California Real Estate Finance

• Lesson 1: Introduction to Real Estate Finance
• Lesson 2: The Effect of the Market and the Government on Real Estate Finance
• Lesson 3: Sources of Funds
• Lesson 4: Financial Qualifications
• Lesson 5: A Real Estate Professional’s Role in a Purchase Transaction
• Lesson 6: Property Valuation
• Lesson 7: The Financing Process
• Lesson 8: Real Estate Closings
• Lesson 9: Closing Expenses
• Lesson 10: The T.I.L.A./R.E.S.P.A. Integrated Disclosure (T.R.I.D.)
• Lesson 11: Foreclosure
• Lesson 12: Conventional Loans
• Lesson 13: Alternative Financial Instruments
• Lesson 14: FHA Loans
• Lesson 15: VA Loans
• Lesson 16: Federal and State Laws and Regulations
• Lesson 17: Fraud in Real Estate
• Lesson 18: Discrimination in Real Estate
• Lesson 19: Contemporary Real Estate Finance
• Lesson 20: 1031 Exchanges
• Lesson 21: Contracts
• Lesson 22: Real Estate Practice
• Final Exam

Real Estate Finance

360training.com, Inc.
DRE Sponsor ID# S0656
6504 Bridge Point Parkway, Suite 100, Austin, TX 78730
https://www.360training.com/
PHONE: (877) 881-2235
EMAIL: accreditation@360training.com

TITLE: Real Estate Finance

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

COPYRIGHT DATE: 1/15/2024

PAGES: 951

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

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.

COST: $80 for ordering a single course.

COURSE HOURS: 45

DELIVERY METHOD: The correspondence course material and exam will be administered online. Students will be expected to read each lesson and complete the accompanying exercises, chapter assessments and the final exam.

REFUND POLICY: It is very important to us that you are satisfied with your purchase. In the unfortunate event that you are unsatisfied, you may be eligible for a refund, subject to the conditions noted below.

1. Your purchase was made no more than 72 hours prior to your refund request.
2. 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
   • Received notification that training materials or other merchandise have been shipped

If you meet all of these criteria, you must submit your refund request in writing via e-mail to Support@360training.com within 72 hours of your course purchase, along with a receipt evidencing your proof of purchase and an explanation for why you are requesting a refund. Further, no refund will be issued for:

• Any training materials or merchandise that have been shipped
• Any associated national, state, and local mandated regulatory fees
• Failure to pass quizzes, final exams, or any other in-course assessment requirements within the allotted attempts (per course guidelines)
• Failure to pass identity validation requirements (including validation of state or 
• government identification, security questions or any other required methods, per course guidelines
• Course expirations (per course guidelines)
• Expedited processing or mailing of certificates, training materials or other merchandise once the requested expedite has been fulfilled as promised

Requested refunds that are approved may take up to 10 business days to reflect in your account.

Refunds will only be issued to the same payment method used during the initial purchase.

Course Specific Policies
Notwithstanding the foregoing, any course-specific terms, conditions, or policies presented during registration that may be inconsistent with the refund policy specified above, will supersede those listed in this refund policy. If you would like to inquire if there are any specific terms or policies for the course you are looking to purchase, please contact us.

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: All participants are required to submit one of the below identifications upon course launch and must use the same information immediately before the final exam to unlock it. The student must also provide a picture of their driver’s license upon course launch.

• A current California driver’s license.
• A current identification card described in Section 13000 of the California Vehicle Code
• 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.

Participants will have 30 seconds to respond to the validation questions in 3 attempts or the course will lock.

COURSE CONTENT / TIME LIMITS: This online 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 to 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 cannot 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 https://www.360training.com/support page.

COURSE PROVIDER COMPLAINT STATEMENT: 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.

ONLINE EVALUATION STATEMENT: 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.

DRE DISCLAIMER STATEMENT: This course is approved for statutory/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.

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.

Upon completion of this course, you will be able to:

• 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.
• Understand the roles and duties of the mortgage and Real Estate professionals involved in the homebuying process
• Become familiar with common causes for lawsuits in Real Estate and common Real Estate Law violations by Real Estate professionals
• 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 analysis.
• List the elements of a pro forma projection, in order, and describe its uses in discounted cash flow analysis.
• 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 Mac balloon mortgage.
• Identify the characteristics of a wraparound mortgage, and compare this to a purchase-money mortgage.
• 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.
• Define fraud in real estate and real estate financing
• Understand the history of housing discrimination
• Identify discriminatory lending practices and shady real estate practices
• Explain California’s Anti-Discrimination laws
• Explain automated underwriting systems, distinguishing between Freddie Mac's Loan Prospector and Fannie Mae's Desktop Underwriter.
• Explain the development of automatic underwriting on the Internet.
• Discuss the concept of true value in investment in real estate.
• Define capital gains and discuss the consequences of taxes on real property and how taxes may affect decisions, especially for investment or business property.
• Explain the purpose of Internal Revenue Code (IRC) Section 1031.
• Define like kind and discuss what property qualifies for a like-kind exchange.
• Distinguish between realized and recognized gain and explain how it is important to the tax laws.
• Calculate an investor's adjusted basis in a property, and identify the relationship to boot.
• Explain how boot is calculated.
• Describe the different ways of doing 1031 exchanges, such as a simultaneous exchange and a delayed exchange.
• Identify the role of the qualified intermediary (QI) as a safe harbor in the delayed exchange.
• Explain the delayed (Starker) exchange format—the 45/180-day time limits and the rules for replacement property identification.
• Explain the reverse exchange format, detailing the exchange accommodation titleholder (EAT), title parking, and describing allowable arrangements between the exchanger and the EAT.
• Explain how an investor can leverage saved capital from tax-deferred exchanges, citing examples.
• Explain the tax benefits of installment sales.
• Identify the differences among the various types of contracts.
• Know the three elements of a contract.
• Identify the five components of a legally enforceable contract.
• Discern between valid, void, voidable, and unenforceable contracts.
• Explain the different types of contract performance.
• Apply the laws, doctrines, and statutes that govern real estate contracts, including the Uniform Commercial Code and the Statute of Limitations.
• Distinguish the differences among the different types of real estate contracts.
• Recall the important elements of leases and listing agreements.
• Explain the key differences between contracts for deed and other real estate contracts.
• Demonstrate the ability to apply what you have learned in this course to situations that you will likely encounter in your career, through analyses of case studies, real world situations, critical thinking questions, and other activities.