Chapter 10 DQ (Financing Programs)

Discussion Prompt:Chapter 10 differentiates between financing programs available to buyers such asconventional, government sponsored loans, and seller financing, andexplains basic loan features such as repayment periods, amortization, LTV, secondary financing, loan fees, and fixed vs. arm.

In tight markets with low inventory (like right now) the type of financing can make or break an accepted offer. Of course, cash beats loan 99.9% of the time. Typically, conventional loans are viewed more favorably than FHA or VA loans. With conventional financing, buyers put down alarger amount as a down paymentand there are less propertyhealth and safety requirements (some properties do not qualifyfor VA/FHA). That does not mean someone using financing other than conventional is unable to purchase, it's just viewed as less desirable, in general.

Scenario:The Ramirez's want to buy their first home. They'veasked you to explain the different types of loan programs to them.What can you tell them about the differences between conventional loans and government-sponsored loans? Between conforming and nonconforming conventional loans?

Here are some considerations you may want to address for each type of loan:

Restrictions on who is eligible for a loan Ease of qualifying for a loan Cash requirements (down paymentamount; limitations on sources of funds) Limits on loan amount Restrictions on types of properties that can be purchased Loan costs (interest rate, loan fees, mortgage insurance, and other charges)