The Application Process Flashcards
______ are individuals who work for banks and other financial institutions with the main objective to recommend individual and business loan applications for approval
A: Lending Officer
B: Loan Officer
C: Mortgage Managers
D: None Of The Above
B: Loan Officer
Pre-Qualified
- This is the first step in the house buying process.
- To be pre-approved for a mortgage means that a bank or lender has investigated your credit history and determined you are an eligible candidate for a mortgage.
- Pre-approvals might only be good for a certain amount of time
What is Loan Officer?
- Loan officers specialize in consumer, mortgage or commercial loans
- They are the liaison between the bank(institution) and the applicant of the loan
- The loan officer seeks to find an arrangement that is best for all parties in the transaction
- The loan officer overlooks all aspects of the loan application (income, credit, assets, debit- how likely can someone repay the debit)
Mortgage
A legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.
Pre-Qualified
- This is the first step in the house buying process.
- To be pre-approved for a mortgage means that a bank or lender has investigated your credit history and determined you are an eligible candidate for a mortgage.
- Pre-approvals might only be good for a certain amount of time
Pre-Approval
In order for your loan representative to submit your application for pre-approval, you must provide the following:
* Last two years’ tax returns and W-2s
* Thirty days of pay stubs
* sixty days of bank account statements
* signed authorization to order your credit report
In order for your loan representative to submit your application for pre-approval, you must provide the following:
* Last two years’ tax returns and W-2s
* Thirty days of pay stubs
* sixty days of bank account statements
* signed authorization to order your credit report
House Hunting Process
- Determine what you can afford
- Get the pre-qualified and pre-approval process complete
- Decide on what type of home you want
- Work with an agent and start researching homes
- Put in an offer for the home
Loan Application (1003)
- The most important form in the mortgage
lending business is the Uniform
Residential Loan Application (which is Freddie
Mac Form 65 and Fannie Mae Form 1003) - It is often referred to as a “1003”
The _______ is a term used by lenders to express the ratio of a loan to the value of a property that is purchased.
A: Lender To Value Ratio (LTV)
B: Loan To Value Ratio (LTV)
C: Term To Loan Value (TLV)
D: None Of The Above
B: Loan To Value Ratio (LTV)
Term & Loan
- A term loan is a monetary loan that is repaid in regular payments over a set period of time.
- Term loans usually last between one and ten years, but may last as long as 30 years in some cases.
- Repayment Period
Interest Rate
- This is how much you pay on top of the principle for the length of period of time.
- It is amortized over the length of the loan
Credit Report
- A credit history is a record of a borrower’s responsible repayment of debts.
- A credit report is a record of the borrower’s credit history from a number of various sources such as banks, credit
card companies, and governments. - “Snap shot of the whole history of the barrower”
Different Types of Credit Bureaus
1) Transunion
2) Equifax
3) Experian
Income
- Income is money that is received from work (wage or salary), capital (profit/interest) or land (renting a property)
- There are many sources of income
- When going through the loan application, the underwriter will evaluate the type of income (hourly, salaried, commission, or self-employed), history of income. They
want to see stability with your income
Assets
- Useful or valuable objects
- Property owned by a person or company
- Military equipment, planes, shops, estates, * There are different types forms of assets: cash, prepaid expenses, inventory, various belongings, and properties
Debt to Income Ratio
To determine your Debt to Income ratio (DTI), it’s a simple
step:
* Take your total debt figure and divide it by your income * 5000 month a salary- and your debits are $2500 (rent payment, car loan, student loans, credit card payments)
* In this case your DTI is 50%
Appraised Value of Property
- It is an evaluation of a property’s value based on a given point in time.
- The evaluation is performed by a professional appraiser
- This takes place during the mortgage origination process.
- The appraiser is usually selected by the lender
- The fees for the appraiser is paid for by the borrower
Loan to value ratio
- Every loan program has different requirements
- The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.
- The term is commonly used by banks to represent the ratio of the first mortgage line as a percentage of the total appraised value of real property
The _____ determines whether applicants are able and likely to repay a debt. They evaluate the loan application and ensures all requirements are fulfilled.
A: Credit Analyst
B: Underwriter
C: Listing Agent
D: None Of The Above
B: Underwriter
Underwriter
What is an underwriter?
* Underwriter is an imperative person in the transaction
* Loan officer, Processor and underwriter are the three individuals who review the loan
* The underwriter is there to protect the interest of the lender and to ensure that all documentation is compiled correctly and that all documents follow the guidelines (criteria)
Fannie Mae (FNMA)
What is their role?
* Fannie Mae is created a liquid secondary mortgage market and thereby made it possible for banks and other loan originators to issue more housing loans, primarily by buying Federal Housing Administration (FHA) insured mortgages
Desktop Underwriter
Automated underwriting system
Freddie Mac
- They make the rules of conventional lending
Lets review the loan officer’s role
- Remember to tell you client, that the loan officer is their friend
- Always complete the application process in a timely fashion and provide all the required documentations
- Always get the pre-approval process done prior to house hunting
Why is a pre-approval so valuable?
A: Lender Has Checked Your Credit And Verified Your Documentation To Approve The Loan Amount
B: Lender Has ONLY Checked Your Credit
C: Lender Has Checked Your Spending History
D: None Of The Above
A: Lender Has Checked Your Credit And Verified Your Documentation To Approve The Loan Amount
What is the pre-approved process?
Lets Review!
- Its always smart to get your pre-approval process before
you start house shopping - Meet with a loan officer and start the application process
- Complete the online application * For Mortgages: you need to have a two year salary
history, two year address history, and good credit
Pre-Approval Process
- Always provide supporting documentation
- The loan officer will look for your gross monthly income
- Discuss the loan terms and loan programs with the loan officer
What is mortgage insurance?
The mortgage insurance will cover the lender Essentially if you default on your payment, the lender forecloses on the property, the mortgage insurance will cover the lender for any loss they may encounter Always encourage your clients to seek professional advice
in regards to what they need (mortgages, taxes, etc.)
Lets review the loan officer’s role
- Remember to tell you client, that the loan officer is their friend
- Always complete the application process in a timely fashion and provide all the required documentations
- Always get the pre-approval process done prior to house hunting
Interest Rate
- This is how much you pay on top of the principle for the length of period of time.
- It is amortized over the length of the loan
The Automated underwriting program for Fannie Mae is called:
A: Desktop Underwriter
B: Ginnie Mae
C: Loan Prospector
D: LTV
A: Desktop Underwriter
An impound account is an account where which of the following are collected?
A: Mortgage Insurance And Property Taxes
B: Property Taxes And Utilities
C: Hazard Insurance And PMI
D: Property Taxes And Hazard Insurance
D: Property Taxes And Hazard Insurance
Mortgage insurance benefits the
A: Buyer
B: Seller
C: Mortgage Lien Holder
D: Title Insurance Company
C: Mortgage Lien Holder
Mortgage insurance is usually required by the lender when the buyer has less than ____ equity in their property
A: 10%
B: 15%
C: 20%
D: 25%
C: 20%
The “Front End Ratio”
A: Compares The Proposed Housing Payment To The Borrower’s Gross Income
B: Compares The Proposed Housing Expense To The Borrower’s Net Income
C: Compares The Loan To Value Ratio And The Back End Ratio
D: Compares The Equity To The PITI
A: Compares The Proposed Housing Payment To The Borrower’s Gross Income
The “Loan to Value Ratio” is calculated by
A: Dividing The Loan Amount By The Value Of The Property
B: Dividing The Value Of The Property By The Loan Amount
C: Dividing The Front End Ratio By The Back End Ratio
D: Dividing The Total Monthly Debt By The Proposed Housing Debt
A: Dividing The Loan Amount By The Value Of The Property
The three credit bureaus are
A: Equifax, Experian, Trans Union
B: Equifax, Experian, Credit Sense
C: Experian, Transunion, Credit Sense
D: Equifax, Transunion, Credit Sense
A: Equifax, Experian, Trans Union
A buyer should expect to provide which of the following documents when applying for a mortgage
A: Tax Returns
B: Bank Statements
C: W-2s
D: All Of The Above
D: All Of The Above
Another name for a mortgage is a(n)
A: Encumbrance
B: Lien
C: Pledge Of Real Estate As Security For Payment Of A Debt
D: All Of The Above
D: All Of The Above
The best time for a buyer to apply for a mortgage is:
A: Before They Ever Go Looking At A Property
B: After They Find The House They Want To Buy
C: After They Are Under Contract For The Hours They Want To Buy
D: Anytime Before Financing And Appraisal Deadline
A: Before They Ever Go Looking At A Property
