Financing

# Financing and Settlement — Study Lesson ## Why This Matters on the Exam Financing and Settlement carries roughly 10% of the national exam (~8–10 questions), and the math that accompanies it overlaps with another 10% — meaning you could see 15–20 combined questions touching these concepts. Understanding loan types, key federal lending laws, and closing calculations is essential to hitting the passing threshold. --- ## Core Financing Instruments ### Mortgage vs. Deed of Trust These are the two primary security instruments used when real property is pledged as collateral for a loan. | Feature | Mortgage | Deed of Trust | |---|---|---| | Parties | 2 (mortgagor/borrower + mortgagee/lender) | 3 (trustor/borrower + trustee/neutral party + beneficiary/lender) | | Foreclosure type | Judicial (court required) | Non-judicial (faster; power of sale) | | Common regions | Northeastern states | Western and southern states | - The mortgagor (borrower) pledges the property; the mortgagee (lender) holds the lien. - In a deed of trust, the trustor conveys bare legal title to a neutral trustee to hold on behalf of the beneficiary (lender) until the loan is paid. --- ## Loan Types at a Glance | Loan Type | Down Payment | Key Feature | |---|---|---| | Conventional | Varies; PMI if LTV > 80% | Not government-backed; conforming or jumbo | | FHA | 3.5% (580+ credit) | Government-insured; requires MIP (upfront + annual) | | VA | 0% | Veterans only; no PMI; VA funding fee applies | | USDA | 0% | Rural areas; income limits; guarantee fee | |…