Maria Center

Learn terms and topics you need to understand for the real estate exam finance section: 

  • Reverse Mortgages: - Minimum qualifying age for a reverse mortgage is 62. - Reverse mortgages allow homeowners to borrow against their home equity, receiving monthly payments from the lender instead of paying a monthly mortgage.
  • Loan Qualification Ratios: - Lenders examine a borrower's monthly expenses, including housing, student loans, car payments, and credit card payments, compared to their income. - The ratio of total monthly debt payments to monthly income is known as the back-end ratio. - The front-end ratio focuses only on housing expenses.
  • Property Value Changes: - Decrease in property value is referred to as depreciation. - The opposite, an increase in value, is known as appreciation. Interest and Loans: - The charge for using money over time, akin to rent for money, is interest. - For a $300,000 loan at 6% interest rate, the annual interest charge would be $18,000.
  • Secondary Mortgage Market Agencies: - Fannie Mae, Freddie Mac, and Ginnie Mae are all part of the secondary mortgage market, facilitating the buying and selling of loans.
  • FHA Loans: - Designed for homeowners with lower-than-average credit scores, FHA loans are federally backed mortgages.
  • Rental Income and Expenses: After deducting expenses from rental income, what remains is net income. Legal and Financial Documents: - Borrowers sign promissory notes to outline the repayment terms and interest rates for their debt.
  • Discount Points: - Borrowers can lower their interest rates by prepaying interest through discount points.
  • Bridge Loans: - Short-term loans used by buyers to bridge the gap until permanent financing becomes available. 
  • VA Loans: - Veterans purchasing homes with VA loans receive a certificate of eligibility indicating their loan qualification amount. 
  • Primary vs. Secondary Mortgage Market: - The primary mortgage market involves borrowers obtaining loans directly from lenders. - The secondary mortgage market involves the selling of packaged loans to investors.
  • Mortgage Payments (PITI): - PITI stands for Principal, Interest, Taxes, and Insurance, covering the comprehensive monthly payment made by homeowners. Origination Fees: - Fees charged by lenders to cover the expenses of processing a loan.
About the Author Maria Center

I began my career in real estate in Ohio in 2003 and currently work as a PrepAgent real estate exam tutor/instructor. 
I am licensed in Ohio, Florida, Alabama, Virginia, and Kentucky. I work as a Real Estate Broker at 1st Class Real Estate Expert Realtors in Philpot, Kentucky; Managing Broker at Renwick Realty in Middletown, Ohio; Associate Broker at 1st Class Real Estate Premier Homes in Ashland, Virginia; and as a broker in both Florida and Alabama. I am a licensed real estate instructor in Florida and teach finance and appraisal in Ohio. I look forward to helping you prep for success!

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