Please. respond. to celene w ith. 200. words
Discussion 7 Chapters 13 & 14
Cele
Please. respond. to celene w ith. 200. words Discussion 7 Chapters 13 & 14
Celene
March 23, 2024
BRE-126 Real Estate Finances
Huber, W
Chapters# 13-14
Overview
After reading chapters 13 and 14 they are the components of what qualifies the borrowers. In Chapter 13 the process of qualifying a borrower is called underwriting. “Before agreeing to make a real estate loan, a lender will evaluate both the borrower’s ability and willingness to repay the loan and or whether or not the property is of sufficient value to serve as collateral of the loan” (Huber, 2017, p. 337). A loan underwriting is the evaluating process, and the underwriter is the individual conducting the process. To minimize risk the underwriter must ask two fundamental questions to minimize the amount of the lender’s risk.
Key Concepts from Chapter 13
In Chapter 13 I learned that “according to the Federal Home Loan Mortgage Corporation (FHLMC) underwriting mortgage loans is an art, not a science. It cannot be reduced to mathematical formulas but requires sensitive weight of the many aspects of the loan” (Huber, 2017, p. 339). One main aspect the underwriter considers is an income investigation, with this information the conventional lender takes into consideration the borrower’s income sufficient for a loan. When being offered payments of principal, interest, taxes, insurance, and not exceeding 28% of their monthly income.
Key Concept from Chapter 14
When reading Chapter 14 I learned that “qualifying the property involves an analysis of its many features to determine whether it has sufficient value to serve as collateral for a real estate loan- and whether its value can be expected to remain stable in the months and years to come” (Huber, 2017, p. 373). The lender’s perception of value is to make use of Appraisers that are certified and licensed to use their expertise of opinion of market value for each property. Appraisers are required by state and federal law unbiased and inspection of the property.
Key Concept from Chapter 13
The second thing I learned in Chapter 13 is the importance of a monthly income. With it, the income provided can be reliable and likely to meet the requirements. Including borrower’s housing expenses, plus any installment debts, alimony, child support, or maintenance payments, not exceeding 36% of their stable monthly income (Huber, 2017, p. 341). For example: $2,900 (stable monthly income) + $700 (proposed mortgage payment) + $225 (auto payments) + $100 (child support) = $1,025. 1,025/2,900 = .35 total expense-to-income ratio.
Summary These two chapters were very informative. From reading these chapters I can now go back, review, and understand what my underwriter wrote and how they qualified my home. My home was purchased 3 years ago but with me being on this course it has given me a better understanding and perspective in my home-buying journey. I still do not know much but I’m eager to learn more. In addition, I am sure these chapters will be on the California Real Estate Exam.