Real Estate Financing
Most buyers borrow money to purchase real estate, so brokers must understand how loans are structured and secured. This topic covers financing instruments, loan types, and the federal laws that govern lending disclosures.
Notes, Mortgages, and Deeds of Trust
A promissory note is the borrower's promise to repay, while the mortgage or deed of trust is the security instrument that pledges the property as collateral. A fully amortizing loan uses level payments that pay off both principal and interest by the end of the term, whereas a balloon loan leaves a large final payment. Interest-only and adjustable-rate loans shift risk between borrower and lender in different ways. Understanding these structures helps brokers explain payment obligations to buyers.
Loan Types and Consumer Protection
Conventional loans are not government-backed, while FHA loans are insured and VA loans are guaranteed for eligible veterans, each with different down payment and qualifying rules. Federal laws such as the Truth in Lending Act and RESPA require clear disclosure of loan costs and prohibit abusive practices like undisclosed kickbacks for referrals. The Equal Credit Opportunity Act bars discrimination in lending based on protected characteristics. Brokers should refer detailed questions to qualified lenders while understanding the basic framework.