Principles of Real Estate 2 Study Guide
1. Math calculation - principal, interest, term - page 261Interestis money paid at a particular rate for the use of money loaned to a person orentity. It is generally calculated
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Principles of Real Estate 2 Study Guide
1. Math calculation - principal, interest, term - page 261Interestis money paid at a particular rate for the use of money loaned to a person orentity. It is generally calculated on an annual percentage rate, and therefore:Yearly interest = Interest Rate (%) × PrincipalThe yearly interest is the Part. The interest rate is the %. Theprincipalis the Total.
oLook at examples in the book for practice
2. Terminology associated with the real estate transaction including closing, funding, servicing,origination, and consummation - page 42CLOSE-The closing of a real estate transaction in which all appropriate documents aresigned and the proceeds of the mortgage loan are disbursed by the lender is calledconsummation. It is the process of formulating, executing, and delivering all documentsrequired by a permanent investor, the disbursement of the mortgage funds, and providingfor the protection of the investor's security. The required documentation for each closingis determined by the lender or investor in the transaction.FUND-The process of transferring funds to a title or escrow company for disbursementis calledfunding. When a loan is approved, the lender issues a commitment to make theloan at specified terms. At funding, the lender funds the loan by forwarding sufficientcash.SERVICING- Servicingincludes sending monthly payment statements and collectingmonthly payments, maintaining records of payments and balances, collecting and payingtaxes and insurance (and managing escrow and impound funds), remitting funds to thenote holder, and following up on delinquencies.ORIGINATION-The process of creating a new mortgage loan, including all steps takenby a lender to attract and qualify a borrower, are consideredoriginationactivities. Amortgage originator can be either a mortgage broker, mortgage banker, or acorrespondent lender. The mortgage products offered are basically the same (fixed-rate,adjustable-rate, FHA, VA, and RHS mortgage loans, for example).
3. The Principles of Appraisal - page 11Theprinciple of anticipationstates that the purchase price is affected by the expectationof future appeal and benefits.At the core of appraisal is a fundamental economic concept referred to as theprinciple ofsubstitution. According to this principle, a commodity's value is influenced by the costof acquiring a substitute or comparable item. An informed person, acting rationally,would pay no more for an item than he or she would for an equally desirable substitute.Therefore, the prices at which similar items are sold in a market tend to be similar. Thevalue of one item can be inferred from the price at which a similar item is sold.Theprinciple of conformitysuggests that value is maximized when there is a reasonabledegree of homogeneity, or sameness, in a neighborhood. Houses in a neighborhood alsotend to conform in value to each other. The home that is outside of the normal range ofvalues for a neighborhood will be problematic, as will the "oddball" house with anarchitectural style that does not blend with the neighboring homes.
4. Types of deeds and their features - page 184special warranty deed- the grantor promises to warrant and defend title, but only againstclaims which may have arisen during his or her period of ownership - executors or
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