Chapter 12 - Lender Loan Process and Calculations for SC, Unit 2 : More on Qualifying the Borrower

How do you calculate LTV?

(Amount financed / property value) x 100

How do you calculate total debt ratio?

(Total of monthly debt obligations / monthly gross income) x 100

How do you calculate the housing ratio?

([Principal + interest + taxes + insurance + association fees] / monthly gross income) x 100

Five factors are used to determine a FICO® credit score. What are they? Age of accounts Credit usage Employment history Inquiries Payment history Types of accounts

Age of Accounts Credit Usage Inquiries Payment History Types of Accounts

Although the credit reports from each of the major reporting agencies may vary, you can expect to find the same type of information. Which of these items can be found on our sample credit report? Accounts in good standing Contact information for the credit reporting company Credit history inquiries Personal information Potentially negative items

All of the above

Income may come from a variety of sources, some viewed more favorably than others. Which of these are sources of income a lender might consider? Select all that apply. Alimony Bonuses Child support Government entitlement funds Normal wages or earnings Pensions

All of the above

Which of these are programs for which SC Housing offers an assistance programs? Select all that apply. Down payment assistance Low interest rate loans Mortgage assistance Mortgage tax credits Rental assistance

All of the above

What's included in a total debt ratio (a.k.a., debt-to-income ratio, total obligation, back-end ratio)?

All recurring (or installment) debt that will last longer than 10 months, such as monthly mortgage, car, credit, and loan payments

What's a loan-to-value (LTV) ratio?

Amount being borrowed compared to the value of a property (either the appraised value or sales price, whichever is less)

What mortgage options are available for self-employed borrowers?

Conventional Loans, FHA Loans, and bank statement loans.

Inquiries or requests for credit history generally come in two types: those you initiated and those you didn't initiate. Categorize each item listed below based on whether the scenario is Initiated by you or Not initiated by you. Credit card application Loan application Insurance application Credit monitoring Pre-approved credit offer

Credit card application Initiated By You Loan application Initiated By You Insurance application Initiated By You Credit monitoring Not Initiated By You Pre-approved credit offer Not Initiated By You

Which factor is NOT used to determine a FICO® credit score? Credit usage Employment history Payment history Types of accounts

Employment history

What's a loan origination fee?

Fees charged by a lender for processing or originating a loan

When an individual is self-employed, proving income and finances to a lender may take a little extra effort than for other individuals who are not self-employed. According to the resource, what additional documents may a self-employed individual need to provide when obtaining a loan? Select all that apply. Bank statements IRS Form 4506-T Profit-and-loss statement Receipts Tax returns

IRS Form 4506-T Profit-and-loss statement Tax returns

Sort the factors based on their importance to a credit score, from most important (first) to least (last). We've attached a new resource here that uses slightly different terminology, like "inquiries" instead of "new credit". Keep in mind that each credit bureau may use its own vocabulary to describe these factors, so it's important to read details in descriptions to recognize the variations when you see them. Length of credit history Credit utilization New credit and types of credit Payment history

Length of credit history Third Credit utilization Second New credit and types of credit Last Payment history First

How do you calculate a loan origination fee?

Loan amount x origination rate (divide a percentage by 100 to obtain the rate, so an origination fee of 2% is the same as 0.02)

Some items on a credit report may be viewed negatively by a lender. Which of these items would you expect to find in this section of the report? Loan with a past due balance Bankruptcies Liens Court judgments Accounts sent to collections Credit account with no late payments

Loan with a past due balance Bankruptcies Liens Court Judgements Accounts sent to collections Consumers should pay particularly close attention to this section and take care of items showing here. They should also make sure this information is accurate because it could cause a lender to turn down a loan. Consumers can dispute the information they believe is incorrect.

What's included in the housing ratio (a.k.a., front-end ratio)?

Monthly housing obligation, (principal, interest, taxes, insurance), homeowners or condo association fees

Which of the following factors carries the heaviest weight when calculating a credit score? Age of accounts Credit usage Inquiries Payment history

Payment history

Ally is reviewing the personal information on her credit report. What information is NOT included in the personal information section? Addresses Name and name variations Race and ethnicity Spouse or co-applicant name

Race and ethnicity

Lender Ron is running Sally's credit report. In which section of the credit report might Ron expect to find information regarding her loan that was paid off on time?

The Accounts in Good Standing Section

The Accounts in Good Standing section lists accounts that may be viewed favorably by a lender. These are generally accounts without any late payments or that have been paid off or closed. What type of accounts may be listed here? Revolving Installment

Both - Revolving and Installment

Where can an extensive list of available state, county, and city programs available for SC residents seeking homeowner assistance?

HUD website

Lenders use credit scores when determining whether to approve a loan application. What does the score tell the lender?

How likely the applicant is to repay the money that's been borrowed

Normal wages are considered when a lender is evaluating an applicant's income. Which of the following must be true for overtime pay to be considered? It must be at least 10% of the person's income. It must have been paid in the last six months. It must have been received regularly in the last year. It must have been received regularly over the last two years.

It must have been received regularly over the last two years.

Listed here are different activities. Based on what you've learned about credit scores so far, would these actions have a positive or negative effect on the score? Missed payments Short credit history Maxed-out credit accounts Lengthy credit history On-time payment history Credit accounts with low or no balances

Missed payments Negative Short credit history Negative Maxed-out credit accounts Negative Lengthy credit history Positive On-time payment history Positive Credit accounts with low or no balances Positive

The personal information section includes either information you reported to the credit reporting agency, or information your creditors or other sources reported to the agency. What information can you find in this section? Select all that apply. Name and name variations Year of birth Employers Spouse or co-applicant name Race and ethnicity Addresses

Name and name variations Year of birth Employers Spouse or co-applicant name Addresses

In order for earnings from a second or part-time job to be considered as part of a lender's income evaluation, what must be true? The applicant must have been employed for at least one year, and the employment must be expected to continue. The applicant must have been employed for at least six months, and the employment must be expected to continue. The applicant must have been employed for at least three years, and the employment must be expected to continue. The applicant must have been employed for at least two years, and the employment must be expected to continue.

The applicant must have been employed for at least two years, and the employment must be expected to continue.

What are the Housing and Total Debt Ratios for Fannie Mae Conforming Loans

Total debt ratio: 36 - 45%* Housing ratio: 28%*

What are the Housing and Total Debt Ratios for Conventional Loans

Total debt ratio: 36% Housing ratio: 28%

What are the Housing and Total Debt Ratios for VA Loans

Total debt ratio: 41% Housing ratio: N/A

What are the Housing and Total Debt Ratios for FHA Loans

Total debt ratio: 43% Housing ratio: 31%

What are the Housing and Total Debt Ratios for Freddie Mac Conforming Loans

Total debt ratio: Up to 45%* Housing ratio: N/A

True or False : Items initiated by you are visible to lenders viewing your credit report. A lot of inquiries may raise some red flags. Items not initiated by you are not visible to the lender. Only you will see these.

True

True or False : One problem that self-employed individuals run into is that they use business expenses to reduce taxable income, which means less qualifying income for a mortgage.

True

True or False : Self-employed borrowers can improve their prospects by increasing their credit score, offering a larger down payment, or paying down debt, among other strategies.

True

Credit scores are calculated using information from which of these items? Credit report School transcripts Employment history Voter registry

credit report