizesize of proposed loan
Residual income analysis

*
Underwriter can make exceptions to income ratio and residual
income requirements if compensating factors present.
Compensating factors must be relevant to weaknesses.
Compensating factors
*
Possible compensating factors:excellent long-term credit
historyconservative use of consumer creditminimal consumer
debtlong-term employmentsignificant liquid assetssizable
downpaymentlittle or no increase in housing expensemilitary
benefits
*

Possible compensating factors, continued:satisfactory previous
experience with home ownershiphigh residual incomelow debt
to income ratiotax credits for child caretax benefits of home
ownershipsignificant equity in property (for refinancing)
*
Special rules for approving applicant whose income ratio is over
41%.Ordinarily: lender must submit statement to VA listing
compensating factors.If residual income exceeds minimum by
20% or more, loan can be approved with income ratio over 41%
and without any other compensating factors or explanatory
statement.
Income ratio exceptions
*
Summary
Loan Amounts and UnderwritingNotice of
ValueDownpaymentSecondary financingIncome ratio

analysisResidual income analysisCompensating factors
Financing Residential Real Estate
Lesson 11:
FHA-Insured Loans
*
Introduction
This lesson will cover:FHA loan programsrules for FHA loans
FHA insurance premiumsFHA underwriting
standardsspecialized FHA programs
*
Overview of FHA Loans
Federal Housing Administration (FHA) created in 1934 as part

of National Housing Act.
Purpose of act was to:generate new jobs by increasing
construction activitystabilize mortgage marketpromote
financing, repair, improvement, and sale of real estate
Federal Housing Administration
*
Today, FHA is part of Department of Housing and Urban
Development (HUD). Primary function is insuring mortgage
loans.Compensates lenders for losses from borrower
default.Does not build homes or make loans.
Federal Housing Administration
*
FHA insurance program is called the Mutual Mortgage
Insurance Plan.Funded by premiums paid by FHA borrowers.
FHA mortgage insurance

*
Direct endorsement lender: lender authorized to underwrite its
own FHA loans.FHA borrowers apply to lender, not FHA.
Lenders authorized to make FHA loans either:submit
applications to FHA for approval, orunderwrite applications
themselves.
*
If FHA borrower defaults on loan: FHA reimburses lender for
full amount of loss.Borrower required to repay FHA.
*

FHA-insured loan program intended to help
low- and moderate-income home buyers.But eligibility isn’t
restricted by income.Instead, FHA sets maximum loan
amounts.Maximum generally only enough to buy moderately
priced house.Low downpayment requirements, lenient
underwriting standards.
Role of FHA loans
*
FHA loans fell out of favor during subprime boom.
Conventional underwriting standards were loosened and loans
were easier to obtain.FHA maximum loan amounts were too low
to use in some areas.
Role of FHA loans
*
FHA loans once again becoming more popular.Low-
downpayment conventional loans harder to get.FHA maximum

loan amounts increased.
Role of FHA loans
*
Many different programs to fit different needs.Programs
referred to by section numbers taken from provisions of
National Housing Act.
FHA loan programs
*
FHA Loan Programs
Section 203(b) is standard FHA program.Most FHA loans are
203(b) loans.Other programs are based on 203(b).Can be used
for purchase or refinancing of principal residences with up to
four units.
Section 203(b) – standard program
*

FHA Loan Programs
203(k) program insures mortgages used to purchase/refinance
and rehabilitate homes.
Section 203(k) – rehabilitation loans
*
FHA Loan Programs
234(c) program covers purchase/refinance of unit in
condominium project approved by FHA.Developer usually
applies for FHA approval when project is built or converted.
Requires: at least 50% of units owner-occupiedadequate
reserves and insurance coverage.
Section 234(c) – condominium units
*
FHA Loan Programs
Section 251 ARM program can be used to purchase/refinance

owner-occupied residence with up to four units.Must have 30-
year loan term.After initial fixed-rate period, adjustments occur
on an annual basis.
Section 251 – ARMs
*
FHA Loan Programs
Qualifying rate: interest rate used to calculate monthly payment
when qualifying buyer.For most FHA ARMs: qualifying rate is
initial interest rate.For 1-year ARM with LTV 95% or above:
qualifying rate is initial interest rate + 1%.
Section 251 – ARMs
*
FHA Loan Programs
Section 255 provides insurance for reverse mortgages, which
FHA calls home equity conversion mortgages (HECMs).
Section 255 – HECMs

*
Summary
Overview of FHA LoansFHAHUDMutual Mortgage
Insurance PlanDirect endorsement lenders203(b) program234(c)
program251 program
Rules for FHA Loans
FHA-insured financing must comply with FHA rules:owner-
occupancymaximum loan amountminimum cash investmentsales
concessionssecondary financing property flippingassumption
*
Rules for FHA Loans
Borrower must intend to occupy home as principal
residence.Secondary residence only in limited circumstances
involving employment-related reasons.Investor loans generally
not permitted.
Owner-occupancy

*
Rules for FHA Loans
Maximum loan amounts vary from area to area and are based on
local median housing costs.Tied to conforming loan limits set
annually for Fannie Mae and Freddie Mac.
Local maximum loan amounts
*
FHA Local Maximum Loan Amounts
2018 basic maximum FHA loan amount for one-unit property is
$294,515.
Basic maximum – most areas
*

In high-cost areas, maximum may be increased above area’s
median home price, up to stated ceiling.In 2018, “ceiling” is
$679,650.Higher ceiling applies in parts of AK, HI, Guam, and
Virgin Islands.
Maximums in high-cost areas
*
Maximum loan amounts set on county-by-county basis. Limit
may be adjusted periodically to reflect changes in cost of
housing.Check with local lender for current FHA maximum loan
amount in your area.
Adjusted to reflect housing costs
*
Rules for FHA Loans
Minimum cash investment: at least 3.5% of appraised value or
sales price, whichever is less.Maximum loan-to-value: 96.5%.
Minimum cash investment and LTV

*
Rules for FHA Loans
Interest rates negotiable between lender and FHA
borrower.Lenders can charge whatever closing costs are
“customary and reasonable” in area.
Prepayment penalties prohibited.
Loan charges and closing costs
*
Rules for FHA Loans
FHA limits amount that seller or other interested party can
contribute to buyer in transaction.Purpose is to prevent parties
from using contributions to defeat FHA’s LTV and minimum
cash investment rules.
Sales concessions
*

FHA Sales Concession Rules
Seller contribution: when seller (or other interested party) pays
for all or part of:buyer’s closing costs or prepaid expensesany
discount pointstemporary or permanent buydownbuyer’s
mortgage interestupfront premium for mortgage insurance
Seller contributions
*
Seller contributions limited to 6% of sales price.Excess
contributions:treated as inducements to purchasededucted from
sales price or value in loan amount calculations6% limit doesn’t
apply to fees and closing costs that sellers typically pay
according to local custom.
Seller contributions
*
Inducement to purchase: when seller (or other interested
party):gives buyer decorating or repair allowancepays for

buyer’s moving expensespays commission on sale of buyer’s
homegives buyer personal property not usually included in sale
of home
Inducements to purchase
*
Value of inducements to purchase is subtracted from property’s
sales price before maximum LTV ratio is applied.Reduces
maximum loan amount
available to borrower.Remember: excess seller contributions
(over 6% limit) = inducements to purchase.
Inducements to purchase
*
Rules for FHA Loans
FHA rules regarding use of secondary financing depend on
whether it’s being used:for minimum cash investment, oras
supplement to make up part of maximum loan amount.
Secondary financing

*
FHA Secondary Financing Rules
Secondary financing can’t be used for minimum cash investment
if it’s from:selleranother interested partyinstitutional lender
Financing minimum cash investment
*
Secondary financing can be used for minimum cash investment
and other costs if it’s from:close family
membergovernment/nonprofit agency
Total financing can’t exceed property’s value or sales price.
Financing minimum cash investment
*

Secondary financing for part of maximum loan
amount:combined loans can’t exceed local FHA loan limit or
maximum loan-to-value ratiocombined payment can’t exceed
borrower’s ability to paymonthly payments on second loan no
balloon payment before10-year markno prepayment penalty on
second loan
Financing part of loan amount
*
Benefit of using secondary financing for part of loan
amount:seller second could have lower rate than FHA
loan:reduces buyer’s monthly paymentmight help buyer qualify
for loan when market interest rates are high
Financing part of loan amount
*
Rules for FHA Loans
Property flipping: reselling property for substantial profit

shortly after purchasing it.Predatory if it involves collusion to
resell home to unsophisticated buyer at inflated price.
Property flipping prevention rules
*
Rules for FHA Loans
FHA rules designed to prevent predatory flipping:Seller must be
property owner of record.More than 90 days must have passed
since seller bought property.If seller bought property within
previous 91-180 days and resale price has doubled, second
appraisal is required.
Property flipping prevention rules
*
Rules for FHA Loans
FHA loans contain due-on-sale clauses and place limits on
assumptions: buyer must intend to occupy home as principal
residencelender review of buyer creditworthinessif buyer is
creditworthy, original borrower released from liability
Assumption of FHA loans

*
Summary
Rules for FHA LoansOwner-occupancyLocal maximum loan
amountMinimum cash investmentSeller
contributionsInducements to purchaseSecondary
financingProperty flippingAssumption
FHA Insurance Premiums
Insurance premiums for FHA loans are called the MIP
(mortgage insurance premiums).
For most programs, borrowers pay:upfront premium, plusannual
premiums.
*
Upfront premium (UFMIP) is also called

one-time premium (OTMIP).Percentage of loan
amount.Currently 1.75%.
Upfront MIP
*
Upfront MIP
UFMIP can be:paid in cash at closing by either borrower or
seller, orfinanced over loan term.
If financed:
UFMIP + Base Loan = Total Amount Financed
Paying UFMIP
*
Upfront MIPFHA buyer can borrow local maximum loan amount
plus UFMIP.Total amount financed can’t exceed property’s
appraised value.
Financed UFMIP and loan amount
*

Most FHA borrowers are required to pay annual premiums in
addition to UFMIP.One-twelfth of premium included in monthly
loan payment.Between 0.45% and 1.05% of loan balance per
year, depending on loan term, loan amount, and LTV.
Annual MIP
*
Annual MIP
Annual MIP for loans made after June 3, 2013: LTV > 90%,
paid for entire life of the loan LTV ≤ 90%, canceled after 11
years
Duration of premium payments
*
Annual MIP
Even after cancellation of annual MIP, mortgage insurance
remains in effect for rest of loan term.

Duration of premium payments
*
Summary
FHA Insurance PremiumsUFMIP (OTMIP)Total amount
financedAnnual MIP
FHA Underwriting
FHA underwriting standards aren’t as strict as Fannie
Mae/Freddie Mac standards.
*
FHA Underwriting
FHA requires lenders to consider credit scores.No FHA loan if
credit score is below 500If credit score is between 500 and 579,
maximum LTV is 90%

Credit reputation
*
FHA Underwriting
Nontraditional credit analysis:Applicant may qualify for FHA
loan even if no credit report and no credit scores
available.Underwriter analyzes applicant's reliability over past
year in paying rent, utilities, other obligations.
Credit reputation
*
FHA Underwriting
FHA underwriter determines applicant’s monthly effective
income.
Effective income: gross income from all sources expected to
continue for first 3 years of loan term.
Income analysis
*

Income Analysis for FHA Loans
Income ratios are used as guidelines in determining adequacy of
effective income:maximum debt to income ratio – 43%maximum
housing expense ratio – 31%if buying energy-efficient home,
ratios may
be 2% higher (45% and 33%)
Income ratios
*
Fixed payments (for debt to income ratio) include: Housing
expense: principal and interest, property taxes, hazard
insurance, annual MIP, and any homeowners dues.Recurring
charges: monthly payments on debts and obligations with 10 or
more payments remaining.
Calculating income ratios
*

If income ratios exceed 43% and/or 31% limits, applicant won’t
qualify for loan unless there are compensating factors that
reduce risk of default.
*
Income Analysis for FHA LoansProposed housing expense is
similar to current housing expense.Large reserves.No
discretionary debt (only installment debt is current housing
expense).Borrower has residual income that would be adequate
for VA loan.Has income, not counted as effective
income, that affects ability to pay.
*
FHA Underwriting
At closing, borrower needs enough cash to cover:minimum cash
investmentprepaid expensesany discount pointsupfront MIP (if

not financed)closing costs, repair costs, or other expenses not
financed
Assets for closing
*
Assets for Closing
Generally, borrower not required to have reserves for FHA loan.
May be compensating factor if income ratios exceed limits.One-
month reserves required for manually underwritten loan.
No reserves required
*
Assets for Closing
FHA borrower may use gift funds for part or even all of funds
needed for closing.Donor must be employer, labor union, family
member, close friend, charitable organization, or government
agency.Gift letter is required.
Gift funds
*

Assets for Closing
FHA borrower may also borrow funds needed for
closing.Unsecured loan: lender must be close family
member.Secured loan:collateral must be property other than
home being purchasedlender can’t be seller, real estate agent, or
other interested party
Borrowed funds
*
Summary
FHA UnderwritingCredit reputationMinimum credit
scoreIncome analysisIncome ratiosEffective incomeFixed
paymentsRecurring chargesAssets for closing
Rehab Loans/Reverse Mortgages
In recent years, both rehabilitation loans and reverse mortgages
have become increasingly popular with FHA borrowers.

*
Section 203(k) – FHA Rehab Loans
203(k) program: insures mortgages used to purchase/refinance
and rehabilitate residence with up to four units.Portion of loan
proceeds used to purchase or refinance property.Remaining
funds deposited in Rehabilitation Escrow Account.
*
Restrictions:home must be at least one year oldHUD imposes
structural and energy-efficiency standards on all rehab
workluxury/temporary improvements ineligible
Restrictions
*
Most of same rules used for 203(b) program apply to

203(k).Exception: for larger loans, an FHA-approved consultant
must inspect periodically to monitor progress.
Consultant
*
For loan amount rules, property’s value is least of: property’s
as-is current value, plus costs of rehabilitation; or110% of
property’s value after rehabilitation.
Determining maximum loan amount
*
Section 255 – FHA HECMs
Home equity conversion mortgage (HECM): used by elderly
homeowner to convert equity into monthly income or line of
credit.Repayment not required as long as home remains owner’s
primary residence.FHA name for reverse mortgage.
Home equity conversion mortgages

*
Section 255 – FHA HECMsHomeowner must be at least
62.Property must be principal residence and owned free and
clear (or with only small mortgage balance).Loan amount
depends on FHA’s ceiling for high-cost areas, appraised value,
current interest rate, and borrower’s age.No income
requirements or credit qualifications.
Requirements
*
Lender recovers principal and interest when property is
sold.Any excess sale proceeds to go seller (or heirs).
Sale of property
*

Proceeds from FHA HECM can be used to purchase 1- to 4-unit
principal residence.
Advantage is that borrower won’t make monthly payments; loan
will be repaid when home is sold.
HECMs for purchase
*
Summary
Rehab Loans/Reverse Mortgages203(k) programRehabilitation
loanSection 255 programReverse/home equity conversion
mortgageHECM for purchase
3/25/2020 Sample Content Topic
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wContent/9226935/View 1/2
FHA or VA Loan?
Introduction: FHA loans offer primary real estate lenders
insurance against default on new home purchases while VA
loans offer these same lenders a government guaranty. FHA
and VA loans have different qualifying criteria and are often a
good option for certain clients. In this Assignment, you will

decide which loan type is best based on the following
scenario.
The following Course Outcome is assessed in this Assignment:
MT431-5: Determine an appropriate client property that
qualifies for an FHA or VA loan.
Scenario: Calandra is a veteran who has been employed with
a technology company for the last seven years. In her newest
job with this company, she is required to spend six months a
year in Seattle, Washington, and spend the other six months at
the company’s Miami, Florida headquarters. Recently she
purchased a two-bedroom condo in Miami using her VA
benefits and now wants to purchase a small two-bedroom, 2-
bath condo as a place to live when she is in Seattle. She wants
the condo to be located close to downtown so she can use
public transportation. Financially, Calandra qualifies under both
the payment ratio and debt ratio for the new loan, has a FICO
score of 620, but she does not have a lot of money to put down
on the new condo in Seattle.
Checklist:
Research the current loan limits using the Internet.
Search a well-known real estate website like realtor.com or
zillow.com etc., and find a property that fits the veteran’s
criteria and for which she will qualify for an FHA or VA loan.
Describe the property you find and evaluate the criteria by
which the property must qualify in order to get the FHA or VA
loan you determine she would qualify for.
Assignment Details

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Determine what type of government sponsored low down
payment loan she would qualify for.
Explain why other low down payment loans would not work for
her.
Determine what her down payment would need to be for the
loan program you recommend for her (show calculations).
Describe the guidelines that qualify her for the loan you are
recommending.
Access the Unit 9 Assignment grading rubric.
Submit your response in a minimum 600-word Word document
using APA format and citation style with additional title and
reference pages, to the Unit 9 Assignment Dropbox.
https://kapextmediassl-
a.akamaihd.net/business/MT431/1904c/rubrics/u9_rubric.pdf
UIDELINES FOR WRITING A CASE STUDY ANALYSIS
A case study analysis requires you to investigate a patient case
or problem, examine the alternative solutions, and propose the
most effective solution using supporting evidence.
What are case studies?
Case studies are stories. They present realistic, complex, and
contextually rich situations and often involve a dilemma,
conflict, or problem that one or more of the characters in the

case must negotiate.
A good case study, according to Professor Paul Lawrence is:
“the vehicle by which a chunk of reality is brought into the
classroom to be worked over by the class and the instructor. A
good case keeps the class discussion grounded upon some of the
stubborn facts that must be faced in real life situations.”
(quoted in Christensen, 1981).
Although they have been used most extensively in the teaching
of medicine, law and business, case studies can be an effective
teaching tool in any number of disciplines. As an instructional
strategy, case studies have a number of virtues. They “bridge
the gap between theory and practice and between the academy
and the workplace” (Barkley, Cross, and Major 2005, p.182).
They also give students practice identifying the parameters of a
problem, recognizing and articulating positions, evaluating
courses of action, and arguing different points of view.
Preparing the Case
Before you begin writing, follow these guidelines to help you
prepare and understand
the case study:
1. Readandexaminethecasethoroughly
o Take notes, highlight relevant facts, underline key problems.
2. Focusyouranalysis
o Identify two to five key problems
o Why do they exist?
o How do they impact the patient?
o Who is responsible for them?
3. Uncoverpossiblesolutions
o Review course readings, discussions, outside research, your
experience.
4. Selectthebestsolution
o Consider strong supporting evidence, pros, and cons: is this
solution realistic?
Drafting the Case
Once you have gathered the necessary information, a draft of

your analysis should include these sections:
1. Introduction
o Identify the key problems and issues in the case study.
o Formulate and include a thesis statement, summarizing the
outcome of your analysis in
1–2 sentences.
2. Background
o Set the scene: background information, relevant facts, and the
most important issues. o Demonstrate that you have researched
the problems in this case study.
3. Alternatives
o Outline possible alternatives (not necessarily all of them) o
Explain why alternatives were rejected
o Constraints/reasons
o Why are alternatives not possible at this time?
4. Proposed
Solution
o Provide one specific and realistic solution
o Explain why this solution was chosen
o Support this solution with solid evidence
o Concepts from class (text readings, discussions, lectures) o
Outside research
o Personal experience (anecdotes)
5. Recommendations
o Determine and discuss specific strategies for accomplishing
the proposed solution. o If applicable, recommend further action

to resolve some of the issues
o What should be done and who should do it?
Finalizing the Case
After you have composed the first draft of your case study
analysis, read through it to check for any gaps or
inconsistencies in content or structure: Is your thesis statement
clear and direct? Have you provided solid evidence? Is any
component from the analysis missing?
Proofread, proofread, proofread, proofread. Then.... Give it to
your smartest friend and ask them to proofread your document.
Spelling errors, grammatical mistakes and just plain not making
sense are all common mistakes made in documents that we
write. Take measures to prevent this from happening. After all,
we are professionals or soon to be professionals in the realm of
human movement science, not professional writing or English.
However, mistakes cost points.

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