Real Estate Finance
A mortgage loan has two documents: the note (the promise to repay) and the mortgage (the lien securing it). Florida uses mortgages rather than deeds of trust. Key clauses include acceleration, due-on-sale, prepayment, subordination, and exculpatory clauses.
Loan types
Conventional loans are not government insured. FHA loans carry mortgage insurance premiums and permit low down payments. VA loans offer 100 percent financing to eligible veterans with a funding fee and entitlement. USDA loans target rural areas. ARMs carry caps (initial, periodic, lifetime), an index, and a margin; other structures include balloon, interest-only, negative amortization, buydowns, and wraparound mortgages.
Ratios and costs
LTV = loan divided by value. PMI is usually required above 80 percent LTV. Discount points are prepaid interest that lowers the rate. Loan origination, appraisal, and title charges are closing costs.
Regulation
RESPA and TILA, integrated through TRID, require a Loan Estimate within three business days of application and a Closing Disclosure at least three business days before closing. The SAFE Act and Florida Chapter 494 license mortgage loan originators through the NMLS. Fannie Mae and Freddie Mac buy conventional loans; Ginnie Mae supports government loans.
Traps
- Points are paid to the lender and reduce the interest rate; they are not a price reduction.
- A buydown lowers early payments, not the purchase price.
- Most loans carry a due-on-sale clause, so assumption requires lender approval.
Rule of thumb
One discount point equals one percent of the loan amount.