PITI Payment
=Principal+Interest+Taxes+Insurance+HOA Fee’s (If applicable)
Hourly GMI
=Hourly Rate x # hours worked x 52 / 12
Weekly GMI
Weekly Rate x 52 / 12
Bi-Weekly GMI
Rate of Pay x 26 / 12
Semi-Monthly GMI
Rate of Pay x 24 / 12
Annual GMI
Rate of Pay / 12
Down Payment
Appraised Value (or Purchase Price) x % Down or Appraised Value (or Purchase Price) - Loan Amount
Loan-to-Value (LTV)
A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased. The higher the LTV, the less cash a borrower is required to pay as down payment.
First Loan Amount / Value (Lowest Amount)
Combined Loan-to-Value (CLTV or TLTV)
All Lien Balances / Value (Lowest Amount)
High Combined Loan-to-Value (HCLTV)
Alternative: High Total Loan to Value (HTLTV)
Front-End DTI (Debt-to-Income)
Equation: (PITI Payment / GMI) x 100
A percentage comparing a borrower’s total monthly cost to purchase a house— mortgage principal and interest, insurance, and real estate taxes—to monthly income before deductions. Also known as “housing ratio.”
Back-End DTI (Debt-to-Income)
Equation: ((PITI+ Other Contractual Debts)/GMI) x 100
ratio that compares the total of all monthly debt payments (mortgage, real estate taxes and insurance, car loans, and other consumer loans) to gross monthly income.
Amortization
Periodic payment on a loan requiring payment of principal and interest to ensure complete repayment of the loan by the loan term.
Appraisal
Qualified appraiser giving an estimate of a properties fair market value based on recent sales of comparable homes in the area and the features of the property.
Annual Percentage Rate (APR)
Measurement of the cost of credit including interest and other charges expressed as a yearly rate.
Adjustable Rate Mortgage (ARM)
Mortgage loan that does not have a fixed interest rate. Will change based on index.
Closing
When parties involved in the transactions sign and indicate their commitment to the transaction.
Closing Costs
Change to close the mortgage loan. Costs include loan originator fee’s, discount points, appraisal fee’s, title insurance, legal fee’s, and prepayment of taxes and insurance.
4 C’s
Description: Ability to repay.
Capacity
Collateral
Credit
Capital
Define the 4 C’s
Capacity- (DTI) Your present and future ability to meet your payment obligations
Collateral- Property or other asset offered to secure loan
Credit- (Financial Character) How responsibly you have paid bills or debt in the past.
Capital- Value of your assets
What is needed to pull a clients credit report?
(SAND) SSN#, Address, Name, Date of Birth
Also Permissible Purpose
Name the 3 companies they pull a credit score from?
Experian, Transunion, and Equifax
What credit score you you use after you pulled the reports?
Middle Score
Loan Officer
A representative of a lending or
mortgage company who is responsible for soliciting
homebuyers, and qualifying and processing loans.
Also known as a “lender,” “loan representative,”
“account executive,” or “loan rep.”
Consumer Financial Protection Bureau (CFPB)
Created the HLTK and regulating authority for consumers financial protections. Put in place to empower clients to make informed decisions and protect clients.
Home Loan Toolkit (HLTK)
Created for clients purchasing a home so they are more informed of the process and can use I to determine affordability when purchasing a home. Informs the client of what to expect during the process of buying a home.
Purchase
This is a mortgage that allows you to buy your home. Usually a down payment is required, but not always.
Refinance
When the borrower replaces an existing loan or debt obligation with a new obligation under different terms.
What are the 2 types of Refinance? Explain each one
- Rate/Term- Lower rate and/or extend or shorten the term. Longer Term=Smaller payment, Shorter Term=Larger Payment.
- Cash Out- Take cash out of the equity in the home and it rolls into the new PITI payment.
Difference between Gross and Net:
Gross=Pre-Tax
Net=Post-Tax
List/Describe the Pay Documentation:
- Pay Stubs – Hourly and Salary
- W2s – Hourly and Salary
- 1099s—Independent Contractors
- Tax Returns – Self Employed and/or Commission
- Award Letters – Passive Income
- 4506-C – All Pay Classifications; amount is determined by the type. The 4506-T is a request form sent to the IRS requesting copies of past tax returns. Emphasize the importance.
- VOE – Verification Of Employment which is completed by our Vendor team
Capital Aka Cash/Assets: Must be T.A.N. Describe T.A.N.
Tracible
Accessible
Not a Liability/Loan
Reserve must be at least ______ times the PITI payment in an account at and after the closing
2
Equity
An owner’s financial interest in a property
Equation for Equity
= Home’s Value-Loan Balance
Collateral
Security in the form of property pledged for the payment of a loan.
Security Instrument
Document that pledges the collateral as security for repayment of a debt.
Closed end loans
Pay off date is known at the time of closing
Open end loans
We don’t know when the pay off date is at the time of closing
What do you need for a completed application?
Address of subject property Loan Amount Income Estimated Value Name SSN#
What does an completed application trigger?
Initial Disclosure
What is a conventional loan?
Not backed or insured by the government, Given out by private companies.
What is a non-conventional loan?
Backed by the government.
What are the 3 governmental programs?
VA- Veteran Affairs
USDA- : US Department of Agriculture
FHA-Federal Housing Administration
What one of the 3 governmental program requires Mortgage Insurance Premium (MIP)?
FHA
Fixed Rate Mortgages
Interest rate is fixed throughout the life of the loan. Principal & Interest stays same. Taxes and Insurance still may change, so therefore overall PITI could still change.
Adjustable-Rate Mortgages
Interest rate adjusts throughout the life of the loan. Lower rates than fixed rate loans initially.
ARM loans are made up of what interest rate?
Fully Indexed Rate
What’s the equation for Fully Indexed Rate?
Margin + Index
What is Margin?
The lowest point the rate can go. It is the lender’s profit. It stays the same throughout the life of the loan.
Index
Fluctuates based on the market.
Name 2 risky features:
Balloon Payment and Prepayment Penalty
What is a Balloon Payment?
A large payment on your mortgage at a specified time, at least 2 times the PITI
What is a Prepayment Penalty?
A fee charged for paying off your loan too early, so the lender doesn’t miss out on profit from interest.
What does 1 point equal?
1% of your loan balance
What are the 2 programs in conventional loans?
Conforming and non-conforming
Loan Estimate
Disclosure that gives clients an estimate of their loan costs
What does page 1 of the loan estimate contain?
stuff
What is a deed?
Deed is the documentation that shows real ownership
What does title mean?
Ownership of the house (Need deed to prove ownership)
What are the 3 things Closing Agents are in charge of?
- Executing legal documents
- Closes loan
- Handles money
Right to Rescind
Buyer can cancel loan only 3 business days after closing. Only applies to refinancing primary residence and reverse mortgages
How many pages makes up the loan estimate?
3
What does page 2 of the loan estimate contain?
sruff
