Utah Real Estate: Application and Underwriting 2 ch 28

The following are all correct regarding a VA loan EXCEPT:

Restricts the price on a home sold to a veteran (these are correct: loans up to 100% loan to value, flexibile underwriting guidelines, and allows seller contribution to closing costs up to 4%)

All of the following are examined by the underwriter EXCEPT:

Blood type (are examined: credit, capital to close and capacity to repay, and cash in reserve)

Seasoned Funds

Buyer funds held in an institution with deposit and balance records available for a period of time.

Property Flipping

Buying a property and selling as soon as possible.

Private Mortgage Insurance

Insurance typically required on conventional loans that meet or exceed 80% LTV.

The maximum loan amount for a conventional conforming loan is:

$417,000

How much time must have elapsed after a bankruptcy to qualify for an FHA loan?

2 years

The qualifying ratios for a conforming conventional loan are:

28/36

The minimum down payment required on an FHA loan is:

3.5%

What are the qualifying ratios on an FHA loan?

31/43

How much time must have elapsed after a chapter 7 bankruptcy to qualify for an FNMA loan?

4 years

Conforming conventional guidelines stipulates that borrowers must contribute how much of their own funds to the down payment and closing costs?

5%

How much time must have elapsed after a bankruptcy to qualify for an FHLMC loan?

7 years

Residual Income Analysis

A VA method of determining the borrower's ability to pay the mortgage payment.

Compensating Factors

A condition that allows an underwriter to overlook negative underwriting information

Upfront Funding Fee

A fee charged by the VA for funding the loan.

In lieu of mortgage insurance, the VA utilizes what?

A first time funding fee of 2.15%

A borrower can use all of the following for a down payment on an FHA loan EXCEPT:

A gift from a parent that requires repayment (can use: Unverifiable cash with a proven history of cash only transactions, the sale of personal or real property, and a gift from an employer that doesn't need to be paid back)

Prequalification Letter

A letter from the lender indicating that the borrowers loan application has been accepted subject to providing the collateral .

Collateral

A term that refers to security used for a loan. It may be real or personal property.

Seller Contributions

An allowable payment from the seller toward closing costs.

Residual Income

An amount determined as the income available to make mortgage payments after other obligations have been considered. It is used instead of debt to income ratios in determining eligibility for VA loans.

Employer Assisted Housing

An eligible employer gift

Hazard Insurance

An insurance policy which indemnifies real property against loss resulting from physical damage to the property such as fire, vandalism, etc. The lender will require this insurance.

Upfront Mortgage Insurance Premium

An insurance premium charged by the FHA at closing (UFMIP)

Effective Income

Net income that is predictable and eligible to be counted in the loan process.

Investment Property

Property which is generating a cash flow, such as a strip mall or a single or milti-family rental property.

Chapter 13

Bankruptcy with a payment plan

Chapter 7

Bankruptcy with all debts cancelled

What is the document provided by the Department of Veteran Affairs showing what a veteran's loan entitlement is?

Certificate of Eligibility

In determining if collateral is adequate, the VA utilizes a:

Certificate of Reasonable Value (CRV)

The loan qualifying process involves all of the following EXCEPT:

Commission

The underwriter qualifying ratio of 28/36 is applied with what loan program?

Conforming conventional

FHA loan limits are established based on:

County

Certificate of Eligibility

Endorsement from the Veterans Administration indicating the right of a veteran to obtain a VA loan and the amount of his eligibility.

The underwriting qualifying ratio of 31/34 is applied with what loan program?

FHA

Statutory Minimum Down Payment

FHA 3%

Freddie Mac Loan Prospector (LP) What is the function of FHA?

Insure loans to protect lenders from loss due to borrower default

Potential Servicing Transfer Statement

Notice given at the time of application and again at settlement that the lender intends to sell its servicing rights.

Patriot Act Disclosure

Notice that identity will be checked.

Which of the following is NOT an automated underwriting system, but is instead desktop origination software?

Point (is an automated system: Fannie Mae Desktop Underwriter (DU), Loan pro, and Freddie Mac Loan Prospector (LD).)

Instead of the ratio in determining adequate income for loam qualification, the VA uses a formula called:

Residual income

An underwriter performs all the following activities EXCEPT:

Setting the interest rate for the loan (does perform: Assessing borrowing capacity of borrowers, verifying that borrowers meet program guidelines, and determining if compliance to federal requirements have been met.)

Home Owners Protection Act

The act that requires Private Mortgage Insurance (PMI) removal

Capacity

The borrower/co-borrowers' ability to repay the loan.

Certificate of Reasonable Value

The document required for a VA loan that verifies the value of property beng used as security for the VA loan (VA appraisal)

Actual Mortgage Amount

The loan amount including upfront funding fee.

Underwriter

The loan decision maker.

Maximum Loan Amount

The maximum insurable FHA loan amount.

Combined Loan to Value Ratio

The ratio of all financing (first and junior mortgages) to the value of the property

Debt Ratio

The sum of all contractual payments including housing compared to gross income known as the back end ratio.

Capital

The total value of assets. This term is sometimes used to refer to the amount actually paid as down payment and closing costs, as in "the borrower's capital in the transaction". Also used to refer to the total value of an investment as in "CAP Rate (Rate of Return of capital invested or purchase price.)"

Zone A

The zone designation that indicates a likelihood of flood and which requires the purchase of flood insurance.

Domestic Partner

This person is a committed in-home companion for at least one year.

Gross-Up

To multiply tax exempt income by 125%

What is NOT a purpose of VA loans:

To provide affordable housing in low income areas (to guarantee loans to lenders in the event of borrower default, providing loans of 100% of the lower of CRV or price, and helping veterans finance homes.)

What describes the required mortgage insurance on an FHA loan?

UFMIP of 1.75% and monthly of 0.5%

The standard application for a mortgage loan is called:

Uniform Residential Loan Application (1003)

The standard form provided to the underwriter along with the loan application, that provides the underwriter with a snapshot of the borrower is called:

Uniform Underwriting and Transmittal Summary (1008)

The following are advantages of an FHA loan EXCEPT:

Upfront mortgage insurance (Low down payment, flexible underwriting guidelines, and seller contribution of up to 6% of closing costs)

Dan purchased a home using a VA 90% LTV loan. Dan's lender is protected against Dan's default by which of the following?

Veterans Administration guarantee

When will mortgage insurance be required for a conforming conventional loan?

When a loan exceeds 80% LTV

According to federal mandate, at what level must mortgage insurance on conventional loans automatically be removed?

When the LTV reaches 78% of original value

Do condominiums using an FHA loan have UFMIP?

Yes, UFMIP

Do FHA loans have an upfront mortgage insurance charge?

Yes, both upfront and monthly mortgage insurance