Real Estate Vocabulary: 10 Important Finance Terms #Finance

hey listen i’m typically a non-violent kind of guy but today pop i’m going to sock it to you i’m going to give you 10 Finance terms 10

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance terms i want you to know because you’re probably going to see them where yeah on that state exam in fact you know what i want you to know them for the rest of your

Real Estate career here it goes let’s start off big let’s go with the term beneficiary ooh the word beneficiary what is it ready let me set the table for you you have a borrower walks into the bank says hey bank i like to borrow some money because i want to buy my house

bank says sure bank does all their research they say yep here you go here’s your money but before we give you the money i want you to sign what’s called a trust deed the promissory note and that’s you mr barrow promising to give us back our money to make payments to us got it you

got the lender you got a trustee and you got the borrower in this particular situation of those three which one is the beneficiary anytime you hear the word beneficiary i want you to think of the lender the lender in this scenario is the beneficiary they’re going to benefit from you paying

the interest you got it next one is Equity Equity what is Equity you buy a house for 750 000 750 000 over a couple of years the value of the house goes up the value goes up to one million dollars now Equity here’s a formula

the difference between the value of the house which is a million bucks and what you owe on the house the difference in this case is a quarter of a million bucks 250 thousand dollars that’s good that’s fantastic that’s Equity in the long run the value of this home

will increase which means in the long run you’re adding more and more and more what yeah adding more Equity now here’s the kicker it’s not liquid funds but when you cash out when you sell the property it’s a lot of dough going into your bank account if you

have Equity now let’s go to the next one the next one is fha that acronym fha let’s start off with the acronym itself and what does it mean what does it stand for stands for federal housing administration now the federal housing administration is a part of the hud

department the government’s hud department what does hud stand for hell that’s a bonus one what does hud stand for housing of urban development now what fha does is this here’s the key factor the fha department insures Loans for people who want to buy property

listen it gets a little stickiest let me clarify it insures Loans it does not give Loans let’s start off nice and slow with fha it started in 1934. now what was happening in 1934 if your history buff what was happening in 1934 yeah wait yeah the great

depression right so what the government wanted to do was they wanted to stimulate the economy so they came up with the fha program now the fha program is extremely beneficial for buyers because it only requires a very small down payment in fact today’s down payment for the fha program is only

three and a half percent which is incredible the Interest Rates are very reasonable it’s a great way for first-time buyers to get involved in home ownership now the great thing about the hud program is that your Credit score doesn’t have to be the best

in fact today’s uh criteria is your Credit score only has to be a 580. think about that at 580 which is fantastic let’s dive deep a little bit about the fha program i want you know how this works fha says hey lender hey bank with money how about you lend money to the

borrower over there and if they default if that borrower defaults mr lender we’ll pay up we’ll cover their Debt we’ll insure the Loan lender’s gonna say well hell we got nothing to lose what a great idea sure we’ll take part in this

party we want in so what the fha program does is it charges the borrower a monthly fee called mortgage Insurance and that small fee of mortgage Insurance will insure that Loan that the lender has no fear that they’re going to lose out hey

i’m going to give you a double on this one pop pop here comes a combination we’re going to go leans not just any lean we’re going to go general lean we’re going to go specifically let’s start off with general lean i want you know what a general lean is now a general

lien is when a Creditor let’s give you an example a Creditor of i don’t know the u.s government you didn’t pay your Taxes that’s when a Creditor in this case the u.s government good old uncle sam says

we’re coming after your property we’re coming after all of your Assets and they can they’ll put a lien on all of your Assets nothing specific if you’ve got two houses they’ll go after two houses bottom line is they want your stuff they

want your money because you owe them big time it’s a general lane how about specifically completely different uh specifically and i want you to know this term a specific clean it’s specific to what yeah one property a specific clean you buy a property you get a mortgage on the property

now that mortgage is specifically yeah specifically it’s specific to that one property that’s a specific clean a mechanic’s lien i’m a candid sling somebody puts a pool in your backyard and you don’t pay up they put a pool on the property located at one two three four

main street you don’t pay up they’re gonna put a mechanics lien on what yeah one two three four main street that’s a specific clean now hope you’re enjoying this none;">Finance terms i sure as hell am listen lighten up not a big deal we’re gonna make them crystal clear again here we go nice and soft let’s go to the next one acceleration clause you like that huh acceleration clause i want you to shorten that keyword of acceleration

to accelerate which means what yeah to speed up ready here comes the example when a borrower borrows money from the bank they send a whole bunch of paperwork and many times there are clauses in there in the acceleration clause it’s the bank’s way of saying this hey borrower don’t

forget you promise to pay us back every single month now the minute they missed that first payment they might get a knock on the door so to speak from the bank saying yo remember our our deal which included that promise here you know that said you would pay us every single month and if you

don’t we have the right to request all monies due at once we have the right to accelerate the payment the whole thing whatever is due we want it like now now of course the bank typically won’t say after a month of being late give us our money we want out of this relationship typically

they’ll give you two three months and if you can’t what they’re gonna do is they’re gonna yeah foreclose on you if you can’t satisfy that acceleration clause and pay up they’re gonna say well the only other remedy we have as a lender is to forcefully take back

our house through the law and that’s called foreclosure all right next term when it comes to Finance hope you’re enjoying this is going to be the term

underwriting or underwriter woohoo the underwriter one of my favorite topics now who is the underwriter what does he do when it comes to underwriting a Loan borrow is excited they want to buy a house they walk into a bank bank gives them a cup of coffee and they chit-chat huh the

buyer provides them with documentation they review the documents they say yes you qualify for a Loan go find yourself a house for a million bucks they look all over the city they find the best house that’s appropriate for their family offer gets accepted the open escrow oh

now things are getting serious huh now this is where the bank really gets heavily involved because the bank wants to do two things they want to be happy and satisfied with the borrower’s qualifications and believe it or not they want to be satisfied with the property’s qualifications

and that’s where the underwriter comes in the underwriter’s job the underwriter’s job is to consider the risk involved here so they’re going to review all the documentation for this borrower everything they want to be super satisfied the underwriter does that this guy

qualifies whoa we’re not done yet they also want to qualify and make sure that the property that was selected if it’s an fha Loan oh this house has to qualify they want to make sure that this property that they’re going to be using as collateral doesn’t have

any safety or health conditions with it so they want to qualify both the borrower and the property so who does all of this that underwriter that nobody sees the mystery person nobody gets to meet this person but they’re back there in that back room and they’re doing some major research

on both the borrower and the property to make sure that the risk is as minimal as possible all right let’s continue to rock and roll here we go the next term is hypothecation might be new to some of you hypothecation you’re going to see this i guarantee it so what is hypothecation

it’s actually a way of owning property hypothetically an agreement hypothecation ready here it comes borrow walks into the bank wants to borrow money to buy their property in a nutshell the bank says sure and they qualify and it’s done at the done deal the homeowner now bought his

property with the bank’s money now per hypothecation this property they just purchased using the lender’s money is going to be collateral for who yeah the bank the bank is saying yo house homeowner over there yeah that’s your house sure you can paint a purple if you like for all

week here do what you want with it but don’t forget we’re in the lender and that house that you’re living in is collateral for the Loan and if you don’t pay up we’re allowed to take it back via foreclosure but in the meantime while you’re living

in it making your payment it’s all yours all the Equity that you gain from owning the property you get to reap the rewards mr borrower you don’t have to give us a dime of your Equity that’s hypothecation hypothecation we’ll lend you the

money long as you make your payments back to us we’re on good terms you get to enjoy the home ownership you get to enjoy the Equity you get to enjoy the bundle of rights all right let’s get straight to the next one Debt to Income ratio

so what is Debt to Income ratio it’s a way for a bank for the lender to see if a borrower qualifies based on their Debt and based on their Income now somebody may make tons of money they have a great salary they make a

million bucks a year oh big shot nice but along with that they may have tons of what yeah Debt that almost eliminates the possibility of purchasing a property because they have too much Debt so what is the criteria what percentage are we going to allow them to have

Debt when it comes to their total Income let’s assume somebody makes ten thousand dollars per month ten thousand dollars per month not bad and their Debt per month is three thousand bucks we’re talking the mortgage we’re talking

their car payment we’re talking i don’t know alimony all the Debt they have it’s three thousand dollars a month the Debt is 30 of their Income now based on the bank’s criteria based on that number 30 percent they’ll

say yep you qualify or no you don’t the Debt to Income ratio now let’s finish off nice and simple huh fixed rate Loan a fixed rate interest rate you go to the bank bank gives you a cup of coffee you chit-chat you want a

Loan you want to borrow some money because you want to buy a house bank says you qualify for a million bucks boom done bank says you want a fixed rate or you want an adjustable rate you say i want a fixed rate fixed means it’s not going to change fixed means it’s going

to remain the same for the for the length of the Loan let’s assume it’s a 30-year Loan and the bank is promising you four percent interest rate well guess what interest rate you’re gonna have on your number twenty nine four percent throughout the

duration of that Loan that four percent remains the same it remains what we call fixed why is a fixed rate beneficial well it’s because the borrower can pretty much predict their payments the only thing that’ll throw off this payment will be the Taxes

hey listen i just gave you 10 terms 10 financial terms that you probably thought you’d never understand listen i loved you throughout this CashNews.co and i wanted to present them to you in a way that you’re going to get it i’m sure you got it now listen you’re also going to

need to know these for the rest of your Real Estate career man share them with your clients let them know that you’re knowledgeable when it comes to this Real Estate industry and listen watch this CashNews.co here get some more study support with this

CashNews.co right here it’ll help you out tremendously we’ll see you next week