Financing
This topic covers loan instruments and clauses, loan-to-value, and the federal laws that govern mortgage lending.
Instruments and Clauses
A borrower signs a promissory note and a security instrument pledging the property. Key clauses include acceleration (full balance due on default), alienation or due-on-sale (repayment required on transfer), and defeasance (lien released when paid). On default, the lender may foreclose to recover the debt. Loans may be conventional or government-backed (FHA, VA).
Ratios and Federal Laws
Loan-to-value (LTV) compares the loan to the property's value; a high LTV (small down payment) often requires private mortgage insurance. Payments commonly bundle PITI. Federal laws include the Truth in Lending Act (APR disclosure), RESPA (settlement disclosures and anti-kickback rules), and the Equal Credit Opportunity Act (prohibiting lending discrimination).