MLO Timeline Flashcards
(38 cards)
Credit Score
Calculated by using a person’s credit report to determine the likelihood of a loan being repaid on time. A lower score means a person is a higher risk, while a higher score means they are less risk.
Debt
An amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.
Capacity
The ability to make mortgage payments on time, depending on your assets and amount of monthly income after paying housing costs, debts and other obligations.
Liquid Asset
A cash asset or an asset that is easily converted into cash, such as stocks or bonds.
Security
Property pledged as collateral for a loan.
Checking Account
A deposit account held at a financial institution that allows withdrawals and deposits. A checking account differs from other bank account due to its allowance of numerous withdrawals and unlimited deposits, whereas savings accounts sometimes limit both.
Divorce
The legal dissolution or ending of a marriage.
Down Payment
The portion of a home’s purchase price that is paid in cash up-front and is not a part of the mortgage loan. This amount varies based on the loan type, but is determined by taking the difference of the sale price and the actual mortgage loan amount. A typical down payment is around 10%, but based on the lender’s credit may be anywhere from 0% to 20%.
Pre-Approval
Occurs when a lender commits to lend a fixed loan amount to a potential borrower based on a completed loan application, credit reports, debt, and savings, all financial documents and information must also be reviewed by an underwriter. The commitment remains as long as the borrower still meets the initial qualification requirements. A loan is not guaranteed, however, until the property passes inspections and meets underwriting guidelines.
Credit Report
A report generated by the credit bureau that contains the borrower’s credit history. Most public items stay on the report for seven years, while other items stay longer, for example, bankruptcies stay for 10 years. Lenders use this information to determine if a loan will be granted.
“Intent to Proceed”
It is a disclosure that a borrower must sign in order to continue the pre-approval process. After this is signed the MLO can release a pre-approval letter to the borrower. You are agreeing to the loan terms and conditions and plan to moving forward with the loan if everything gets approved.
Asking Price
The price a home is listed on the market by the seller.
Credit Card
A card issued by a financial company given the holder an option to borrow funds, usually at a point of sale. Credit cards charge interest and are primarily used for short-term lending.
Gross Income
Money earned before taxes and other deductions. This may include income from self-employment, rental property, alimony, child support, public assistance payments, and retirement benefits.
Principal
The amount of money borrowed to buy a house or the amount of the loan that has not been paid back to the lender. Principal does not include the interest charged to borrow that money. The principal balance is the amount owed on a loan at any given time. It equals the original loan amount minus all repayments made on principal.
Interest
A fee charged for borrowed money.
Property Tax
A tax charged by local government and used to fund municipal services, such as schools, police, or street maintenance. Local governments use a formula, usually based on a percent per $1000 of the assessed value of a property, to determine the tax amount.
Insurance
Protection against a specific loss, such as fire and wind, over a specified period of time. This is secured by the payment of a regularly scheduled premium.
Homeowners Insurace
An insurance policy that protects a dwelling and its contents against damage. It covers fire, storms, or other damages with protection against claims of negligence or inappropriate action that result in someone’s injury or property damage. Most lenders require homeowners insurance and may escrow the cost. Flood insurance is generally not included in standard policies and must be purchased separately. Homeowners insurance may be used interchangeably with the term “hazard insurance”.
Disclosures
The release of relevant information about a property that may influence the final sale, especially if it represents defects or problems. The information is also relative to the terms of the credit extended by the lender. “Full disclosure” usually refer to the responsibility of the seller to voluntarily provide all known information about the property. Some disclosures may be required by law, such as the federal requirement to warn of potential lead-based paint hazards in pre-1978 housing. A seller found to have knowingly lies about a defect might face legal penalties.
Loan Estimate
A disclosure that helps applicants of forward closed end mortgages comprehend the expense, risk and characteristic of the specified loan for which they are applying.
Offer
A potential buyer’s indication of his willingness to purchase a home at a specified price; it is generally expressed in writing.
Contract
A written or spoken agreement between two or more parties. A mortgage is an example.
Underwriting
The process of analyzing a loan application to determine the amount of risk involved in making the loan. It includes a review of the potential borrower’s credit history and a judgement of the property value.
