Book Opener

monthly payments increase over the life of the loan. A balloon-paymentmortgage has relatively low fixed payments during the life of the mortgage,but it is followed by one large final (balloon) payment. There are alsoother creative ways of financing the purchase of real property.Example 3. Joan Ackley wants to borrow $100,000 to expandher business. She owns a valuable building on which there isalready an existing mortgage of $50,000 at 8 percent interest.Ackley does not want to disturb this mortgage because theinterest rate is so low. Henry Baker agrees to loan Ackley$150,000 at 11 percent. Baker will give Ackley only $100,000cash, however, and take over her payments on the $50,000 firstmortgage. Ackley will pay $150,000 plus interest back to Bakerover the life of the loan. The mortgage that Ackley gives Bakeris called a wraparound mortgage because it includes the firstmortgage in its payment plan.Federal ProtectionThe Real Estate Settlement Procedures Act (RESPA), a federal law,gives you protection when you apply for a loan. Under this law, thelender must give you a copy of a booklet that explains the real estatesettlement procedure. The lender must also give you an estimate of thecosts that you will incur in obtaining the loan. Later, a uniform settlementstatement must be filled out, which will show you the exact costof the settlement. You have a right to see the completed form on the daybefore the closing if you wish. The lender must also give you a truthin-lendingstatement showing the true costs of the interest and financecharge on the mortgage loan.Since it began in 1968,Fannie Mae has helpedmore than 49 millionfamilies achieve theAmerican dream ofhome ownership. GinnieMae estimates thatit has helped over25.5 million Americanfamilies since it beganoperating in 1968.Freddie Mac openedits doors two yearslater and has financedhomes for an estimated30 million families.A HOME AT LASTThere are different typesof co-ownership of realproperty. Which type ofco-ownership allows titleto pass automaticallyto the co-owner if theother owner dies?Chapter 34: Buying a Home 739