section 12 unit 1: The Loan Process and Qualifying the Borrower

The loan application is used to gather information needed to determine whether the applicant can repay the loan. What information is requested in the application? a. credit references b. Borrower net worth c. employment history d. Appraised value of property

a. credit references b. borrower net worth c. employment history Borrower information includes details about employment, assets, and liabilities. Let's focus on assets and liabilities a bit more.

Verification of Employment Part 2: Verification of Present Employment a. current employer b. lender c. former employer

a. current employer

bonuses a. income b. expense

a. income

commission a. income b. expense

a. income

Provides final loan terms and closing costs for the borrower

closing disclosure

Jared is buying a condo from Luke. Sally is Jared's lender, and Thomas is Jared's agent. Meredith is Luke's agent. Who is responsible for providing the Loan Estimate? a. jared, the buyer b. Luke, the seller c. Meredith, Luke's agent d. Sally, Jared's lender

d. Sally, Jared's lender

Tara has made an offer on a home and is completing the loan application. Which of the following is an asset that she'll list? a. boat loans b. car loans c. credit card balance d. Savings account deposit

d. Savings account deposit

Mark is a single father applying for a loan to buy a house of his own. Which of these items is a liability on a residential loan application? a. motorcycle b. savings account c. cash d. child support

d. child support

Obligations or debts owed by the borrower

liabilities

Provides approximate loan-related costs, along with loan's terms

loan estimate

cash a. asset b. liability

a. asset

At least three business days before closing

closing disclosure

Request for Verification of Deposit Form What is the purpose of this form? a. It allows the lender to verify the cash deposits listed on the applicant's loan application. b. It allows the lender to verify the employment listed on the applicant's loan application. c. It allows the lender to verify the down payment listed on the applicant's loan application. d. It allows the lender to release confidential information about the applicant to depository institutions.

a. It allows the lender to verify the cash deposits listed on the applicant's loan application.

Larry is a lender processing a loan application. Which of the following might he request to verify the applicant's bank deposit information? a. account statement b. debit card c. loan application d. paystub

a. account statement

real estate a. asset b. liability

a. asset

Items of value belonging to the borrower

assets

Biff is completing a residential loan application. Which of the following would he include in the liabilities section? a. amount of deposit at his bank b. car loan c. house d. stock holdings

b. car loan

Curtis is completing a residential loan application. Which of the following would he include in the assets section? a. amount of deposit at his bank b. car loan c. credit card balance d. student loan

a. amount of deposit at his bank

Within three business days of loan application

loan estimate

Loan application a. borrower b. lender

a. borrower

wages or salary a. income b. expense

a. income

Current employers provide quite a bit of information to the lender. Which of these items are provided? a. Probability of continued employment b. Gross base pay amount c. Overtime, bonuses, or commissions paid d. Likely continuance of bonus or overtime pay e.Information about last and next pay increase

a. Probability of continued employment b. Gross base pay amount c. Overtime, bonuses, or commissions paid d. Likely continuance of bonus or overtime pay e.Information about last and next pay increase

The purpose of the loan is another piece of information the borrower must complete. If the loan is for construction, what five pieces of additional information must the borrower provide? a. acreage b. original cost c. Existing lien amount d. present value of lot e. costs of improvements f. Year the lot was acquired

a. acreage b. original cost c. Existing lien amount d. present value of lot e. costs of improvements f. Year the lot was acquired Additional information is also requested if the loan is for a refinance.

What type of information does the application request? a. amortization type b. amount c. interest rate d. length e. mortgage type f. points

a. amortization type b. amount c. interest rate d. length e. mortgage type The lender can provide assistance to the borrower when filling out this (and any) section of the application, especially related to the loan terms.

checking account a. asset b. liability

a. asset

Borrowers provide a lot of unsubstantiated information on the loan application. Which of these items might a lender use to verify the information provided by borrowers? a. bank statements b. credit reports c. credit card statements d. pay stubs e. verification of deposit f. Verification of employment

a. bank statements b. credit reports d. pay stubs e. verification of deposit f. Verification of employment lenders will obtain a credit report and something that can be used to verify deposits (either bank statements or a verification of deposit allowing the financial institution to release balance information), and verify employment (either pay stubs or a verification of employment allowing the employer to release wage and employment information).

Part 1: Request a. lender b. depository institution

a. lender

What type of borrower information does the loan application request? a. name b. social security number c. current address d. Number and ages of dependents e. number and types of pets f. marital status

a. name b. social security address c. current address d. number ages of dependents f. marital status This information must be provided by all borrowers, in addition to date of birth, years of school, and a contact number. If borrowers have lived at their current address for less than two years, they may need to provide a previous address as well.

Borrowers are also required to provide employment information. Let's assume a borrower works for a single employer and has worked for the employer for five years. What employment information must be provided? a. name and address of employer b. years working in this job c. Years working in this profession/industry d. position or title e. monthly income

a. name and address of employer b. years working in this job c. Years working in this profession/industry d. position or title Borrowers note in this section if they are self-employed. This is important to know because the lender may require additional documentation to verify the applicants' income. Lenders often require buyers to complete a verification of employment form, which gives their employer authorization to release information about the borrower, including wages.

one of the final sections the borrower simples is Declarations. what does this section seek to uncover? a. outstanding judgements b. previous bankruptcies or foreclosures c. current delinquency or default on debt obligations d. citizenship e. intention to occupy the property as a primary residence

a. outstanding judgements b. previous bankruptcies or foreclosures c. current delinquency or default on debt obligations d. citizenship e. intention to occupy the property as a primary residence

What additional five pieces of information must the borrower provide when requesting a refinance? a. reason for financing b. original cost c. Existing lien amount d. present value of property e. Cost and description of improvements made or to be made f. year the property was acquired

a. reason for financing b. original cost c. Existing lien amount e. Cost and description of improvements made or to be made f. year the property was acquired

One of the pieces of information the depository institution provides is the average balance for the applicant's accounts. What time period does this average cover? a. two month b. three months c. six months d. 12 months

a. two months A current balance is also provided for deposit accounts. If the applicant has loans with the institution, information on the original amount, current balance, payment amount and frequency, and number of late payments is also provided.

What property information is provided in the application?

address estate type legal description names for title year built The borrower would also indicate if this property will be a primary or secondary residence, or an investment property.

rent a. income b. expenses

b. expenses

taxes a. income b. expenses

b. expenses

Loan Estimate a. borrower b. lender

b. lender

Verification of Employment Part 1: Request a. current employer b. lender c. former employer

b. lender

Closing Disclosure a. borrower b. lender

b. lender The borrower applies for the loan, and the lender must provide the Loan Estimate within three days of that application. The lender later provides the Closing Disclosure to the parties.

car loans a. asset b. liability

b. liability

mortgage a. asset b. liabilitiy

b. liability

unpaid taxes a. asset b. liability

b. liability

The lender, the depository institution, and the _______ all complete parts of the request for verification of deposit form. a. appraiser b. loan applicant c. seller d. settlement agent

b. loan applicant

The lender, the employer, and the ______ all complete parts of the request for verification of employment form. a. appraiser b. loan applicant c. seller d. settlement agent

b. loan applicant Although the lender and employer have heavier roles in completing the form, the applicant must sign it to give the employer permission to provide information to the lender. The employer may be either a current or previous employer.

Provides details if the loan were sold to another servicer

loan transfer disclosure

The difference between assets and liabilities

net worth

Who must provide the buyer and seller with a copy of the closing disclosure? a. agents for both parties b. attorney's for both parties c. the buyer's lender d. settlement agent

c. the buyer's lender

Bella is a lender. Joshua is the loan applicant. They both complete their part of the request for verification of the deposit form. The last party to complete the deposit form will be the _______. a. appraiser b. depository institution c. seller d. settlement agent

b. depository institution

Verification of Employment Part 3: Verification of Previous Employment a. current employer b. lender c. former employer

c. former employer

Several parties are involved in the loan approval process. Who are four of the major players in a typical financing arrangement? a. borrower b. lender c. real estate agent d. seller e. settlement writer f. underwriting

a borrower b. lender e. settlement writer f. underwriting

Part 2: Verification of Depository a. lender b. depository institution

b. depository institution

insurance a. income b. expenses

b. expenses

When completing the Assets and Liabilities section of the application, what information should the borrower be prepared to provide? a. account number b. cash value or unpaid balance c. Name and address of bank or company d. monthly payment

a. account number b. cash value or unpaid balance c. Name and address of bank or company d. monthly payment Additionally, the borrower should provide information requested about other assets (such as stocks, bonds, life insurance, automobiles, other real estate, etc.) and liabilities (such as alimony, child support, other expenses) as appropriate.

Several parties have a role in completing parts of the form. Which of these parties are involved? a. applicant b. lender c. Applicant's real estate agent d. seller e. applicant's employer f. disposition institution

a. applicant b. lender e. applicant's employer Although the lender and employer have heavier roles in completing the form, the applicant must sign it to give the employer permission to provide information to the lender. The employer may be either a current or previous employer.

Several parties have a role in completing parts of the form. Which of these parties are involved? a. applicant b. lender c. applicant's real estate agent d. seller e. applicants employer f. Depository institution

a. applicant b. lender f. Depository institution Although the lender and depository institution have heavier roles in completing the form, the applicant must sign it to give the depository institution permission to provide information to the lender.

Completing a residential loan application requires providing information about the loan being requested, the property being purchased, and the ________. a. Appraisal value of the property b. Borrower purchasing the property c. lender providing the loan d. seller of the property

b. Borrower purchasing the property Completing a residential loan application requires providing information about the loan being requested, the borrower, and the property they're seeking to purchase.

What is the purpose of the request for verification of employment? a. It allows the lender to verify the cash deposits listed on the applicant's loan application. b. It allows the lender to verify the employment listed on the applicant's loan application. c. It allows the lender to verify the down payment listed on the applicant's loan application. d. It allows the lender to release confidential information about the applicant to depository institutions.

b. It allows the lender to verify the employment listed on the applicant's loan application.

Bobby is completing a residential loan application. On the application, he lists his liabilities. What are liabilities? a. Items of value the borrower owns b. Obligations the borrower owes c. The difference between a borrower's items of value and obligations d. wages earned form employment

b. Obligations the borrower owes

What is the purpose of the loan transfer disclosure? a. To notify the borrower how to obtain a cashier's check for closing b. To notify the borrower that the loan is being resold on the secondary market, and how and where to make future payments c. To notify the lender that the buyer is relying on borrowed funds d. To notify the seller that the buyer is relying on borrowed funds

b. To notify the borrower that the loan is being resold on the secondary market, and how and where to make future payments

_______ are part of the loan-approval process and are responsible for completing a loan application and supplying supporting documentation. a. brokers b. buyers c. lenders d. sellers

b. buyers Prospective buyers complete a loan application and submit it to the lender, along with additional documentation, if they need to obtain financing to purchase a property.

The Barbers are looking to purchase a new home for their family of four, but they'll need to be approved for a loan. What document will they need to complete to initiate their loan process? a. closing disclosure b. loan application c. loan estimate d. Pre-qualification request

b. loan application

Which of the following, once completed, initiates the loan process? a. Closing Disclosure b. loan application c. loan estimate d. Pre-qualification request

b. loan application

Which borrower's net worth is the most favorable? a. Borrower A's assets are equal to her liabilities. b. Borrower B's liabilities are twice as much as his assets. c. Borrower C's assets are twice as much as her liabilities.

c. Borrower C's assets are twice as much as her liabilities.

Naomi is completing a residential loan application. On the application, she lists her assets and liabilities so that her net worth can be determined. What's net worth? a. Items of value the borrower owns b. obligations the borrower owes c. The difference between a borrower's items of value and obligations d. wages earned from employment

c. The difference between a borrower's items of value and obligations

Kate is looking over the document that provides the approximate loan-related costs, along with the loan's terms. What is Kate reviewing? a. Closing Disclosure b. estimated value statement c. loan estimate d. loan transfer disclosure

c. loan estimate

Maria is applying for a loan. Maria's employer has been asked to provide employment verification. Who else must complete parts of the request for proof of employment form? a. Maria's agent b. the appraiser c. the lender d. the seller

c. the lender

Which party to the loan approval process evaluates the loan application, the supporting documentation and data, and the property appraisal in order to make an approval recommendation? a. buyer's agent b. seller's agent c. settlement agent d. underwriter

d. underwriter