module 2
Reserves
cash on deposit or other highly liquid assets a borrower will have available after the loan funds.
processor
responsible for verification of the information contained in the file of the various aspects of the loan (such as working with the title company)
1. Above 720 2. Between 620 and 720 3. Below 620
1. acceptable credit risk 2. marginal 3. high risk
basis point
1/100th of a percentage point
co-signer
A _____ is a credit applicant who does not have ownership interest in the security property as indicted on the title but signs the note.
Housing Expense Ratio
A borrower's housing expense ratio, aka front-end ratio, is the relationship of the borrower's total monthly housing expense to gross income expressed as a percentage. Total Housing Expense / Gross Monthly Income = Housing Expense ratio &
Credit History
A person's record of debt repayment, often used as a guide to whether they are likely to pay accounts on time in the future
Credit Scoring
A system created by credit bureaus and used by lenders to make a determination regarding the creditworthiness of a potential borrower
Debt
Any recurring monthly monetary obligation that will not be canceled
gift letter signed by the donor stating no repayment is expected
Bob and Mary are providing a gift to their daughter, Amy, as down payment for the purchase of her new home. They provide a current bank statement for their account, a copy of their check to Amy, and a copy of the deposit slip into Amy's account. Amy provides a current ledger from her checking account that verifies the deposit was made and the amount of the current balance. What key document is missing?
28%
Conventional lenders consider a borrower's income adequate for a loan if the proposed total mortgage payment of PITI does not exceed _____ of stable monthly gross income.
36%
Conventional lenders do not want a borrower's total debt to income ratio to exceed ____ of stable monthly gross income.
4 C's of Underwriting
Credit history of the borrower, Capacity to repay the loan, Cash assets, Collateral
three
Disability payments count as income if they are a permanent source of income, but lenders must use caution if the disability payments are only for a limited time. If the benefits have a defined expiration date, the remaining term should be at least ____ years from the date of the mortgage application.
two months
Documentation of assets includes _____ of bank statements (all pages) to verify available funds.
adjusted gross income, adding up to 25%
If a lender can verity that a regular source of a borrower's income is nontaxable and is likely to continue, then they may develop an _______ for the borrower by _____ of the nontaxable income to the borrower's income.
lock-in agreement
Which of the following is used as a commitment guaranteed by a lender that an interest rate will not change on a specific loan for a specific period of time?
origination
Which step of the mortgage loan process typically involves ordering a credit report?
loan processor.
Who is typically responsible for verification of the information contained in a borrower's loan file, such as sending out employment verification forms?
$4,500
Karen buys a house for $200,000, making a $50,000 down payment and paying three discount points to buy down the interest rate. What is the total cost of the discount points?
Is it verifiable- can it be proven that the income was received? Is it continuous- has this income stream been regular for two year? Is it ongoing- is this income stream likely to continue for at least three more years?
When considering whether income from unemployment or welfare can be counted as stable income, the MLO should ask these questions:
Closing
When the parties to a mortgage loan transaction sign the necessary documents and thereby become responsible for the mortgage loan, aka settlement.
lender
Section L1: property and loan information of the new URLA is to be completed by the:
two year period
The URLA requires the borrower to provide details about all current and previous employment over a:
Origination
The process of making or initiating a new loan. Origination involves being the initial contact for a consumer, counseling them on the advantages and disadvantages of available loan programs, and then taking a loan application.
1. Consulting the mortgage loan originator 2. Completing a loan application 3. Processing a loan application 4. Analyzing the borrower and property
The real estate mortgage loan approval process traditionally consists of four steps:
Debt to Income Ratio (DTI)
The relationship of borrower's total monthly debt obligations to income, expressed as a percentage (Total Debt / Income = Ratio %)
Trust funds, certificates of deposit, cash value of life insurance, stocks and bonds
Which of the following are liquid assets?
1. Multiply the hourly wage by the number of hours worked in a week. 2. Multiply by 52 weeks in a year 3. Divide by 12 months in a year
To convert a borrower's hourly wages to monthly earnings:
25%
To qualify with self-employment income, the borrower must own at least _____ of the business.
Pre-approval
_____ is the process by which a lender determines if a potential borrower can receive financing through the lender and for what amount of money.
co-borrower
a person who signs the promissory note along with the primary borrower and accepts a joint obligation to repay the loan.
Yield Spread Premium (YSP)
a tool that an MLO may use to lower the upfront cash out-of pocket expenses at closing for a borrower in exchange for higher monthly out-of-pocket payments
Floating
choosing not to lock the interest rate
Form 4506-T
gives the lender permission to request electronic transcripts of federal tax returns from the IRS when documenting the borrower's income.
Assets
items of value
interest rate
the amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the loan amount (the principal)
Servicing
the continued maintenance of a loan after the loan transaction has closed. It involves maintaining direct contact with borrowers, sending mortgage and escrow analysis statements, collecting payments, and pursuing late payments
Underwriting
the process of evaluating risk and deciding whether to make a new loan and, if yes, on what terms
Pre-qualification
the process of pre-determining how much a potential borrower might be eligible to borrow.
Par Rate
the rate without discounts or points that lenders offer only to mortgage brokers, aka "wholesale" rate
1. Consulting with mortgage loan originator 2. Completing a loan application 3. Processing a loan application 4. Analyzing the borrower and property
the real estate mortgage loan approval process traditionally consists of four steps:
Lender's return (lender's yield)
the total amount of money the lender can make from a loan in relation to the amount invested.