Financing

Financing & Settlement — Study Lesson > Why this matters on the exam: The Financing & Settlement section accounts for roughly 8–10 questions on the national portion of the TN Real Estate Salesperson exam. You must be comfortable identifying loan types, understanding consumer protection laws (RESPA, TILA, ECOA), calculating LTV and discount points, and applying TN's mortgage tax formula. --- ## The Mortgage Instrument: Two Frameworks When a borrower pledges real property as collateral for a loan, the legal document doing that pledging is either a mortgage or a deed of trust. | Feature | Mortgage | Deed of Trust | |---|---|---| | Parties | 2 (borrower + lender) | 3 (trustor, trustee, beneficiary) | | Who holds title | Borrower retains title | Trustee holds legal title | | Common in | Many states | Tennessee + many western states | | Foreclosure | Judicial (court involved) | Typically non-judicial (faster) | Trustor = the borrower. Trustee = a neutral third party. Beneficiary = the lender. Tennessee primarily uses deeds of trust in practice, so expect exam questions that reference all three parties. --- ## Loan Types You Must Know ### Conventional Loans - Not government-insured or guaranteed - Conforming: meets Fannie Mae/Freddie Mac guidelines (loan limits, credit standards) - Jumbo: exceeds conforming loan limits; higher rates/requirements ### Government-Backed Loans | Loan | Down Payment | Key Feature | |---|---|---| | FHA | 3.5% minimum | Requires mortgage insurance premium (MIP); flexible credit standards | | VA | No down payment required | For eligible veterans/service members; no PMI | | USDA | No down payment required | Rural areas only; income limits apply | ### Rate Structures…