Chapter 22 - The Mortgage Lending Process

Question 1

Assets

Answer 1

Items that are of value to the owner. Assets that are liquid, such as cash, stocks, or bonds, can be converted to cash quickly.

Question 2

Bankruptcy

Answer 2

A court process that cancels debt and provides some relief for creditors; chapter 7, sometimes called a straight bankruptcy, it is a liquidation proceeding; chapter 13, sometimes called a reoganization proceeding, is filed by individuals who want to pay off their debts over a period of three to five years

Question 3

Broker Price Opinion (BPO)

Answer 3

The estimated value of a property as determined by a real estate broker or other qualified individual or firm

Question 4

Credit History

Answer 4

A record of debt repayment, detailing how a person paid credit accounts in the past as a guide to whether he or she is likely to pay accounts on time and as agreed in the future.

Question 5

Credit Scoring

Answer 5

An objective means of determining creditworthiness of potential borrowers based on assigning specified numerical values to different aspects of a borrower.

Question 6

Debt-to-Income Ratio

Answer 6

The relationship of a borrower’s total monthly debt obligations, including housing and long-term debts with 10 or more payments, remaining, to income, expressed as a percentage (total Debt / Income = Ratio%)

Question 7

FICO Score

Answer 7

Credit scoring where a number from 300-850 is assigned to a consumer’s credit history. The lower the score the greater the risk of default. Generally, above 660 is an acceptable risk, 620-660 is a marginal risk, below 620 is a high risk. Another type of credit score is a BEACON score.

Question 8

Float

Answer 8

An unlocked interest rate that could change between the time of application and closing

Question 9

Good Faith Estimate (GFE)

Answer 9

The mortgage loan originator’s estimate of closing costs the borrower must pay for a real estate loan. The lender must give this to the borrower within three business days of completed loan application

Question 10

Housing Expense Ratio

Answer 10

The relationship of a borrower’s total monthly housing expense to income, expressed as a percentage (total Housing Expense / income = Ratio %

Question 11

Liabilities

Answer 11

Financial obligations or debt. Any money that is owed.

Question 12

PITI

Answer 12

Principal, Interest, Taxes and Insurance; a typical mortgage payment

Question 13

Point

Answer 13

One percent of the loan amount. Points are charged for any reason, but are often used for buydowns, where they may also be called discount points. Points are used to increase the lender’;s yield on a loan

Question 14

Pre-Approval

Answer 14

Process by which a lender determines if potential borrowers can be financed through the lender, and for what amount of money

Question 15

Pre-Qualification

Answer 15

The process of determining how much money a prospective homebuyer might be eligible to borrow; It is not guarantee.

Question 16

Rate Lock

Answer 16

A specific fixed interest rate for a specified amount of time that is guaranteed by the mortgage lender

Question 17

Reserves

Answer 17

Cash on deposit or other highly liquid assets a borrower must have in order to cover two nmonths of PITI mortgage payments, after they make the cash down payment and pays all closing costs

Question 18

Stable Income

Answer 18

Income expected to continue in the future

Question 19

Usury

Answer 19

The lending of money at excessive rates of interest