CHAPTER FOUR FINANCING STEPS Flashcards
___ approval - A step above pre-qualification, an evaluation of a potential borrower by a
lender that determines whether the borrower qualifies for a loan from the lender, or the
maximum amount that the lender would be willing to lend.
Pre-Approval
____ qualification- A process whereby a loan officer takes information from a borrower
and makes a tentative assessment of how much the lending institution is willing to lend
them.
Pre-Qualification -
___ ____- is one of
the first indications you have that the home buyer is serious about the purchase. It also means
there’s a lender that is most likely willing to help them through the process.
Pre-qualification
pre qualification letter is the place to start.
___ ___ letters - don’t hold much weight because the lender has only used
very basic information about the buyer to calculate this information. Pre approvals do.
Pre-qualification
To obtain this letter, the home buyer must first fill out a formal mortgage application. The mortgage
application requires a great deal of information.
- The home buyer’s credit history is gathered. His or her tax returns, income statements, other
financial obligations, and other factors come into light right now. Some lenders talk to references
Pre-approval letter
The final step in the process is to get ___ commitment. This occurs when the bank issues a letter
to the home buyer that tells them that they are approving the application.
loan
___- An individual at a lending institution who determines credit worthiness in order to qualify an applicant for a loan.
Underwriter
___- The criteria with which a lender determines the credit worthiness in order to qualify them for the loan.
Underwriting
r. The ____ guarantees the payment to the buyer for the home and takes on
the financial risk of taking on that loan.
- Specifically, the underwriter is reviewing the capacity of the buyer, the credit of that buyer, and the
collateral itself
underwriter
First, the underwriter looks at the ____ of the borrower. Does this person have the financial
resources and the means to pay off any debts? To know this, they take a very close look at the
individual’s employment records. They look at income and debt. They look at all assets owned. The
debt-to-income ratio is considered - the percentage of the home buyer’s debt compared to
the amount of income he or she is bringing in. Generally, this will not exceed 30 percent
capacity
___ to ___ ratio- is considered - the percentage of the home buyer’s debt compared to
the amount of income he or she is bringing in. Generally, this will not exceed 30 percent
debt-to-income ratio
What does PITI stand for - what the lender looks at when looking at debt
Principal, Interest, Taxes, and Insurance
In the underwriting process, the underwriting then looks at ____.
debt to credit ratio should not be more than 43 percent
credit
underwriting process
And, there’s ____. Here, the underwriter must ensure that the value of the property being
purchased is high enough to cover the value of the loan. This is where some real estate agents may
find themselves facing concerns. If for some reason, the appraisal of the home doesn’t go well or
there are questions about condition, the underwriter can halt the buying process to inquire
collateral.
However, if the conditions of the loan have changed – or the borrower’s credit qualifications
have changed – the lender can make changes to the ___ rate. This can happen during the
underwriting process.
interest
