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Home Mortgages. Qualifications and the Home Mortgage Process By: Andrew Hunt. Learning Objectives. Understand the consumer mortgage process Know what lenders offer mortgages Know how a lender evaluates the applicants themselves Know what private and public mortgage insurance is - PowerPoint PPT Presentation

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Home MortgagesQualifications and the Home Mortgage ProcessBy: Andrew HuntUnderstand the consumer mortgage processKnow what lenders offer mortgagesKnow how a lender evaluates the applicants themselvesKnow what private and public mortgage insurance isBe aware of some mortgage scamsLearning ObjectivesDetails on mortgage types and optionsThe secondary mortgage market (the business side of mortgages)The subprime mortgage marketWhat we wont cover

Home Mortgage Process Selecting a LenderThree general types of mortgage originatorsPortfolio loansMortgage BankersWholesale lenders operating through brokerLarge institutions may originate more than one type of loanSize and reputation may mean more than the lowest rate

Selecting a Lender -Home Mortgage Process Getting Pre-ApprovalPre-Qualification vs Pre-ApprovalKnow your FICO scoreFICO ramifications of pre approvalLender determines maximum they would lendSignals to sellers that youre seriousCan save time during closing

Getting Pre ApprovalInformation required for pre approvalRelevant financial and work informationIncome ItemsAsset ItemsCredit Items

Details can be found @

Getting Pre Approvalhttp://www.realestateabc.com/loanguide/things2.htmHome Mortgage Process Picking the HouseHome Mortgage Process Getting QuotesSimpler process with pre approval

Still room for negotiation and more details to cover

Lender can still refuse to make a loan even if buyer has a pre approval letterGetting QuotesSimple ratios used to determine mortgage amounts as percent of incomeNo more than 28% of income on monthly house paymentNo more than 36% of income on all recurring debt paymentsFHA limits are 31/4328/36 Ratios becoming common again after housing bubble burst

28/36 RatiosSimple ratio of loan value to the assessed value of the collateralBasically a measure of risk in the event of foreclosureFactors involved include the down payment and mortgage insuranceLoan to Value (LTV) RatioCompensates the lender in the event of loss due to defaultApplies when down payment < 20%Public and Private mortgage insuranceMortgage Insurance

Public Mortgage Insurance from the Federal Housing CommissionLasts for the life of the loanHigher in cost than private insuranceEligible with poor credit historyMortgage Insurance - Public

Private Mortgage InsuranceMust qualifyCan be canceled as equity is built thanks to Homeowner protection act of 1998Lower in cost than public insurance

Mortgage Insurance - Private

Home Mortgage Process Lender ApprovalCommitment Letter Commits lender to make the loanApplicant can still back outCommitment only lasts for a specified period of timeFine print and rules changes may invalidate offersLender ApprovalLock in lossGet signed paperworkLosing paperwork to delay the processTalk to a supervisorComplain to state regulatorsConsider talking to an attorneyRate too good to be trueMay be high hidden fees or a teaser rate that doesnt lastMortgage broker paid twiceReview paperwork carefullyScams in MortgagesDeal with reputable and stable lendersAsk friends and local realtorsKeep an eye on your credit scoreGet paperwork in on timeKnow the market in your areaShop aroundPrepare a detailed financial biographyLenders will tell you the specific documents they requireHave enough cash to cover closing fees

Suggestions for a Smooth MortgageConsider a $100,000 loan at 5%

The Cost of a Mortgage30 year Loan15 year Loan10 year LoanTotal InterestMonthly Payment$93,255.78$42,342.85$27,278.62$536.82$790.79$1,060.66Shortening the period reduces the rateGeneral process of home mortgagesTypes of lendersMetrics that lenders use to judge applicantsTypes of insurance and the necessity of itBasic mortgage scamsCosts of a mortgage

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