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Real Estate Finance - Aceable (TX) Study Guide
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Real Estate Finance - Aceable (TX) Study Guide
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Real Estate Finance - Aceable (TX) Study Guideportfolio lenders Correct Answer-Local banks that lend their own money
and do not sell their loans on the secondary market are
Commercial lenders Correct Answer-specialize in financing for income-
producing properties such as shopping centers, industrial and office
properties, and multi-family homes.
Types of Loans Correct Answer-Conventional, Government-backed
(FHA, VA, USDA), Seller financing, Interest -only
Loan underwriters Correct Answer-evaluate deals to determine loan
amounts, the creditworthiness of borrowers, and the income potential of
projects.
Lender considerations Correct Answer-borrower's income, credit, debt,
source of funds for the down payment, and net worth.
Private Mortgage Insurance (PMI) Correct Answer-is for the protection
of the lender and paid by the borrower
Methods to determine property value Correct Answer-sales comparison
approach (aka comparables), cost approach, income approach
Loan servicer Correct Answer-is responsible for the day-to-day
management of a mortgage loan account, including collecting and
,crediting monthly loan payments, and handling the escrow account as
needed.
Escrow account Correct Answer-is a fund held by the servicer that the
borrower pays into for property taxes and homeowner's insurance.
Supply and demand Correct Answer-affect the price of real estate
Sales comparison approach Correct Answer-The sales comparison
approach to value is based on the prices that similar properties in the
vicinity have sold for recently.
Cost approach Correct Answer-seeks to determine how much a property
would cost to replace (meaning, rebuild) after subtracting accrued
depreciation.
Income approach Correct Answer-considers the income that an owner
could get from the property.
Statement Correct Answer-details the activity of the escrow account,
showing the account balance and payments for property taxes,
homeowners insurance, and other escrowed items.
When supply exceeds demand Correct Answer-prices decrease
When demand exceeds supply Correct Answer-prices increase
,Four economic phases Correct Answer-1. Recovery
2. Expansion
3. Hyper supply
4. Recession
Recovery Correct Answer-he phase that follows a recession. conditions
stabilize and the outlook for the market is just starting to look brighter.
Distinguishing characteristics of a recovery phase include:
- High unemployment (but it's not getting any worse)
- Lots of home foreclosures
People are hesitant to buy homes
- Government lowers interest rates to encourage investments
Expansion Correct Answer-market activity really picks up. Businesses
are hiring more, and people tend to view real estate as a good investment
again. Signs of expansion include:
- Most available properties have been bought or rented, driving vacancy
rates down
- Rent and home prices are rising
- Construction for new homes and commercial buildings starts
Hyper Supply Correct Answer-The real estate industry has been
booming and new properties are popping up left and right. In this phase
supply catches up with (and eventually surpasses) demand. The first
, warning sign is an increase in vacant or unsold property. Property
valuations are also at a high point.
Recession Correct Answer-The final phase in the real estate cycle. Starts
when occupancy falls below the long term average. Homes sit on the
market, unsold. Prices are at their lowest. Foreclosures abound,
especially when the real estate recession is coupled with an economic
recession that leaves homeowners unemployed and unable to pay their
mortgages.
A recession is a period in which economic activity drastically declines
and stays declined for more than six months.
Factors that affect real estate prices Correct Answer-- The demand for
property
- The supply of property
- Unemployment
- Government influence
Three major forms of government influence: Correct Answer-- Supply
of money
- Interest rates
- Tax policies
Supply of money Correct Answer-The Federal Reserve controls the
money supply and can print money. When money for financing is
available, demand for housing rises. Government action has the most
direct influence on inflation.
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