Here are the correct answers for this assignment:1.
1. FHA Borrowers can qualify for this loan with monthly PITI payments up to 31% of gross monthly income and total monthly fixed expenses up to 43% of gross monthly income.
2. USDA This loan uses 29% housing-to-income and 41% debt-to-income ratios. Applicants must be without adequate housing, cannot qualify for a conventional home loan with private mortgage insurance, must have a steady income of up to 115% of the median income for the area and have a reasonable credit history.
3. VA A borrower cannot borrow more than the value shown on this loan's appraisal, called a Certificate of Reasonable Value (CRV). He can, however, buy the property for a higher purchase price if he pays the difference in cash. If he does not wish to do so, he can terminate the transaction through a required "escape clause" in the sales contract and receive a refund of his earnest money.
4. FHA The borrower is charged both a non-refundable upfront mortgage insurance premium at closing and ongoing annual mortgage insurance premiums, which are paid monthly.
5. FHA This loan requires the use of an Amendatory Clause, in most transactions, which provides that the buyer is not obligated to conclude the transaction, and is entitled to a full refund of his earnest money deposit, if the property is appraised at less than the purchase price.
6. VA The borrower is qualified using either a 41% debt-to-income ratio (including housing and fixed debt) or the residual income method (whether the borrower has enough income after paying the debts to cover daily living expenses).
7. VA The borrower is charged a non-refundable upfront funding fee for a guarantee of up to 25% of the loan amount for the lender, which can be financed, instead of a mortgage insurance premium. Note, the USDA also has an upfront funding fee, but it pays for a guarantee of 90% of the loan amount.
8. VA The seller can pay all of the borrower's non-recurring closing costs and discount points, with no limit, and up to 4% of the sales price in seller concessions, including prepaid taxes and insurance, funding fee, payoff of the borrower's existing debts, temporary buydown fees and gifts.
9. USDA This loan is available only in rural areas to build, repair, rehabilitate, renovate or relocate a primary residence, or to purchase a site for one.
10. VA The primary advantage to this loan for the borrower is that there is no down payment required on a loan up to the Freddie Mac conforming loan limit. Note, the USDA also has no down payment, but its loan limits are not tied to the Freddie Mac conforming loan limit.
FHA LOANS
The main advantages to the borrower are:
- High loan-to-value ratio equals low cash investment
- Cash investment (including down payment) can be 100% gift from approved sources
- Higher qualifying ratios of 31/43%
- No minimum credit score required and alternate credit accepted
- Assumable
- Seller concessions allowed
- Appraisal and credit report limited to actual cost and no tax service fee
- "For Your Protection: Get a Home Inspection" notice must be given to buyer informing of importance of home inspection
- Amendatory Clause frees buyer if appraisal less than purchase price
The main advantages for the lender are:
- The lender is insured against loss if borrower defaults
VA LOANS
The main advantages to the borrower are:
- Zero down payment on purchases up to the Freddie Mac conforming loan limit
- Seller can pay all nonrecurring closing costs and discount points (with no limit) and up to 4% of the sales price in concessions
- Easier to qualify for than conventional loan
- Escape clause frees borrower if CRV less than purchase price
The main advantages to the lender are:
- The lender is guaranteed against loss if borrower defaults
USDA LOANS
The main advantages to the borrower are:
- Zero down
- Can get loan with moderate income
- Can get loan in rural area
- High debt-to-income ratios
The main advantages to the lender are:
- The lender is guaranteed against loss if buyer defaults