The Mortgage Process Flashcards
Uniform Residential Loan Application
1003; the loan application for a residential m ortgage
Uniform Underwriting and Transmittal Summary
1008; contains a summary of the loan including, among other things, borrower info, LTV ratio, credit score, appraised value and loan type
3 appraisal approaches
cost approach, income approach, market approach
cost approach
based upon the cost that would be necessary to rebuild the property; often used on new construction, special use properties and other properties difficult to appraise with other methods
cost to replace or reproduce the improvements minus the depreciated value
income approach
typically used on rental and investment properties; valuates property based on income the borrower will receive and the rate of return
market approach
also sales comparison approach; compares subject property with sales date for comparable properties in the same area to establish value; preferred and most common way to valuate single family res properties; compares subject property with comparable properties and makes adjustments for differences between properties
predominant value
the most common sales price in a specific area
1040
tax returns
IRS form 2106
non-reimbursed business expenses
acceptable sources of down payment
- savings and checking
- liquid investment accts
- gifts from relatives/domestic partners
- grants from nonprofit orgs
- bonuses
- secured loans
- sale of personal property
- trade equity
unacceptable sources for down payments
- unsecured loans
- credit cards
- undocumented cash on hand
- gifts from the seller
title insurance
protects owner of the property against ownership disputes, covenant issues or undetected liens or encumbrances on the property
lien
claim on the title which usually must be paid at closing
encumbrance
claim or liability on the title to a property, such as a lien or a mortgage
deed of trust/mortgage
both used to secure a note and may carry a rider or an addendum
contain:
-a due-on-sale clause which requies the loan be paid off if the property is sold
*if loan is assumbale, new borrowers must qualify with the lender and the sue-on-sale clause would be excluded
-a property description
-loan amt
-borrower’s name
-order in which payments will be applied
*interest
*principal
*escrow acct
*late charges
-a defeasance clause which provides for the release of the lien when the borrower repays the debt
promissory note
- borrower’s name
- loan amt
- interest rate
- loan terms
- a provision requiring notices in writing
ways a title may be held
joint tenancy or tenancy in common
joint tenancy
allows for the property to automatically transfer to the surviving owners upon the death of one and provides for undivided ownership by 2 or more parties if one person transfers interest, the joint tenancy is severed and the ownership becomes tenancy in common
tenancy in common
`allows for disproportionate ownership. an owner’s share in the property may pass to his or her heirs. if ownership is not specified in the deed, it is assumed to be equal am ong all of the owners
FEMA
Federal Emergency Management Agency
LTV
Loan amount / lesser of purchase price or appraised value
Front-End Ratio:
PITI / gross monthly income
Back-End Ratio
(PITI + all monthly obligations) / gross monthly income
Interest-only payments
[Loan amount x interest rate (as a percentage)] / 12
Daily interest
[Loan amount x interest rate (as a percentage)] / 365
Mortgage insurance payment:
[Loan amount x MI factor (as a percentage)] / 12
Tax payment
[annual taxes OR (assessed value x tax rate)] / 12
Insurance payment:
Annual premium / 12
Monthly income, paid weekly:
[Weekly income x 52] / 12
Monthly income, paid bi-weekly:
[Bi-weekly income x 26] / 12
Monthly income, paid hourly:
[Hourly rate x number of hours worked per week x 52] / 12
