Real Estate Financing and Lending
Loan basics
Loan types include conventional, FHA, VA, USDA rural, and Alaska Housing Finance Corporation (AHFC) programs, which are common sources for Alaska first-time and rural buyers. Key metrics: loan-to-value (LTV), debt-to-income (DTI), and housing/expense ratios. A pre-qualification is an informal estimate; a pre-approval is a lender's conditional commitment.
Cost and disclosure rules
Points are prepaid interest (one point = 1% of the loan); origination fees are lender charges; the APR folds fees into a yearly cost so it usually exceeds the note rate. Under federal TRID rules, the Loan Estimate is delivered within three business days of application and the Closing Disclosure at least three business days before consummation. RESPA Section 8 prohibits kickbacks and unearned fees.
Loan terms to recognize
Escrow/impound accounts, PMI and its cancellation rules, amortization, acceleration, alienation (due-on-sale), prepayment penalties, and seller carryback financing. Alaska's non-judicial foreclosure runs through deeds of trust under state statute, so most Alaska loans use a deed of trust rather than a mortgage.
Traps
- Confusing points with origination fees, or the note rate with the APR.
- Calling a pre-qualification letter a loan commitment.
- Assuming a seller-financed deal escapes all disclosure obligations.
- Forgetting that a due-on-sale clause can be triggered by a transfer of title.
Worked example
A buyer purchases for $350,000 with 20% down, so LTV is 80% and the loan is $280,000. Two points cost 2% × $280,000 = $5,600, paid at closing. If a 10% second lien were added, combined LTV would be 90% - a threshold question for pricing.