LENDER CHECKLIST
Your lender will require you to provide a multitude of documentation in order to make lending decisions. This checklist will help you prepare for your loan application and enable the lender to process your file efficiently.
At time of loan application lender requires you to pay for a credit report. Appraisal fee shall be collected at the time it is ordered.
QUESTIONS & ANSWERS
What information should I receive from my lender?
A Good Faith Estimate of the settlement (or closing) costs of your loan.
This is the lender’s best estimate of the settlement costs, based on the information available to the lender when you apply for the loan. If any of the costs are uncertain at the time, the lender will indicate which ones are estimates. The settlement form lists all the services provided and fees charged in connection with your loan. This information is required to be provided by the Real Estate Settlement Procedures Act of 1974 (RESPA).
The Annual Percentage Rate (APR) that you will pay on the loan.
The APR shows the cost of your mortgage loan as a yearly rate. This rate is usually higher than the rate stated in your mortgage or deed or trust note because the APR includes up-front fees (such as points) as well as interest. The APR is intended to show you the true cost of your loan. When comparing one loan to another, be sure to compare APR’s to get a true picture of what each one will cost you.
Your lender will provide you a Truth-in-Lending statement that shows these itmes in addition to the APR:
· The finance charge (Don’t be surprised: the total 30-year finance charge will probably exceed the price of your house! Buy by the time you finish paying the loan, the amount wouldn’t seem nearly so big)
· Schedule of payments
· Late payment charges
This information is required by the Truth-in-Lending Act
The department of Housing and Urban Development publishes a brochure called “A HUD guide for Home Buyers—Settlement Costs.”. When you apply for a mortgage loan, your lender will give you a copy. If you haven’t yet applied for a loan, you may request brochure from any mortgage lender for HUD.
ADJUSTABLE RATE MORTGAGE ARM A mortgage for which the interest rate and the payments change during the life of the loan.
AMORTIZATION A gradual repayment of a mortgage by periodic installments.
ANNUAL PERCENTAGE RATE APR The total cost of credit expressed as a yearly rate. It reflects all of your mortgage loan financing costs, including interest paid up front as points and interest paid over the life of the loan.
APPRAISAL An analysis done by a qualified appraiser that puts a dollar value on a property based on a number of considerations, including the condition, location and size of the property.
ASSUMABLE LOAN A loan that can be picked up by a subsequent buyer for a small assumption fee. It saves thousands of dollars in closing costs and loan origination fees. Conventional loans that are assumable usually require a new application.
CLOSING OR SETTLEMENT The conclusion of a transaction, including the delivery of a deed, financial adjustments, signing of the note and the disbursement of funds, which allows for transfer of ownership.
CLOSING COSTS Costs in addition to the price of a house, usually including mortgage origination fee, title search and insurance, recording fees and prepayable payments collected in advance and held in an escrow account. Be sure your purchase contract clearly states who will pay these costs -- the buyer or the seller.
COMMITMENT A written promise of a lender to a borrower to make a mortgage loan, on a specific property, under stated terms and conditions. The terms of the commitment most important to borrowers are the interest rate on the loan and expiration date of the commitment.
CONVENTIONAL LOAN Fixed-rate or adjustable-rate mortgage that is not guaranteed by a government agency. If you are applying for a conventional loan and your downpayment is less than 20 percent of the purchase price, mortgage insurance is required. The lender will obtain mortgage insurance for you. Mortgage insurance protects lenders against default by borrowers.
CREDIT REPORT Lists the credit history of a borrower on current and previous credit obligations.
DEED A written document transferring ownership of property from seller to buyer.
DOWN PAYMENT A specified percentage of a home's value paid at closing. Usually a down payment is 5 to 25 percent of the house price. Private mortgage insurance is required at amounts less than 20 percent.
EARNEST MONEY Deposit money given to the seller by the potential buyer to show that he is serious about buying the house. If the deal goes through, the earnest money is usually applied to the down payment. If the deal does not go through, it may be forfeited.
ENCUMBRANCE A legal interest in a property that affects or limits the sale or transfer of property. Examples of encumbrances are mortgages, leases, easements, judgments, and liens.
EQUITY The homeowner’s net ownership of his home, determined by subtracting the amount of the principal owed on the mortgage loan from the home’s market value.
ESCROW PAYMENTS The portion of a mortgagor’s monthly payments held by the lender in an escrow account to pay for taxes, hazard insurance, mortgage insurance and other monthly payments as they become due.
FHA MORTGAGES Loans made by private lenders, which are insured by the Federal Housing Administrations
(FHA).
Good-Faith Estimate A preliminary accounting of expected closing costs.
HAZARD INSURANCE Protects homeowners against damage caused to a property by fire, wind, or other common hazards. It is required by the lender up to the amount of the mortgage to protect the lender’s security interest in the property. Additional coverage on the property can be purchased by the borrower.
LIEN A legal claim on property as security for a debt.
LOAN-TO-VALUE RATIO … LTV The relationship between the amount of your mortgage to the appraised value of your property, the security. For example, if you have a $60,000 mortgage on property valued at $80,000, your LTV is 75% ($60,000 divided by $80,000 = 75%).
LOCK-IN When the borrower informs the lender that he/she wished to lock-in a guaranteed interest rate and points for a specified time period. To keep the lock-in price, the loan must close or settle by the end of the lock-in period. Be sure you fully understand the terms and conditions under which you lock-in your guaranteed interest rate and points.
MORTGAGE INSURANCE An insurance, paid for by the mortgagor, which protects a lender against default. If the loan-to-value ratio is grater than 80% (or in some cases less than 80%) on conventional loans, lenders will require mortgage insurance issued by an independent mortgage insurer. Mortgage insurance protects the lender’s security interest in a property if the borrower defaults on the loan. Mortgage insurance for FHA mortgages is known as the Mortgage Insurance Premium, or MIP. MIP is required on all FHA mortgages regardless of the loan-to-value ration. Mortgage insurance should not be confused with mortgage life insurance, which pays off a mortgage loan in the event of the borrower’s death.
MORTGAGE NOTE Defines the terms of repayment of the debt secured by the mortgage.
TRUTH-IN-LENDING STATEMENT The main purpose of this is to ensure that borrowers are given meaningful information with respect to the cost of loan, etc.
