California Real Estate Finance

• Explain the basic concepts of real estate finance, describing them in detail.
• Explain how interest rates affect the real estate market.
• Distinguish between the principal instruments of financing -- the promissory note, the mortgage, and the deed of trust -- and explain how they are used.
• Explain how mortgages are structured and that mortgages create a lien, identifying the difference between a secured note and an unsecured loan.
• Explain the function of a discount point, when it is offered, and when it should be bought.
• Discuss the operations of the secondary market for loans.
• Calculate the monthly payments for a fully amortized, fixed-rate loan.
• Distinguish between the tax deductions and tax credits associated with real estate ownership, and calculate each.
• Explain the use of and legal requirements placed on escrow accounts.
• State who lends money to the purchasers of real estate, identifying them with 100 percent accuracy.
• Distinguish between lien theory and title theory.
• Explain what an assumption loan is and provide an example.
• Explain how the forces of supply and demand in the real estate market affect and are affected by the primary lending market, identifying them in case studies.
• Explain the economic theory of inflation, and define how this theory can influence the real estate market.
• Demonstrate how the government influences real estate finance through agencies such as the Federal Reserve (the Fed) and the Department of Housing and Urban Development (HUD), and be able to cite examples.
• Identify the four main roles of the Federal Reserve.
• Describe the primary provisions of the Community Reinvestment Act.
• Demonstrate how the government can influence the real estate market through taxation policy, distinguishing between tax exemptions, tax deductions, and tax credits.
• List the financial qualifications for obtaining mortgage loans, identifying the most important financial qualification.
• Calculate a lender's qualifying income ratios.
• List the five elements of a credit report, and explain how FICO scores affect a consumer's borrowing ability.
• Explain the provisions of the federal legislation that affect real estate lending, and distinguish between those of the Fair Credit Reporting Act (FCRA), the Equal Credit Opportunity Act (ECOA), and the Truth in Lending Act.
• Recall that when purchasers of real estate are ready to make a purchase, they are required to have cash in hand, identifying some common sources of funds.
• List the classification of types of debts, identifying each in a case study.
• Explain how a borrower's debts are used in determining whether she or he qualifies for a mortgage loan, listing two forms of qualifying ratio.
• Define net worth and demonstrate how it is used in the determination of whether someone is qualified for a mortgage for a business property.
• List the eight steps to completing an appraisal in the correct order.
• Explain the principal appraisal methods and distinguish between Sales Comparison Approach and Cost Approach.
• Explain the most common approach to valuing income-producing property -- the cap rate analyses.
• List the elements of a pro forma projection, in order, and describe its uses in discounted cash flow analyses.
• Utilize spreadsheet and investment software to calculate net present values and internal rates of return.
• Explain how taxes and depreciation are an important element of decision-making in real estate, identifying the procedure for calculating depreciation.
• Distinguish between a mortgage broker and a loan officer, identifying each in a case study.
• Explain the loan application process, defining prequalification, online applications, and floating rates.
• Distinguish between constructive and actual notice and explain the buyer's obligations under the principle of caveat emptor.
• List the lender's requirements for qualifying the title and explain how, through a title search, a title insurance company verifies that a mortgagee will have the first lien.
• List the types of insurance policies, identifying characteristics of each.
• Explain the purpose of surveys, and name the three main types.
• Distinguish between the purpose and content of an earnest money contract and the earnest money deposit.
• Explain the requirements for and the logic behind establishing escrow accounts.
• Explain what a deed is and list the types of interest it can convey.
• Explain the exceptions and reservations that can be placed on a title, providing specific examples.
• Distinguish between a deed and a title, identifying each in a case study.
• List the pre-closing requirements, distinguishing between seller's concerns and buyer's concerns.
• List the required documents that the buyer and seller are each responsible for providing.
• Distinguish between face-to-face and escrow closings, and cite who presides over each.
• Name the proper form for reporting transactions to the IRS, and list the various parties who can be responsible for filing the form.
• List the official responsibilities of the licensee, and utilize the closing checklist.
• Explain the function of the Real Estate Settlement Procedures Act (RESPA), listing the procedures and disclosures that must happen during closing, in compliance with the Act.
• List the basic conventions that determine how expenses are allocated in a typical real-estate transaction, and provide an example of each.
• Name the two categories of nonrecurring closing costs, and list the costs associated with each.
• Distinguish between credits and debits, and demonstrate the procedure for calculating them.
• Explain the process of prorating expenses, and provide examples of prepaid and accrued items.
• Demonstrate the formula for calculating prorated expenses.
• Demonstrate an understanding of closing transactions by completing a closing activity.
• Explain the reasons for default, and define tax liens, insurance and maintenance, delinquency, moratoriums, forbearance, and recasting.
• Compare the different procedures that follow a default, identifying the various elements of foreclosure.
• Explain what leads to a property being considered in distress, and compare the difference between liquidating and holding a distressed property.
• Explain what is meant by a conventional loan, and distinguish between conforming and nonconforming loans.
• List the current Fannie Mae and Freddie Mac conforming loan limits.
• Explain private mortgage insurance (PMI) and state when it is required, when it is advisable, and when it is cancelable.
• Detail Fannie Mae underwriting guidelines for loans.
• Detail Freddie Mac underwriting guidelines for loans.
• Discuss the function of Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector electronic underwriting programs.
• List the requirements for a borrower's financial qualifications in a conforming loan, with 100 percent accuracy.
• Define adjustable rate mortgages (ARMs) and compare these to float-to-fixed rate loans.
• Explain the 80-10-10 piggyback loan, and identify the appeal of this loan to a borrower.
• Distinguish between graduated payment mortgage (GPM) and growth equity mortgage (GEM), listing the benefits of each.
• Explain a balloon mortgage, and distinguish between a Fannie Mae balloon mortgage and a Freddie
• Explain the concepts of reverse annuity mortgages, blanket mortgages, and open-end mortgages, providing examples of each.
• Explain the provisions of construction mortgages and the concept of draws.
• Explain why a sale-leaseback is beneficial to the purchasing party.
• Distinguish between permanent buydown and temporary buydown, listing the two advantages and two disadvantages of temporary buydowns.
• Name additional loan payment plans.
• Identify who may qualify for FHA loans, listing the benefits and limits.
• Outline the qualification process, listing the six CAIVRS applicant categories.
• Discuss the most important FHA programs, especially Section 203(b).
• Explain the mortgage insurance premium (MIP) and list the conditions borrowers must meet to be eligible for a refund on their mortgage insurance.
• Explain FHA underwriting requirements, such as down-payment and closing-cost requirements, comparing the advantages and disadvantages of FHA loans.
• Complete the FHA qualifying worksheet.
• Distinguish between the FHA's mortgage insurance premium (MIP) and PMI, identifying each in a case study.
• Explain the purpose and benefits of a VA loan, outlining what a VA loan can be used for.
• List the types of loans available to qualified borrowers, and explain each.
• Explain the underwriting requirements, and define the role of a VA appraiser.
• State the current amount of a veteran's maximum entitlement and calculate remaining entitlement.
• Explain the relationship between remaining entitlement and restored entitlement.
• State who is eligible for the VA program and describe the documents required to prove one's eligibility.
• Identify the necessary documentation for obtaining a VA loan.
• Determine whether or not a veteran meets the VA debt service ratio requirement to receive a guaranteed loan in a practice activity.
• Identify the purpose of the Equal Credit Opportunity Act, and list the restrictions placed on the lender as mandated in the Act.
• Explain the Truth in Lending Act, and distinguish between the two principal regulations, Regulation M and Regulation Z.
• Explain RESPA and identify the purposes of the various sections.
• Explain the enforcement of RESPA against violators of the Act, and state the procedure for filing a complaint.
• Distinguish between Titles I-VII of the Financial Services Modernization Act, detailing each with 100% accuracy.
• Explain Computerized Loan Origination (CLO), identifying the new "final" rule of the CLO as issued by HUD.
• Explain automated underwriting systems, distinguishing between Freddie Mac's Loan Prospector and Fannie Mae's Desktop Underwriter.

Real Estate Finance

360training.com, Inc.
5000 Plaza on the Lake, Suite 305, Austin, TX 78746
DRE Sponsor ID# S0656
www.360training.com
PHONE: (877) 881-2235
FAX: (512) 441-1811

COURSE TITLE: Real Estate Finance

AUTHOR: This course is authored by the instructional design staff and contracting subject matter experts of 360training.com.

PUBLISHER: This course is published by 360training.com, Inc.

EDITION: This is the first PDF edition of the Real Estate Finance published by 360training.com, Inc.

COPYRIGHT YEAR: 2018

PAGES: 515

COST: $80 for ordering a single course.

COURSE DESCRIPTION: This course provides an introduction to real estate finance. From qualifying the borrower and qualifying the property in the underwriting process to various types of financing, closing the sale, the Community Reinvestment Act and more, we discuss the monetary systems that control the market, delve into supply and demand, cover housing agencies, and discuss the government influence on real estate.

Most real estate is purchased with borrowed money. The methods of real estate finance are many and varied. Making real estate loans carries a certain amount of risk for lenders; for this reason, lenders must have a firm grasp of a borrower's financial qualifications. Lenders consider a borrower's income, credit, debt, source of funds, and net worth. However, no analysis, no matter how thorough, of a borrower's creditworthiness, can be enough to ensure that a loan is completely free of risk.

You will learn the methods used by lenders to qualify loan applicants and how lenders qualify 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 you will feel confident and familiar with them when you meet them in the real world.

The basics of the financing and the sale process are discussed over two lessons. You will learn how title (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 another lesson, the focus turns to closing. You 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 Procedures Act (RESPA).

This course also covers foreclosure. We consider 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 and sold at auction and how the creditors are repaid.

No real estate finance course would be complete without discussing the types of mortgages available. We have two lessons that will detail 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 you 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 a monthly insurance premium that cannot be canceled. VA loans are guaranteed in part by the government, but are available only to veterans, active servicemen, and certain National Guard members and special reservists.

The final lesson deals with a topic important to real estate investment: Internal Revenue Code (IRC) Section 1031 exchanges (a k a 1031s). Buying and selling real estate investments can be a tax-heavy business. By "exchanging" their investments under the continuity of investment principle, investors can receive more financing and improve their portfolios.

At the end of each lesson, you will be required to complete a quiz for that lesson before moving on to the next lesson. The course ends with a real-world practice lesson that brings together the concepts and material discussed throughout the entire course.

The course includes information obtained from the California Department of Real Estate, California Association of REALTORS® which is where the forms were obtained; the National Association of REALTORS® and information was obtained on the CalVet program from the California Department of Veterans Affairs. We have used the content references from websites including www.dre.ca.gov; www.car.org; www.nar.realtor; www.calvet.ca.gov and others.

DELIVERY METHOD: The correspondence course includes downloadable PDF course materials and the exam will be administered online. Students will be expected to read each lesson and complete the accompanying exercises and the final exam.

REFUND POLICY: All tuition and fees paid for the course are due and refundable when: (a) the course of instruction is discontinued by the school, preventing a student from completing the course; OR (b) the enrollment of student was procured because of any misrepresentation in advertising, promotion materials of the school, or representation made by an owner or employee of the school. All refunds will be completed within 30 days after the effective date of enrollment termination.

VALIDATION REQUIREMENTS: Our authentication system incorporates a mechanism for preventing fraud by ensuring that the student registered for the course is engaged in the course material. During course enrollment, students create a personal registration profile by entering personal information on a secure page so that the provider may process certification. The required information may include driver's license number, address, and form of payment. During registration, the system also prompts the user for additional personal validation information used during the course: "How many doors does your vehicle have?" / "How did you renew your driver's license last?" / etc.

Randomly, the user is prompted with a personal validation question at several points during the course; these questions are based on the answers provided by the student during registration. Additionally, the questions are timed and must be answered correctly for the trainee to proceed with the course. If the question supplied is incorrect, the course is temporarily suspended and the trainee is prompted to call the provider to explain why they failed validation. Their information is verified by a trainer who can then remotely unlock the course to allow the student to proceed with the coursework. If this personal information is not verified, the provider will suspend the student from any further access, refund any tuition payments collected and take the appropriate administrative enforcement actions. This validation sequence is enforced randomly on multiple occasions upon entering, taking and exiting the course.

Correspondence Course Identification Statement:
Participants shall present one of the following forms of identification immediately before the administration of the final examination:
A. A current California driver's license.
B. A current identification card described in Section 13000 of the California Vehicle Code.
C. Any identification of the participant issued by a governmental agency or a recognized real estate related trade organization within the immediately preceding five years which bears a photograph, signature and identification number of the participant.

COURSE CONTENT / TIME LIMITS: This home-study course consists of spending a minimum of 45 hours reading and studying the course material, taking the lesson/module quizzes, and passing a final examination. The final examination can be taken a minimum of 18 days from the date the student has had access to the course materials. No two courses can be completed in less than five weeks. Students must spend a minimum of 2.5 weeks studying each course. The maximum time students have complete a course is one year from the date of registration. If students fail the final examination, they can take an alternate final examination one time. However, students must wait a minimum of another 18 days studying the course materials before they can re-take the final examination. If students fail the final examination two times, they will need to re-enroll in the course and pay the enrollment fee.

FINAL EXAMINATION: The proctored final exam is closed-book and consists of 100 multiple choice questions. Students are allowed 1 hour and 40 minutes to complete the final exam and need to score a minimum of 60% to pass. Internet final exams can not be printed or downloaded, and the exam will automatically time-out at 1 hour and 40 minutes (or 100 minutes). Under no circumstances shall the final exam be furnished directly to the students.

Please note that the student will have (2) chances to take the final exam.

As required by California Department of Real Estate regulations, if you do not pass the exam on the first attempt, you must wait a minimum of 18 days before you will be allowed to retake the exam.

COURSE COMPLETION CERTIFICATES / RECORDS: Course completion certificates will be issued immediately upon passing the final examination (to be printed by the student). Records of course completion certificates will be maintained indefinitely to allow students to receive a duplicate certificate if needed.

PROBLEMS / COMPLAINTS: Persons seeking to resolve problems or complaints should contact 360training.com, Inc. at the address or telephone number above or visit the http://www.360training.com/support page.

A course provider complaint form is available on the California Department of Real Estate (DRE) website at www.dre.ca.gov. Access this form by typing in "RE 340" in the search box located in the upper right corner of the home page. An informational form regarding course provider complaints, "RE 340A" is also available.

EVALUATION: A course and instructor evaluation is available on the California Department of Real Estate (DRE) website at www.dre.ca.gov. Access this form by typing in "RE 318A" in the search box located in the upper right corner of the home page.

DISCLOSURE STATEMENT: Private providers of pre-license statutory real estate courses must obtain course approval from the California Department of Real Estate (DRE). As part of the approval process, the DRE reviews the course materials only. The DRE does not qualify the school or course provider. In addition, there is no regulatory oversight of private pre-license course providers who offer courses or programs costing $500 or less. For courses or programs over $500, qualification by the Bureau for Private Postsecondary and Vocational Education is required, in addition to DRE course approval. As a result, if a course provider offering a course costing $500 or less fails to deliver the educational course/program as represented, a student's monetary remedy is to seek redress in Small Claims Court. Students are cautioned to fully understand the education course/program offered by the provider before enrolling or registering. A list of pre-license statutory courses approved by the DRE can be found on the DRE Web site at www.dre.ca.gov under DRE Records.

DRE DISCLAIMER STATEMENT: This course is approved for pre-license education credit by the California Department of Real Estate. However, this approval does not constitute an endorsement of the views or opinions which are expressed by the course sponsor, instructors, authors, or lecturers.

PLEASE BE ADVISED: The California Department of Real Estate (DRE) encourages salesperson and broker exam applicants to mark the "Self Schedule" box on the Salesperson Exam Application (RE 400A), Broker Exam Application (RE 400B), Salesperson Combination Exam/License (RE 435), or Broker Combination Exam/License (RE 436) when submitting these document to the Department. This "Self Schedule" option allows for the Department to notify an applicant when his or her application has been fully qualified and is ready to be self scheduled for an exam date using our eLicensing system on our website, www.dre.ca.gov. The eLicensing system provides greater flexibility when choosing exam dates, offers same day scheduling provided that space is available, and allows the applicant to print a barcoded exam schedule and admittance notice.

When Does My Course Expire?

Your course will expire one (1) year after you purchase it (the date you submit payment), unless the course itself indicates otherwise.

For more information about course expiration dates, please read Terms of Use.

How Quickly Will I Get My Certificate of Completion?

Once you finish your course and pass any required exams, you can print your certificate of completion right away.

What Can I Do If I Lose My Certificate?

If you lose your certificate of completion and need a new one, you can contact customer service at (877) 881-2235 or support@360training.com.

What If I Need a Refund for My Training Course?

If for some reason you are not happy and would like a refund, send us a request within 72 hours of purchase. Here are the eligibility requirements you must meet:

• Your purchase was made no more than 72 hours prior to your refund request.
• You have NOT
  • Attempted any portion of a test or exam.
  • Requested or been issued a certificate of completion.
  • Completed 50% or more of the purchased course.

If you meet all of these criteria, submit your refund request in writing via email to support@360training.com with a proof-of-purchase receipt and an explanation for why you are requesting a refund.

You can find more information about our refund policy here.