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What can cause a holdup with a loan application for Julio?

A lack of identification of personal information, debts, income, or other qualifying factors. A lender needs to verify all of the borrower's financials. If they do not have all of the borrower's information, the loan approval process will be held up.

What is an FHA loan?

A loan backed by the Federal Housing Administration with easier qualifications. FHA loans are loans that are insured by the Federal Housing Administration. These types of loans have minimal down payment requirements, and are very favorable towards first-time home buyers.

What is a mortgage banker?

A middleman that packages and sells loans to third parties, but also manages payments. A mortgage banker is a person whose principal business is the originating, financing, closing, selling and servicing of loans secured by real property for institutional lenders on a contractual basis.

If Jeff wants to obtain a VA loan, where does he apply for it?

After getting a Certificate of Eligibility from the VA, he can work through any VA approved lender. The borrower must first obtain a Certificate of Eligibility. Then, the borrower can work with a qualified lender to get pre-approved for a VA loan.

Maxie has decided to buy a home. She visits you to see homes. What's your first question?

Have you been pre-approved for a loan? It is always best for the buyer to obtain a pre-approval letter from a lender prior to looking at homes. This way, both the broker and the buyer know how much the buyer can afford to pay for a home.

Who qualifies for a VA loan?

Active duty and retired veterans of the United States Armed Forces. Both active members of the military and Veterans qualify for a VA loan.

What is in the loan commitment letter?

It identifies the borrower, conditions of the loan, interest rates, and financial terms.

What's less expensive, a broker or a credit union?

Credit unions don't have middlemen, which can reduce costs. Credit unions typically do not work with mortgage brokers, which makes them a less expensive option.

Who establishes the criteria for owner financing?

The buyer and seller work out terms.

Sam and Jenn are just starting the home buying process. What should you tell them to look for in a lender?

Good rates, affordability, access, and strong financial history. Borrowers should aim to get the best loan terms possible from a reliable lender.

If Jessica wants a stable monthly payment, what should she look for in a loan?

A fixed interest rate loan. Fixed interest rate loans are less risky because the monthly loan payment is the same each month for the entire term of the loan. This allows the borrower to better budget for the loan payment.

What impact does a high-valued home have on the cost of a loan?

A higher valued home is more risk, increasing the potential interest rate and costs. Larger loans, typically called jumbo loans, typically have higher interest rates.

Angela wants a conventional loan to buy a home. What is it?

A basic type of loan, one that is not backed by federal loan programs. A conventional loan is defined as a mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. This type of loan is customarily made by a bank or savings and loan association.

You're brokering a deal with a property owner and a large developer. What type of loan is available?

A blanket mortgage A blanket loan, or blanket mortgage, is a type of loan used to fund the purchase of more than one piece of real property. Blanket loans are popular with builders and developers who buy large tracts of land, then subdivide them to create many individual parcels to be gradually sold one at a time.

What is a Certificate of Eligibility?

A document from the VA saying a person qualifies for a VA loan based on his or her service. BA document from the VA approving the individual for a loan. Lenders are required to get proof of a Veteran's service during the VA loan process. The Certificate of Eligibility (COE) serves as that proof, and tells a lender that an applicant has officially met the minimum service requirement.

What are mortgage insurance premiums?

A fee paid by the home buyer upfront and worth 1.75 percent of the loan amount. MIP is paid by the borrower of an FHA loan to the lender.

What happens during the property closing?

All parties sign the documents and close the loan. It transfers hands. The closing documents are signed by all parties. The seller receives the purchase price (this includes the buyer's loan and the buyer's down payment), the buyer receives title to the property.

What is a second mortgage?

Another loan taken out on a home after a mortgage is already in place. A second mortgage is a second loan taken out against a property. The second mortgage will be a junior lien to the first mortgage.

Who benefits from owner financing?

Both the buyer and seller - since the buyer may not qualify for traditional loans and the seller can collect interest. Both parties benefit. The seller gets a steady stream of income from the loan, while the buyer gets to purchase a house they may not have qualified for under a conventional bank or lender.

Doris wants to obtain a second mortgage to do some remodeling. Who offers these?

Commercial banks heavily offer them. Most lenders will offer a second mortgage as long as the borrower's financials are strong enough.

What's the biggest difference in credit unions and typical banks?

Credit unions are member-owned, and not profit-driven organizations.

Why do longer loan terms cost more in interest?

During a longer term, the lender maintains the same risk but for a longer time. Longer term loans are riskier for lenders. For this reason, lenders charge a higher interest rate.

Gabe's lender has a list of concerns before closing. What happens now?

Gabe must meet those concerns before moving forward. The borrower must address each of the lender's concerns, otherwise, they risk getting denied for the loan.

Thomas has been a member of a credit union for 10 years. Should he get a loan here?

Generally, yes, because rates can be lower. However, he should consider all options. Thomas should use the credit union if they can offer him the best loan terms.

How can your client, Drew, obtain a loan to build a home?

He can obtain a construction loan through a traditional mortgage lender. A construction loan is a short-term, interim loan to pay for the building of a house. As work progresses, the lender pays out the money in stages. Construction loans are typically short term with a maximum of one year and have variable rates that move up and down with the prime rate.

Jacob is ready to buy a home. How does he know what type of loan he should obtain?

He meets with a mortgage lender to see what type of loan he is best suited for Jacob needs to work with a mortgage broker or banker to review the various loan options.

What is an indication your home buyer is serious about buying?

He's pre-approved for a loan.

Lex is attracted to a very low interest rate on an adjustable rate loan. He asks if it's a good idea. What do you say?

It can be, if you believe rates will remain low long-term, but he needs to know rates and monthly payments will change. An adjustable rate mortgage is riskier than a fixed rate mortgage. The interest rate may be lower up front, but may increase over time.

With a low-down payment, is a savings and loan association best for a borrower?

It may be one option, but these loans tend to offer only 95 percent of the home loan as financing. An S&L is still a viable option as long as they can offer the borrower loan terms that work for them.

How will Sally's lender know about her personal loan through a lender not on her credit report?

It may not know, but it will inquire about payments being made to third parties. During the underwriting process, the lender will look into any outstanding debt of the borrower. They want to know how much debt the borrower has and how much they pay each month in loan payments.

Why is the Uniform Loan Application important?

It provides information that backers of loans, such as Fannie Mae and Freddie Mac require.

What is a pre-qualification letter?

It says the lender has done basic levels of determining if a home buyer is qualified to buy.

Your buyer has an FHA loan pre-approval. What concerns do you have about the home he is purchasing?

It will need to meet safety standards set by FHA and those homes without this could be hard to get approval for. Properties purchased using an FHA loan must pass an inspection to ensure the condition is adequate.

If home seller Sandra and buyer Amy agree to owner financing in order to close the transaction, how does that impact you, the real estate agent?

It won't, you still earn a commission.

Carl wants you to tell him how much interest he should pay on a loan. What do you say?

It's a complex number based on current rates but also Carl's creditworthiness, the home's value, and the local area.

Jamie hasn't secured home insurance yet and closing is approaching. Is this a problem?

It's likely to be a condition to closing the loan. All lenders require homeowners insurance. The borrower must obtain insurance prior to closing.

Sally is worried. It's been three weeks and the lender hasn't completed the underwriting. What do you say?

It's okay and normal for this process to take time.

How can you explain to Dave why his lender is charging him more for a home loan than his friend?

Like with the stock market, lenders assign risk to each investment. High risks have to yield a high return. Higher interest rates are charged to high-risk borrowers.

Will a borrower need to pay closing costs on his VA loan?

Maybe, but these are often paid by the seller and are typically lower. VA loans allow for up to 4% in seller concessions, which may cover all closing costs in some transactions.

Ellen has a good income, but has missed payments on her credit report. What impacts her credit score more?

Missed payments will hurt the borrower more than any other factor. Missed payments are a major contributing factor to one's credit score.

If a home buyer wants an FHA loan, can he get it through a savings and loan association?

Most offer them, but not all favor these loans.

Jack is ready to buy a home and can make a 10% down payment. Can he qualify for a conventional loan?

Most often, conventional loans require 20 percent down. Jack can still qualify but must pay PMI. PMI is typically required on conventional loans with a down payment of less than 20% of the purchase price.

Why doesn't Alex's lender send a pre-approval?

Most often, information is missing or not completed. A pre-approval letter can only be issued once the borrower's financials have been reviewed. If there is missing information, the lender cannot complete their pre-approval process.

Peter says he needs a national lender because his parent's bank is just too old fashioned. Is that true?

Most savings and loan organizations have modernized to offer more options than ever. As long as his local bank can offer him a loan with terms that work for him, the local bank is still a viable option. National banks are not always the best fit for every borrower.

If Nora fails to make a payment on her loan, the private mortgage insurance pays the lender, and there's no need for foreclosure. Is this true?

No, PMI pays a fee to the lender, but it does not stop foreclosure nor compensate for the entire amount lost. The lender may still proceed with the foreclosure process and force a sale of the property to pay off the outstanding loan balance.

Are credit reports the only thing lenders use during the application process?

No, all income and expenses are independently verified.

Matt has a pre-qualification letter from a lender. Has he been approved?

No, it means he's supplied information but that information is not yet verified.

Are FHA loans available for 100 percent financing?

No, most will need to have a loan to value ratio of 90 percent or less, but more if the borrower has good credit.

Are commercial banks a good bet for your buyer who wants to sit down and talk to an agent?

No, they could be located nationwide and typically don't have actual branches. National banks are not always the best fit for every borrower.

How much does Jessie need to have for a down payment on a VA loan?

Nothing. These loans are available at 100 percent financing. VA loans may offer up to 100% financing for those who qualify.

When can you give your buyer the keys to the home?

Only after the official signing of the terms after money changes hands.

If your buyer has a pre-approval for a VA loan, can he buy a home in need of significant repairs?

Potentially, but VA loans require a home inspection and must meet safety standards. Homes purchased using a VA loan must pass an inspection to ensure the property is in acceptable condition.

Sally wants to buy a home and has a job, but the lender says she's too risky. What does that mean?

Sally's financial history indicates she's a high-risk borrower. The lender will always assess their risk in a deal. They want to make sure the borrower will not default on the loan.

Barb's lender took her information over the phone and was able to get pre-qualified. Can she buy a home now?

She can start looking, but pre-approval hasn't been provided yet. Pre-qualification if the first step in getting approved for a loan; however, it doesn't carry much weight. A pre-approval letter from a lender, which is the next step in the approval process, is much more valuable.

What is the most commonly used mortgage application?

The 1003 mortgage application or Uniform Loan Application. The Uniform Residential Loan Application, also known as a Fannie Mae Form 1003 or just a 1003 form, is a standard form that contains all the information necessary for a lender to establish the risk profile of a borrower. All requests for residential mortgage loans are processed using this application, whether the loans are for home purchases, refinancing, or residential home construction.

If Cindy owned a home in 2010, can she apply for an FHA loan?

Yes, because it has been at least three years. Borrowers may qualify for an FHA first-time homebuyer loan every three years.

Can an interest rate change during underwriting?

Yes, especially if not locked in. It is always best for the borrower to lock-in an interest rate, otherwise, rates may change during the closing process.

What is the lender's cost to borrow money?

The cost the lender pays to borrow money to fund a loan from other banks. Lenders may borrow money from other lenders at times. The lender's cost to borrow money from other lenders is usually slightly higher than the base rate set by the Federal Reserve.

What is the collateral in a blanket mortgage?

The land itself. A blanket loan, or blanket mortgage, is a type of loan used to fund the purchase of more than one piece of real property. Blanket loans are popular with builders and developers who buy large tracts of land, then subdivide them to create many individual parcels to be gradually sold one at a time.

Gomer has a pre-approval letter. What does this mean?

The lender has completed their verification and plans to lend to the borrower. It is always best for the buyer to obtain a pre-approval letter from a lender prior to looking at homes. This way both the broker and the buyer know how much the buyer can afford to pay for a home.

Who decides what credit score is good enough to secure a loan?

The lender. The lender will use a person's credit score as a determining factor when underwriting a loan.

Abagail thinks she wasn't approved for a loan because of her race. Does this matter?

Yes, it is a potential violation of the Equal Credit Opportunity Act.

If Jimmy serves in the Army, but you don't know any details, who should he see about getting a VA loan?

The local Veterans Affairs office for approval.

What happens when your home buyer purchases a home where a blanket mortgage is in place?

The person buying the home obtains a new loan that pays off the blanket mortgage on just their property.

Who has more protection in a land sales contract?

The seller - who has the ability to take possession of the home again quickly. The seller is protected because they can take back title to the property if the buyer defaults on the loan.

Your home seller, Leslie, is agreeable to a purchase money mortgage. What is that?

The seller is willing to accept payments from a buyer over time to purchase the home.

Who owns a home in an installment land sales contract?

The seller maintains the legal title until the terms of the contract are met. Under an installment contract, the buyer gets possession of the property and makes installment payments of the purchase price over an extended period of time to the seller, who conveys legal title to property once the purchase price is fully paid.

James wants to choose the least affordable loan term. What should he look for?

The shortest term loan. The shorter the loan term, the more expensive the monthly payment; however, the borrower will pay less in mortgage interest over the life of the loan.

You've learned your buyer's underwriter is questioning the value of the home. What does that mean?

The underwriter needs better verification of the home's worth as collateral. The home is ultimately used as collateral for the loan. If the underwriter considers the loan-to-value ratio too high, they may have to reduce the loan amount.

How long are FHA loans?

They are available as 15 year or 30 year loans.

What are the key benefits of VA loans?

They are less expensive and easier to obtain for qualified buyers. VA loans may offer up to 100% financing at a lower interest rate. This makes a VA loan the most affordable loan option.

Steve wants to buy a home that's in pretty bad need of repairs. Are conventional loans a good option?

They can be because other loans have high restrictions imposed by the backers. Yes. This type of property may not qualify for a federally backed loan. Conventional loans are more likely to qualify; however, the interest rate may be higher.

Is Toby able to obtain a loan to cover some of the furnishings in his new home?

Yes, in a package loan, the buyer can purchase real and personal property. A package mortgage is a loan secured by real estate and in which the personal property and furniture is included in the purchase price of the house. The personal property is used as collateral, and cannot be sold without the approval of the lender.

What is an example of a buydown?

To lower the interest rate, a builder makes a payment to the lender on behalf of the buyer. A buydown allows the buyer to obtain a lower interest rate by paying a fee at closing. The fee is usually a percentage of the loan amount. The higher the percentage paid, the lower the interest rate on the loan.

Can Glenn negotiate with the mortgage banker about a lower interest rate?

To some point, but often this is set by the lending company, not the broker on the phone.

Nick received an offer from a mortgage broker. Will his loan come from that broker?

Typically, mortgage brokers work with numerous lenders, not just one. Nick's loan could come from multiple sources. A mortgage broker works with multiple lenders, which is why they can typically get a borrower the best terms on a loan.

If Christine is moving and has someone who can take over her VA loan, will the VA allow it?

VA loans are assumable, but the lender must approve it. In some cases, VA loans may be assumed. The lender must approve the loan assumption.

What has Amy's lender done to send a pre-approval letter?

Verified all of her income and debts, considered a credit report, and verified all details. A pre-approval letter is only issued after the borrower's financials have been reviewed and the lender is comfortable issuing the borrower an initial loan approval at a specified amount.

What does the underwriter do?

Verifies all information on the loan application and ensures the level of risk is acceptable to the lender's needs. The underwriter reviews all of the borrower's financials and determines if they qualify for a loan.

What is the lender always considering?

Whether or not making an investment in a borrower is worthwhile The lender will always assess their risk in a deal. They want to make sure the borrower will not default on the loan.

Can private mortgage insurance be canceled later?

Yes, after the borrower proves he will maintain his loan payments and accumulates equity in the home. Once the loan balance falls below 80% of the purchase price, PMI is no longer required.

Otis sees a drop in income in the weeks before closing on a loan. Does this matter?

Yes, the underwriting process will verify the borrower's ability to make payments. Even after approving a borrower for a loan, the underwriter will double-check the borrower's financials prior to closing on the property to ensure they still qualify for the loan. If the borrower's financials have deteriorated between issuing a loan approval and closing on the property, the underwriter may still deny the borrower.

Are commercial banks regulated?

Yes, these are federally regulated banks, making them a safe overall investment. National banks are regulated by the Office of the Comptroller of the Currency (OCC).

Pat doesn't have a 20 percent down payment. Can an FHA loan help?

Yes, these loans often have a much lower down payment requirement, sometimes at low as 3.5 percent. FHA loans have minimal down payment requirements. Borrowers who don't qualify for a conventional loan may opt for the FHA insured loan.

Are conventional loans risky to lenders?

Yes, they carry more risk than federally-backed programs. Conventional loans are riskier because they are not insured or guaranteed by a federal loan program.

Does the lender care about home insurance and taxes?

Yes, they ensure this is affordable to the borrower. The lender wants to ensure the borrower pays their property taxes and insurance. For this reason, the lender will typically withhold cash from the borrower in an escrow account, which is used to pay for property taxes and insurance.

Can a buyer fill out a loan application online?

Yes, this has become a common first step for homeowners.

Does the home buyer need to report stocks and bonds or other investments on home loan applications?

Yes, this is a source of income or debt and needs to be considered. All income and outstanding debt must be reported.

Can the underwriter deny a loan?

Yes, which can happen if the borrower's credit changes or for other reasons. The underwriter can deny a borrower if they determine the borrower's financials are not strong enough to qualify for a loan.

Can you help your buyer with pre-qualification?

You can encourage them to stay on top of the application process. It is best to have the borrower work with a lender or mortgage broker to obtain a pre-qualification letter.

Is a real estate agent able to direct financial questions from buyers to lenders?

You can make recommendations, but may not want to offer financial advice. An agent should never provide financial advice. Instead, they should recommend a mortgage broker, or have the buyer find their own mortgage broker.

Your home buyer, Eloise, was turned down for a loan from her bank. She wants to give up. What do you tell her?

You encourage her to try other lenders such as mortgage brokers.

The Jones family asks you where to get a loan. What do you say?

You encourage them to compare numerous brokers, local lenders, and their current bank. All buyers should shop around to various banks and mortgage brokers in order to find the best loan terms.