General Mortgage Knowledge Flashcards
Loan to Value
Purchase price or Appraised value, whichever is less, divided into the loan amount
Combined Loan-to-Value (CLTV)
1st mortgage, plus the amount drawn from the HELOC, divided by the value
Total Loan-To-Value (TLTV)
1st mortgage, plus the total of the HELOC or 2nd mortgage, divided by the value
Table funding
Any loan that is funded by a wholesale lender for a mortgage broker (brokers cannot underwrite or fund loans).
Mortgage Banker
Any company that can underwrite or fund loans. Mortgage Brokers cannot fund or underwrite loans.
Yield Spread Premium
Money paid from the wholesaler to the broker for charging a higher interest right to the borrower.
Extended lock agreement
Cannot be issued by a broker and must contain four items: Program, interest rate, cost, and expiration date.
Delinquent loan
Any loan over 30 days due.
Discount Point
1% of the loan amount and can only used for reduction of interest rate
Premium pricing
Used to help the borrower pay their closing costs. The premium results from the interest rate being increased.
Cash Out Refinance
Taking equity from the loan.
Rate and Term Refinance
The extension of the term or reduction
of interest rate to reduce the payments.
Right of Rescission
-Three business days, not including the
day the documents are signed
-Two copies of the Rescission form
must be given to all borrowers
and owners of the property.
-If a mistake is made on the Right of Rescission, the rescission period extends to three years.
Escrow Accounts
Accounts that are paid into by the borrower for taxes, insurances, and possibly HOA/POA fees. This money belongs to the borrower, not the mortgage company.
Repurchase
An investor requiring the originating lender to buy the loan back because of fraud, unacceptable underwriting, or appraisal.
Liens
1st mortgage, 2nd mortgage, IRS tax Lien, judgments, mechanics liens.
Early Payment Default
The borrower does not make the 1st, 2nd, or possibly the third payment. This is most likely fraud.
Federal Mortgage Loan
-Any loan originated and closed under Fannie Mae, Freddie Mac, FHA , VA, or USDA requirements.
-Any loan that can be sold to
Fannie Mae of Freddie Mac:
▪ Maximum LTV – 97% ▪ Any loan above 80% must have PMI and escrows
Non-Conforming Loan
Any loan that cannot be sold to Fannie Mae or Freddie Mac. Also, Jumbo or any loans that are using non verified income.
Nontraditional Loan
Any loan that is not a 30-year fixed.
USDA-United States Department of
Agriculture
▪ In areas of less than 35,000 people
▪ 100% financing. Income limitations to be eligible
▪ 29/41 Underwriting Ratios
▪ Guarantee Fee– Government mortgage insurance is required for the life of the loan.
▪ USDA must underwrite and fund all loans.
Federal Housing Administration (FHA)
▪ Maximum LTV is 96.5%
▪ 31% for housing/43% overall underwriting ratios
▪ MIP is required for the life of the loan if over 90% LTV.
▪ Seller concessions is limited to 6%.
▪ All borrowers must be run through CAIVRS.
▪ Occupancy needs to occur in within 60 days and be maintained for a year.
▪ Upfront MIP (Mortgage Insurance Premium) is 1.75%, which may be loaded into the loan.
▪ The MIP renewal is 0.0085 (.85%) of the loan amount / by 12= The monthly MIP premium to be added to the P&I payment.
VA Loans
▪ Down payment is determined by obtaining the DD214 from the veteran, which tells you they have benefits.
▪ Certificate of Entitlement or Eligibility (COE) is issued
▪ Maximum Loan-to-Value is 100%.
▪ The maximum guarantee authorized by the VA is 25 percent of the loan amount, up to $113,275. The maximum VA home loan is Fannie or Freddie loan limits.
▪ Overall ratio is 41%
Program - 5/1
Rate fixed for 5 years and then adjusts every year thereafter.
Caps – 2/5
2% is the limit the interest rate can go up or go down on each adjustment. 5% is the lifetime cap.
The lifetime cap
The highest the rate can go over the life of the loan. If the starting rate was 4% and the lifetime cap is 5%, the highest the rate can go over the life of the loan is 9%.
Margin
The only number on an ARM Loan that cannot change. It is also the floor, meaning the interest rate cannot go below the margin.
Fully-Indexed Rate
▪ Addition of the Index and the Margin.
▪ The borrower is underwritten at the higher of the starting interest rate, or the Fully-Indexed Rate.
Negative Amortization
The mortgage balance goes up every month, because the interest is not paid (no mortgage payments are required) and the borrowers are paid each month.
Non-Recourse Mortgage
If the mortgage balance is higher than the value at the end of the loan, FHA absorbs the loss.
Home Equity Line of Credit (HELOC)
▪ Term is usually 8 to 10 years
▪ Floating Interest Rate, usually based on Prime Rate.
▪ No principal payment required unless the borrower chooses to pay, but the balance will be due at the end of the loan.
Example– Value of property is $200,000. The first mortgage is $100,000. The HELOC lender will go to 80% LTV, or $160,000.
▪ The HELOC amount would be
$60,000. $160,000 - $100,000.
2nd Mortgage
All the proceeds are paid out at the closing. They will start monthly P&I payments, usually within 45 days. The term is 15 years and can be an ARM or fixed-rate mortgage.
Subordination Agreement
▪ If a borrower has a first mortgage, as well as a second mortgage with another lender.
▪ If the borrower wants to refinance the first mortgage, they have to obtain a signed Subordination Agreement from the second mortgage lender, which says the second mortgage lender will stay in 2nd position while the 1st is
refinanced
Construction Loans (2-types)
▪ Construction Loan with a Permanent Take Out
▪ Construction Perm
-The consumer will close on a construction permanent loan.
-The consumer obtains a construction loan from a lender. The construction
lender will request a Permanent Take
Out before making the construction
loan.
-if the borrower meets the requirements of the commitment letter, your company will pay off the construction loan and the borrower starts making payments on the permanent loan.
▪ One set of closing costs.
▪ Borrower has the home built and
will pay interest on the draws to
pay the contractor, as bills are
presented.
lender will calculate the P&I payment based on the amount of the loan and the remaining term of the loan
