LOAN ORIGINATION ACTIVITYS Flashcards
- A borrower’s net worth is determined by
by subtracting liabilities from assets.
- Assets are the items of value owned by the
borrower, such as cash on hand, checking and savings accounts, stocks, insurance, etc.
- Liabilities are
financial obligations or debts owed by a borrower
- Debts are considered any
any reoccurring monetary obligations that cannot be canceled.
- Underwriters want to confirm that the borrowers have sufficient assets and personal money
to make a down payment on the property and pay closing cost, without having to borrow.
- Underwriters want to confirm that the borrower will have adequate
adequate reserves
usually two months of PITI, after making the down payment and closing cost.
- Reserves are
cash on deposit or other highly liquid assets a borrower will have available after the loan funds.
- Lenders would like to see at least enough to cover
two months’ PITI mortgage payments of principal, interest, taxes, and insurance (and assessments such as condominium association fees, if applicable) after the borrower makes the down payment and pays all closing costs; however, inmost cases, this is not required.
- For investment properties,
six months’ PITI payments must be verified for loans on non-owner-occupied property.
- Consumer debts that have less than ___ months of payments remaining do not need to be included for the purpose of calculating debt ratios.
10 months of payments remaining do not need to be included for the purpose of calculating debt ratios.
- If the credit report does not show a
required minimum payment amount, the lender should use an amount equal to five percent of the outstanding balance.
- Lease payments must always be
considered a recurring monthly debt obligation, regardless of the number of months remaining on the lease.
- At a minimum, the borrower should have
2 months of mortgage payments after closing as reserves in a bank or brokerage account.
- Gross Monthly Income =
IF YOU ONLY HAVE ANNUAL INCOME
Annual Income ÷ 12.
- Gross Monthly Income =
IF PAID WEEKLY
Weekly Income x 52 ÷ 12.
- Gross Monthly Income =
IF PAID HOURLY
Hourly rate x weekly hours worked x 52 ÷ 12.
- Gross Monthly Income =
IF PAID BI-WEEKLY
Bi-weekly rate x 26 weeks ÷ 12
- Gross Monthly Income =
IF PAID BI MONTHLY; AKA EVERY TWO WEEKS
Bi-monthly rate x 24 weeks ÷ 12.
- A quality source of income is one that is
reasonably reliable, such as income from an established employer, government agency, interest-yielding investment account, etc.
- A durable source of income can
be expected to continue for a sustained period. For Example Permanent disability, retirement earnings, and interest on established investments clearly are durable types of income.
( Temporary unemployment benefits are unlikely to be counted.)
- TO BE CONSIDERED ‘‘DURABLE’’ , bonus, commission, and part-time earning types of income must be shown to
shown to have been a consistent part of the borrower’s earnings for two years.
- __% of ownership in a business is required for an individual to be considered self-employed. Verification of income requires 2 years of personal and business income tax returns. A year-to-date Profit and Loss Statement and a Balance Sheet may also be required.
25%
- A Profit and Loss Statement summarizes the company’s
assets and liabilities over a range of time.
A balance sheet depicts the company’s book value at a single moment in time. It is a snapshot of value.
- Employment income must be
verifiable for the past 2 tax years.
Any source of income which is not verifiable is NOT acceptable to the lender.