Real Estate Finance and Mortgage Lending
Instruments and priority
Separate the note (the promise to pay) from the security instrument (mortgage or deed of trust). Montana uses both: a deed of trust names a trustor, beneficiary, and trustee and permits nonjudicial foreclosure by trustee's sale after the required default and notice steps, while a mortgage is typically foreclosed judicially. Liens rank by recording order, subject to subordination agreements. Watch for due-on-sale clauses, alienation provisions, and junior liens surviving or being wiped out at foreclosure.
Programs and disclosures
Conventional, FHA (mortgage insurance premium, lower down payment), VA (entitlement, funding fee, no monthly mortgage insurance), and USDA. Know the Loan Estimate and Closing Disclosure under TILA/RESPA, what the APR captures, that discount points are prepaid interest buying a lower rate, and how private mortgage insurance is terminated. Originators are licensed through NMLS and supervised by Montana's Division of Banking and Financial Institutions.
Qualifying math
Lenders test a housing ratio (PITI divided by gross monthly income, roughly 28%) and a total debt ratio (roughly 36 to 43%). Worked example: a borrower earning $6,000 per month carries a $400 car payment. At a 43% back-end ratio total debt is capped at $2,580, so PITI cannot exceed about $2,180.
Traps
PITI is principal, interest, taxes, and insurance - not utilities. Points cost equals loan amount times points: 2 points on $320,000 is $6,400. LTV is loan divided by the lesser of price or appraised value, and seller concessions reduce net proceeds rather than the contract price.