Mortgage Origination Chapter 4
Terms
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- All mortgage plans can be divided into these two major categories
-
Conventional
Insured Government Loans - This is any loan not insured by the government
- Conventional loan
- What are the two subcategories of conventional loans?
- conforming and nonconforming
- what is necessary for a conventional loan to be conforming?
- it must follow the guidelines of FANNIE Mae and Freddie MAC
- what is the debt to income ratio for a conforming mortgage?
- 28/36
- what is the minimum investment and amount in reserves for most conforming loans with a LTV greater than 80%?
- at least 5% investment and 2 months reserve PITI
- on loans below 80% LTV the entire down payment may be this...
- a gift
- sellers contribution is based on what?
- sales price or appraised value whichever is less not the mortgage amount
- when a seller pays closing costs this is known as...
- seller contribution
- what is the minimum credit score for a conforming loan?
- 620
- how do most lenders determine credit score?
- by using the middle of the three scores or the lower of two.
- Fannie Mae requires how many years to elapse from the discharge date of a chapter 7,11 or 12 bankruptcy?
- four (4) years
- For a borrower with a two-year-old bankruptcy, foreclosure or deed-in-lieu exceptions will be made if the borrower can provide this
- verification of extenuating circumstances
- is prepayment allowed on a conforming second mortgage?
- no
- on a conforming second mortgage the paymnets must not balloon in less than how many years
- 5 years
- if the borrower uses a non occupying co-borrower on a conforming loan the LTV will be limited to what percent?
- 90%
- What is a subprime mortgage?
- less than perfect credit
- what is a jumbo loan?
- a loan that exceeds FNMA and FHLMC loan limits
- What is an Alt-A loan?
- generally stated income loans or ARMs with a credit score of 640 or above
- What is the minimum credit score on a subprime loan?
- 500
- what is the maximum allowable range for subprime debt-to-income ratios?
- 50-55%
- what is reviewed in a subprime loan to determine credit grade?
- 12 month mortgage history
- if a borrower just went through a bankruptcy or foreclosure do they qualify for a subprime loan?
- yes. usually with a 70% LTV
- why do Government-insured loans help lower the costs of mortgages
- so more people can afford to own their own homes
- name the three government agencies that insure mortgages
-
FHA
VA
RHS (Rural Housing Service) - What is another advantage of a FHA loan?
- it is assumable. there is only a $500 buyer qualification fee.
- how much must a borrower invest in a FHA transaction?
- at least 3%
- What is the greatest disadvantage of a FHA loan?
- the MIP
- how much is the up front MIP on a FHA loan amount?
- 1.5%
- When will MMI payments automatically be canceled?
- when the balance reaches 78% of the original purchase price
- are miscellaneous fees (application, doc prep. etc.) charged to a borrower an a FHA transaction?
- no. if the lender does charge it must be to the seller at closing.
- what is the maximum seller contribution in a FHA transaction?
- 6%
- When paying off a FHA loan why is it important to schedule closing towards the end of the month?
- because FHA has the right to collect interest on a loan until the end of the month regardless of payoff date
- if a borrower does not have at least two trade lines in an FHA loan this may be used
- Alternative forms of credit