Loan Application Process

Question 1

What 2 ways can buyers find out how much of a loan they can qualify for?

Answer 1

Pre-qualification and Pre-approval

Question 2

Explain Pre-qualification

Answer 2

An informal process that can be done by a real estate agent or lender by asking a series of questions about their financial status and then establishing a price range for the home buyer(s)

Question 3

Explain Pre-approval

Answer 3

A formal process that can only be done by the lender which requires the buyers to fill out a loan application. A letter is then issued which states the maximum amount that will be lent to the buyers

Question 4

Which loan process is more attractive to sellers?

Answer 4

Pre-approval. Makes the closing go more smoothly

Question 5

How do lenders qualify buyers?

Answer 5

Qualifying standards or loan underwriting standards

Question 6

What 4 critical procedures are involved when a lender is processing a loan?

Answer 6

The lender must:
Determine the ability of the borrower to repay the loan
Estimate the value of the property that is collateral for the loan
Research and analyze the marketability of the title
Prepare the docs necessary to approve the loan and close the transaction

Question 7

What process is used to determine the borrower’s ability to repay a loan and estimate the value fo the property being used as collateral?

Answer 7

Underwriting

Question 8

What 4 types of repayment plans are there?

Answer 8

Straight (interest-only), Mortgage style, Ballon payment, and Adjustable-rate

Question 9

Explain Straight (interest-only)

Answer 9

Monthly payments allocated to interest. At the end of the term, the borrower must be able to pay off the entire principal or get another loan

Question 10

Explain Mortgage style

Answer 10

Fixed-interest, long-term loans of 15 or 30 years. At the end of the loan term, the full amount of the principal and all of the interest is totally paid off and the balance is zero

Question 11

Explain Balloon payment

Answer 11

A loan that has one large final payment due when the loan matures.

Question 12

Explain Adjustable-rate

Answer 12

A good option for short-term borrowers, adjustable-rate mortgages, are made up of: index, margin, calculated rate or note rate, initial rate, adjustment period, mortgage payment adjustment period, interest rate caps, payment cap, and negative amortization cap