SU # 24__Buyer Financial Qualification Flashcards
When you pre-qualify a buyer, what are you trying to determine?
If the buyer has a need to buy, the capacity to buy, and some knowledge of the market.
What is the major difference between pre-qualification and pre-approval?
Pre-qualification is an informal process that a lender or an agent can do.
Pre-approval is a formal process that only a lender can do and it involves an actual loan application.
What risks do lenders face when making a mortgage loan?
The borrower will not be able to repay the loan.
If the borrower defaults on the loan, the property will be worth less than what is still owed on the loan.
Define underwriting.
The evaluation process used to determine the borrower’s ability to repay a loan and estimating the value of the property being used as collateral.
How does a lender determine if the buyer’s income is enough to pay the loan?
By establishing an income ratio and a debt ratio.
Why is information about net worth important?
It gives an indication of the borrower’s ability to keep up the payments on the loan in the event that the borrower would lose his or her job.
What does the term net equity mean?
The proceeds from the sale of the buyers’ current home that will be used to help finance the purchase of the new home.
What is the most important part of a credit report?
The borrower’s payment history.
What is the single most important document used to determine loan worthiness?
Job History
Credit History
Income Records
Capital Assets
Credit History
Buyers can find out how much of a loan they can qualify for by:
Pre-qualification, a formal process that can be performed by a real estate agent or by a lender.
Pre-approval, a formal process that only a lender can perform.
Pre-qualification, an informal process that can only be performed by a HUD lender or mortgage banker.
Pre-approval, an informal process that a real estate agent or lender can perform
Pre-approval, a formal process that only a lender can perform.
What term is used to denote everything that a person owes?
Credit History
Arrears Payments
Liabilities
Passive Capital
Liabilities
Bob and Linda Todd are buyers with $60,000 of stable income and unknown credit scores. Using the typical conventional loan qualifying percentage and assuming about 20% of that amount would be for taxes and insurance, how much of a monthly payment (principal and interest) could the Todd’s qualify for?
$1,120.00
$1,400.00
$1,680.00
Cannot be determined.
$1,120.00
Which type of status is viewed as a stronger buying position?
A buyer who has many charge accounts.
A buyer who has a good rent history.
A buyer who has been pre-qualified.
A buyer who holds a pre-approval letter.
A buyer who holds a pre-approval letter.
The evaluation process used to determine the borrower’s ability to repay a loan and estimating the value of the property being used as collateral is called ______.
Subrogation.
Assessment.
Underwriting.
Reconciliation.
Underwriting.
Which type of loan requires that debt-ratio guidelines must not exceed 41 percent?
Urban Renewal loans
Conventional loans
FHA loans
PMI loans
FHA loans
