Check Your Understanding-Answers
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Define the term loan-to-value ratio.
- The term loan-to-value ratio means the ratio of debt to the value of the property. If the loan-to-value ratio is low, the borrower is paying a higher down payment on the property. If the loan-to-value ratio is high, the borrower is making a low down payment.
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When is a lender required to terminate a borrower's private mortgage insurance?
- After the borrower has accumulated 22% of equity in the property and is current with the loan payments.
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What is the difference between an FHA loan and a VA loan?
- FHA insures loans and VA guarantees them.
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What is the major difference between a CalVet loan and other loans?
- Unlike other loans, the CalVet loan is actually a land contract. When a veteran is approved for a CalVet loan, the state purchases the property and resells it to the veteran using a contract of sale. The state retains the title to the property until the loan is paid off, after which California will issue a grant deed to transfer legal title to the veteran.
