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mortgage lending process
25% of exam
Terms in this set (47)
items of value
any recurring monetary obligation that will not be canceled
An amount paid to a lender when a loan is made to make up the difference between the current market interest rate and the rate a lender gives a borrower on a note. Discount points increase a lender's yield on a note, allowing the lender to give a borrower a lower interest rate.
financial obligations owed by a borrower
cash on deposit or other highly liquid assets a borrower possesses after paying the cash down payment and all closing costs
yield spread premium
a higher interest rate in return for reducing closing costs
What are the two forms of uniform residential loan application (URLA)
Freddie Mac Form 65
Fannie Mae Form 1003
verifying the information contained in the file assembled by the originator, such as sending out employment verification forms and coordinating the various aspects of the loan (working with the title company)
The process of evaluating and deciding whether to make a new loan
What are fannie maes and freddie macs underwriting systems?
Fannie Mae's Automated Underwriting System is Desktop Underwriter (DU)
Freddie Mac's Direct Electronic Underwriting System is called Loan Product Advisor
what are the 4 C's in a borrower analysis?
What is stable monthly income?
monthly income that can reasonably be expected to continue in the future as well as acceptable secondary sources of income
gives the lender permission to request electronic transcripts of federal tax returns from the IRS to verify the borrower's income
A detailed report of an individual's credit history including dept repayment
used to see the likelihood of a debt repayment
Chapter 7 Bankruptcy
remains on credit report for 10 years
Chapter 13 Bankruptcy
(wage earner plan)
remains on credit report for 7 years
object means of determining creditworthiness of potential borrowers
what are the 3 most familiar credit bureaus
What are the 3 qualifying ratios to evaluate the borrower and property
Loan to Value Ratio
Total Debt to Income Ratio
Housing Expense Ratio
Loan to Value Ratio (LTV) formula
(Loan Amount) / (lesser of sale price or appraised value )
NOTE: the lower the LTV, the higher the down payment, which means the loan is more secure
Housing Expense Ratio formula
Total Housing Expense (PITI) / Gross Monthly Income
minimum requirement on a conventional loan is 28% or lower
Total Debt to Income Ratio formula
Total Debt / Gross monthly income
minimum requirement on conventional loan is 36% or lower
what does PITI stand for
Conventional loans housing expense ratio and DTI ratio are what?
28% and 36%
FHA loans housing expense ratio and DTI ratio are what?
31% and 43%
VA loans housing expense ratio and DTI ratio are what?
Housing expense ratio not used
DTI = 41%
opinion/estimate of market value as of a certain date supported by data
what are the 3 appraisal approaches?
Sales Comparison Approach
Sales Comparison Approach
The process of estimating the value of a property by examining and comparing actual sales of comparable properties.
minimum of 3 comparables to make accurate
most useful for residential property
calculates the cost of the land, site improvements, and the cost to build on the land
used for unusal properties or non-income commercial properties (Churches, school, etc.)
analyzes the revenue the property generates or could generate
also known as capitalization approach
mainly used on investment properties
a contract in which one party agrees to compensate another party for a loss that occurs as a result of a designated hazard
mortgage insurance (If LTV is over 80%)
homeowner's hazard insurance
covers loss or damage to property in the event of fire or other natural disasters
used when a property is in a flood zone.
must be in a community that participates in the NFIP
High Risk Zones = required
Moderate = optional
Minimal zones = not required
Private Mortgage insurance (PMI)
Insurance provided by a private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.
conforming loans require 3rd party insurance on home loans with less than 20% down
Mortgage Insurance is cancelled when?
Automatically when the home is paid down to 78% of its original value
At the buyers request when LTV reaches 80% and mortgage payments are current
Upfront Mortgage Insurance Premium
1.75% of the base loan amount
one time charge and can be added to closing costs
Annual MIP and formula for it
paid monthly as part of mortgage payment
(Loan Amount * MI rate) / 12 monthly
person responsible for the mechanics of closing
protects lenders against loss due to disputes over ownership of a property
What is 100 bps equivalent to as a percentage and points
1% or 1 point = 100 bps
Income that is tax-free may be grossed up by how many percent?
Electronic Signatures in Global and National Commerce Act (E-Sign)
ensures the validity and legality of contracts and documents that are entered into by electronic methods
what is the maximum LTV for Va loans?
Section 502 loans are a program of which government entity?
what is hypothecation
Pledging property as collateral
a borrower is buying ahouse for $150,000 at 6.5%. He provides a down payment of $15,000. How much would he have to pay for three discount points?
pint = 1% of loan
loan amount = $135,000
135,000*.01 = 1350
1350*3 = $4050
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