Finance I (0411) Book format
This course provides an introduction to the basics of real estate financing, from qualifying the borrower and qualifying the property in the underwriting process, to the various types of financing available, to closing the sale. The course begins with a review of the basic mathematical concepts and calculations that will be necessary to understand the material. We then progress into a discussion of the forces that control the market: supply, demand, and the government. This leads us into the third lesson.
Most real estate is purchased with borrowed money. The methods of real estate finance are many and varied. Lenders run risks in making real estate loans and for this reason they must have a firm grasp of a borrower’s financial qualifications. They consider a borrower’s income, credit, debt, source of funds, and net worth. But no analysis, no matter how thorough, of a borrower’s creditworthiness can be enough to make a loan free of risk.
The fourth lesson of this module is concerned with how the lender qualifies loan applicants; the fifth is concerned with how the lender qualifies the property to be mortgaged. This involves a thorough and accurate property valuation, using the sales comparison or cost approach for residential property and a cap rate or discounted cash flow analysis for investment property. These methods of valuation will be discussed in depth, so that the student will feel confident and familiar with them when he or she meets them in the real world.
The basics of the financing and sale process are discussed in lessons six and seven. The student will learn how title, the abstract ownership rights to the property, is transferred to the buyer with a deed. The earnest money contract will also be discussed: terms of the contract, contingencies, and earnest money deposits. In lesson seven, the focus turns to closing. The student will learn the customary costs involved in a real estate transaction; how certain items are prorated between the buyer and the seller; and the requirements set forth by the Real Estate Settlement and Procedures Act (RESPA).
Lesson eight discusses foreclosure. It considers what happens when a borrower is in default of the mortgage contract and how lenders may help borrowers prevent foreclosure through forbearance, moratoriums, and recasting. Also discussed is how, when these techniques fail, the property is foreclosed, sold at auction, and the creditors repaid.The module continues with the types of mortgages available. The ninth and tenth lessons discuss the elements of conventional loans—both conforming and nonconforming—adjustable rate, graduated payment, growth equity, and reverse annuity mortgages, to name a few. The advantages and disadvantages of each type of financing are emphasized, so that the student may better understand the decision making process inherent in real estate finance.
Two specific types of financing, FHA-insured and VA-guaranteed loans, are reserved for separate lessons. FHA loans are insured by the government and perceived as less risky by lenders. They are available to all natural and naturalized U.S. citizens, but they carry an uncancelable monthly insurance premium. VA loans are guaranteed in part by the government, but are only available to veterans, active servicemen, and certain national guardspersons and special reservists.
The thirteenth lesson deals with a topic important to real estate investment, IRC Section 1031 exchanges. Buying and selling real estate investments can be a tax-heavy business. By “exchanging” one’s investments under the continuity of investment principle, investors can receive more financing and improve their portfolios.
At the end of each lesson, the student will be asked to complete a quiz that tests the information covered in that lesson in order to move on to the next lesson. The module ends with a real world practice lesson that brings together the concepts and material discussed throughout the entire module.
Upon completion of this module, the student will:
Our staff works diligently to provide you with an analysis of current mandates and legislation that affects you the licensee. All information pertaining to the Mandatory Continuing Education requirements can be found on the State Requirements page. You can find the link to this page on the upper Navigation bar on the Course Catalog.
Any applicable completion certificates or affidavits can be printed after completing the course and final exam.
Quizzes - There is a quiz at the end of each lesson to test comprehension of the subject matter.
Final Exam - Passing Grade 70%. You can take the final three times.
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