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Fundamentals of Mortgage Lending


This course provides an introduction to the basics of mortgage lending, from qualifying the borrower and qualifying the property in the underwriting process, to the various types of financing available, to closing the sale. The course begins with a discussion of the forces that control the market: supply, demand and the government. The student will learn the varied methods of real estate finance. Lenders run risks in making real estate loans; for this reason, they must have a firm grasp of a borrower's financial qualifications. They 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 make a loan free of risk. The second lesson introduces the different legislation related to real estate mortgage of which the student must have a fair knowledge. The third lesson describes the mortgage market and the way it is divided into primary and secondary lenders.

The student will learn how title, the 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 lesson five, the focus turns to closing. The student 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 and Procedures Act (RESPA).

Lesson six discusses foreclosure. It considers 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.

The module continues with the types of mortgages available. The seventh and eighth lesson discuss the elements of conventional loans-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 the student 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 only available to veterans, active servicemen and certain national guardspersons and special reservists.

At the end of each lesson, the student will be asked to complete a quiz that tests the information covered in that lesson in order to move 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.

Upon completion of this module, the student will:

  • Understand how the forces of supply and demand in the real estate market affect and are affected by the primary lending market.
  • Know how the government influences real estate finance through agencies like the Federal Reserve and the Department of Housing and Urban Development.
  • Understand the basic concepts of real estate finance.
  • Know the principal instruments of financing-the promissory note, the mortgage and the deed of trust-and how they are used.
  • Understand how interest rates affect the real estate market.
  • Know who lends money to the purchasers of real estate.
  • Be familiar with the operations of the secondary market for loans.
  • Know how to calculate the monthly payments for a fully amortized, fixed-rate loan.
  • Be familiar with the tax deductions and credits associated with real estate ownership.
  • Know the use of and legal requirements placed upon escrow accounts.
  • Know the difference between lien theory and title theory states.
  • Know what a discount point is, when it is offered and when it should be bought.
  • Be familiar with what an underwriter looks for in approving a loan.
  • Be familiar with the elements of a credit report and how FICO scores affect a consumer's borrowing ability.
  • Be familiar with the provisions of the federal legislation that affect real estate lending: the Fair Credit Reporting Act, the Equal Credit Opportunity Act and the Truth in Lending Act.
  • Know the use and the method of calculation of a lender's qualifying income ratios.
  • Be familiar with the classification of types of debts.
  • Understand the role of mortgage brokers and loan officers in the financing process.
  • Know the difference between constructive and actual notice and the buyer's obligations under the principle of caveat emptor.
  • Be familiar with the lender's requirements for qualifying the title and how a title insurance company verifies that a mortgagee will have the first lien through a title search.
  • Know the purpose and content of an earnest money contract and the earnest money deposit.
  • Know what a deed is and the types of interest it can convey.
  • Be familiar with the exceptions and reservations that can be placed upon a title.
  • Be familiar with the RESPA requirements for closing procedures and disclosures at closing.
  • Know the basic organization of face-to-face and escrow closings: who presides over them and how transactions are conducted.
  • Know the principles of proration: calendar years and banker's years, as well as prepaid items, accrued items and how to divide them by calculating a daily rate.
  • Know the current Fannie Mae and Freddie Mac loan limits.
  • Understand private mortgage insurance: when it is required, when it is advisable and when it is cancelable.
  • Know the requirements for a borrower's financial qualifications in a conforming loan.
  • Be familiar with the different types of mortgages, including ARMs, GEMs, GPMs and balloon mortgages.
  • Understand the use and purpose of temporary and permanent buydowns.
  • Be familiar with the most important FHA programs, especially Section 203(b).
  • Know the various underwriting requirements for FHA-insured loans, such as down payment and closing cost requirements.
  • Understand the FHA's mortgage insurance premium (MIP) and how it is different from PMI.
  • Be familiar with the key elements of the VA loan guarantee program.
  • Know who is eligible for the VA program and the documents required for proving one's eligibility.
  • Know the current amount of a veteran's maximum entitlement and how to calculate remaining entitlement.
  • Be familiar with Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector electronic underwriting programs.


Upon successful completion of this course, you can print your certificate online.


Quizzes - There is a quiz at the end of each lesson to test comprehension of the subject matter.

Final Exam - Passing Grade 70%. You can take the final three times.

course quick facts
course code TRN7181
cost $125.00
estimated time to
complete course
15 Hours
course materials
365 Days