MLO Timeline - Chapter 2 Flashcards
The Four Cs
Credit, Cash, Capacity, Collateral.
Credit
The borrower’s credit score and history.
Cash
The liquid assets the borrower has available to cover any shortfalls.
Capacity
The borrower’s income or their incoming cash flow versus the monthly bills they’re obligated to pay.
Collateral
The property pledged as security for the loan.
Amortization
Periodic payments on a loan requiring payment of enough principal and interest to ensure complete repayment of the loan by the end of the loan term.
Negative Amortization
Occurs when the mortgage payment made does not cover the full amount of interest owed. Ex: Reverse Mortgages
MLO Timeline: Pre-Application
Borrower considers shopping for a mortgage.
MLO advertises.
MLO Timeline: Application
Credit is verified
Credit report is pulled
Application is collected
MLO matches borrower with product and program
Intent to proceed
MLO Timeline: Processing
Supporting documentation collected
MLO Timeline: Underwriting
Capacity: DTI and employment verified
Cash: Bank accounts verified
Collateral: Value verified (appraisals), ownership verified (title work).
MLO Timeline: Closing
Documents signed by lender, borrower and seller (purchase only)
Documents recorded by closing agent
MLO Timeline: Ownership
Servicing = collection of payment
