Financing, Mortgages, and Lending Practices
Financing questions cover the note and mortgage, loan types, disclosures, and the financing contingency. The broker must know when a buyer's loan commitment is late and how federal disclosure timing affects closing.
Core rules
- The note evidences the debt; the mortgage secures it. Florida generally uses mortgages rather than deeds of trust. A recourse loan allows a deficiency judgment; a nonrecourse loan generally does not.
- Loan types include conventional, FHA, VA, fixed-rate, and adjustable-rate mortgages. PMI is common when the down payment is below 20 percent on a conventional loan.
- The APR reflects the cost of credit over the loan term and is not the same as the note rate.
- RESPA and TRID require a Loan Estimate within three business days after application and a Closing Disclosure at least three business days before consummation.
- The financing contingency protects a buyer only if the buyer applies and obtains a commitment within the contract deadline.
Worked example
A buyer's financing contingency expires Friday. The lender issues a loan commitment the following Monday. If the contract makes time of the essence, the buyer may have lost the right to terminate and may risk the deposit. The broker should document the lender delay and seek a written extension before the deadline. The reasoning: a contingency is a deadline-backed condition, not an open-ended escape.
Traps
Do not confuse prequalification with preapproval. Do not ignore Loan Estimate and Closing Disclosure timing. Do not assume the seller pays documentary stamp taxes. Do not tell a buyer that loan approval is guaranteed.