Real Estate Finance and Financing
Products, costs, and consumer protection
Candidates must know loan programs (conventional, FHA with mortgage insurance premium, VA with a funding fee and no monthly PMI, USDA), loan-to-value, points versus origination fees, and the PITI payment (principal, interest, taxes, insurance) plus mortgage insurance and HOA dues. The note rate is the interest rate; the APR folds in certain closing costs, so it is usually higher.
Disclosures. Under TILA-RESPA integrated disclosures, the Loan Estimate goes out within three business days of application and the Closing Disclosure must be received at least three business days before consummation. RESPA Section 8 prohibits fees or things of value for referral of settlement service business, including many affiliated-business arrangements without proper disclosure.
Default and foreclosure. Illinois is a lien-theory state and foreclosure is judicial under the Illinois Mortgage Foreclosure Law, with a statutory redemption period after judgment. Alternatives include short sale, deed in lieu, and reinstatement. A due-on-sale clause prevents transfer without lender consent; 'assuming' a loan is different from taking 'subject to' it.
PMI: borrowers may request cancellation at 80% LTV based on the original value and it terminates automatically at 78% of original value on the amortization schedule.
Worked example: purchase price $300,000, 10% down, loan $270,000. Auto-termination of PMI occurs when the scheduled balance reaches 78% of $300,000, or $234,000.
Traps: points are prepaid interest, not a service fee; VA loans have a funding fee, not PMI; a licensee may not steer a borrower to a lender for a fee, and mortgage loan originators are separately licensed through NMLS - a real estate license does not authorize taking loan applications.