Home Loan Evaluation
Take advantage of 25 years mortgage loan experience. Let us use our expertise to evaluate
your loan request then locate and structure the proper loan that meets your objectives.
Each customer's specific loan request is evaluated based on the individual loan characteristics.
These loan characteristics include the following items.
Income Source
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Income Documentation
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Income History
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Credit History
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Property
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Purpose of Loan
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Assets
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Liabilities
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Income/Debt Ratios
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Prepayment Penalty
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Loan Assumability
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Loan Amount
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Weakness in one area may be over come with other compensating factors in another area. Each one of the above loan characteristic singularly or together with other factor may impact the availability of a loan program. This is why it is so important to evaluate the loan request initially to ensure eligibility and selection of the appropriate loan program. The Consumer Financial Protection Bureau's ability-to-repay (ATR) and qualified mortgages requirements(QM) regulations may impact loan program eligibility requirements. Non-QM loan programs may be available.
Income Source: salaried, commissioned, self-employed, or retired, investments.
Income Documentation: Full Doc - W-2s, Income Tax Returns, pension payments, bank statements (personal and/or business), verified assets (mutual funds, security investment statements, savings Certificate of Deposits). Income stated/quick qualifier or reduced doc loan programs, income not verified /or verified by bank statement cash flow or by verification of deposit, are limited to private lenders in the current mortgage market.
Income History: the longer the income stream has been established, regular and recurring, the greater the likelihood the income will continue from the lender perspective. Changes in the employment, industry, type of income, occupation changes, employment status, salaried or self-employed are all factors to consider when determining the proper loan program.
Credit History: Individual Borrower Credit Scores are used by lenders to help determine credit risk. The credit scores are generated by computer programs used by the three main credit reporting repository companies. Each credit repository uses their own credit score name as follows: FICO - (Experion formerly TRW); Beacon - Equifax; Empirica -TransUnion. The higher the numeric credit scores the less chance of credit risk from the lender perspective. The credit score together with the past and present credit history is evaluated based on the amount, type, frequency of credit use, and any derogatory items to determine the appropriate loan program. Credit deficiencies such as delinquencies, collections, judgments, charge-off, liens, bankruptcies or foreclosures all need to be considered when evaluating the appropriate loan program.
Property: the type of property may impact the loan program available. (Single family residence, condominium, Planned Unit Development, Multifamily units, investment, seconds home). For purchase transactions loan-to-value is defined as the purchase price or appraised value whichever is less in relationship to the loan amount. For refinance transactions loan-to-value is appraised value if property has been owned for one year or more otherwise it the original purchase price in relationship to the loan amount. The lower the loan-to-value the more equity or cash the borrower has in the property the lower the loan risk from a lender/investor perspective.
Purpose of Loan: Purchase, refinance, cash out, construction, home improvement. Common reasons for a new loan are to lower the interest rate, lower monthly payment amount, changing loan program from adjustable to fixed interest rate or to pull cash out from the equity in the property. First time home buyers loan programs may require special borrower and property eligibility requirements. The loan transaction is considered cash out if funds were received above the previous loan amount within one year or if a second trust deed was obtained or an equity line draw was used within the past year.
Assets: The greater the assets accumulated demonstrated the ability to save and provides reserves
in the event income is temporarily interrupted from the lender perspective. Bank accounts, mutual funds, stocks, bonds, IRA's, 401K's, employer retirement accounts, real estate, personal assets, business assets should be taken into consideration. The type of assets, minimum dollar reserves amount, liquidity, the length of time owned requirements might be different for each lender/investor.
Liabilities: The dollar amount, type of obligation, duration and payment experience demonstrates the borrowers past ability to repay and meet loan obligations. How the borrower has made payments in the past for housing, installment, and revolving debts is the best indication of how the borrower will make payments in the future from the lender/investor perspective.
Payment of obligations on installment loans of 10 months or more generally do not need to be calculated when determining the monthly debt obligations. Paying off debts to qualify may be permitted depending of the specific lender/investor requirements. When installment debts are paid off generally no minimum payment is used after payoff. When revolving debts are paid off or have 10 payments or less, a minimum of $10.00 or 5% of the outstanding balance which ever is greater is generally used in the monthly liability payments to calculate the debt to income ratio.
Income/Debt ratios: Most lenders/investors consider debt to income ratios when evaluating a loan. Two ratios are used the Housing Expense ratio and the Total Expense or Debt to Income Ratio. The Housing Expense ratio includes the following (monthly principal and interest payment, hazard insurance, real estate taxes, and mortgage insurance and/or homeowners association dues if applicable). The Total Expense ratio includes all housing expenses and all debts and monthly obligations (revolving charges, installment debt, loans secured and unsecured, alimony and child support). The bench mark qualification ratios are approximately, Housing Ratio 35% and Total Expense Ratio 43%. Ratios can be higher with compensation factors for most lenders/investors. Automated Underwriting Systems used by Fannie Mae, Freddie Mac and other private investors establish maximum ratios accepted based on the total risk assessment decision.
Prepayment penalty: Its important to determine if a prepayment penalty is applicable in the loan transaction. If it is a refinance transaction, does your existing loan have a prepayment penalty if the loan is paid off? If you are not sure check the note for terms and conditions of any prepayment penalty. Prepayment penalties usually have a set time frame limit, are based on a percentage of outstanding principal balance or a specific number of months interest or other condition, like if property is sold the penalty is not charged. Lenders/investors may offer more attractive pricing if a prepayment penalty is placed on the new loan. Based on your loan objective a prepayment penalty may be an item to consider. For example 3,2,1 percent penalty for 3 years but no prepayment penalty if the property is sold.
Loan Assumability: If a loan is assumable, the property can be sold to a new person and the existing loan on the property assumed based on the same terms and conditions which may be based upon credit evaluation and approval of the lender. If the interest rate is attractive it may be financial advantageous to assume the first and obtain only secondary financing. If the loan is not assumable, when the property is sold the purchaser must obtain a new loan or pay off the existing loan on the property. Most fixed rate loans are not assumable.
Loan Amount: Conforming loan amounts are the most common loan amount which are used by Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae). The maximum conforming loan amount is currently $510,400. The current jumbo conforming loan amount is $765,600 for Los Angeles and Orange Counties. Each County in California has its own loan limit. Non-conforming/Jumbo loans are loan amounts above the conforming loans.The non-conforming/jumbo loans are placed at Banks, Savings and Loans, lenders, investors, national secondary mortgage markets companies and financial mortgage securities companies. Super Jumbo loans are loans over $650,000.00 to $4,000,000.00. The loan source for the Super Jumbo loan are major financial institutions with large capitalization and can be held in loan portfolio or sold into the secondary mortgage market.
Copyright © 1998 Newport Center Mortgage
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