Freedom Mortgage - Study Prep

June 26

FHA Minimum Down payment

3.5% of the purchase price

FHA loan credit score requirements

1) Minimum credit score 580 to qualify for the lowest down payment option of 3.5%
2) Borrowers w/ credit scores between 500-579 may still qualify if they make a larger down payment of at least 10%

Unlimited Tolerances between Loan Estimate (LE) and Closing Disclosure (CD)?

According to the TRID Rule,

• Prepaid interest

• property insurance premiums

• impounds

• required services that the borrower is permitted to shop or, where the provider is different than the service provider list

• charges paid to third-party service providers for services not required

FHA Seller Concessions

Sellers can contribute up to 6% of the sale price Towards:

1. buyer’s closing cost

2. prepaid items

3. discount points

4. other costs normally paid by the buyer

FHA loan ratio requirements

Front-end DTI maximum 31%

Back-end DTI typically 43%

What is the mortgage loan life cycle? And what parts in the primary market

(Securitization) Application → processing → underwriting → closing → funding → servicing
primary market: Application, processing underwriting, closing

Minimum Property Standards (MPS)

Establish essential requirements to ensure properties with FHA loans are safe, sound, and secure

When must and ABA disclosure be provided to a borrower?

Must be given to consumers when they refer them to an affiliated company for settlement services or before under RESPA

What are the pieces of info for a completed URLA

(A)ddress (L)oan amount requested (I)ncome (E)stimated value of property (N)ame (S)ocial Security Number

What are the steps in the title process?

1. Order title search

2. Legal Review

3. Closing

4. Funding

5. Issue short -form policy

6. Recording

7. Issue long-form policy

What are the section of the URLA

Borrower information

Assets + liabilities

Real Estate

Property + loan information

Declaration

Acknowledgements

Military

Demographic - HMDA section

Originator information

THE LE must be delivered or placed in the mail no more than…

3 business days after receiving the application

What are the names/ Identifications for the Uniform Residential loan application?

URLA

Fannie Mae Form 1003

Freddie Mac Form 65

What are the different names of a ballon payment

Call

demand

bullet

What is a conversion option?

The option on an ARM that gives a borrower the opportunity to convert their loan to a fixed rate

Conditional refinance provision Qualifications

1. Must live in the house

2. no 2nd liens

3. loan must be current and not had only late payment in the last 12 months

4. documents must be signed, and fees paid

5. The new rate cannot >5% order the note

6. Must add to 30

VA high-cost area limit

up to $1,089,300

What amount do lenders typically extend loans (VA)

Lenders typically extend loans of up to 4x the available guaranty amounts without requiring a down payment

VA Loan Entitlement Amounts

Basic: $36,000

Bonus entitlement: up to $68,250 (varies by county)

What are VA funding Fees?

required instead of mortgage insurance

one-time fee paid directly to the Department of veteran Affairs

used to back VA loans in case of default

can be financed into the loan amount

percentage is determined by:

• type of service

• down payment (if any)

• whether is the 1st VA loan or subsequent use

Funding Fee Exemption

• Veterans receiving VA disability compensation (10% disabled or more)

• Purple heart recipients

Statement of Insurability (FHA Loans)

FHA loans are federally insured, an appraisal is required to confirm all the min. Property standards and requirements have been met. The comments section of the appraisal will include a “statement of insurability”

• Insurable (IN) - meets requirements, no major repairs

• Insurable with Escrow (IE) - insurable with repairs <$10,000

• uninsurable (UI) - need repairs > $10,000

What are the types of bankruptcy that need to be declared on a URLA?

• Chapter 7 - Liquidation

• Chapter 11 - Reorganization

• Chapter 12 - family farmers/ fishermen

• Chapter 13 - repayment plan

How long is the required advanced notice for a servicing transfer?

15 days advanced notice to borrowers

What form gives the lender permission to get copies of a prospective borrower’s transcript for income tax returns

IRS form 4506 - C

What are 0% tolerances from the LE to the CD?

According to TRID Rule,

• fees paid to land home or mortgage broker or an affiliate of either

• Required services that the borrower was not permitted to shop for

• Transfer taxes

VA minimum property standards + requirements

SAFE

SOUND

SANITARY

VA eligibility Requirements

• Active-duty service members who have served 90 consecutive days during wartime or 181 days during peacetime

• national guard and reserve members who died in the line of duty or from a service - connected disability

• Other qualifying individuals situations determined by the VA

What DTI does the VA require?

• No specific DTI ratio requirements

• uses a residual income test instead

• while many lenders use a 41% total DTI as a benchmark, higher ratios can be approved if the borrower:

  • meets residual income requirements

  • demonstrates satisfactory credit

  • shows stability of income

VA seller concessions

Can contribute:

• all of the buyers closing cost

• up to 4% of the purchase price in additional concessions

Limit applies to seller concessions which include

• Payment of the VA funding fee

• Prepaid closing costs

• payoff of buyers credit balances or judgments

• funds for temporary buydowns

Who publishes the URLA?

It is jointly published by Fannie Mae and Freddie Mac

What are the types of ownership status?

SOLD

PENDING

RETAINED

What are the intended occupancy types?

Primary

Secondary

Investment

Other

What are the conforming loan amounts (loan limits) for one - family properties?
(Bonus - 2,3,&4 Family properties)

$832,750 (most locations) x 1.5 = $1,249,125 (high cost area)

2) family $1,066,250, $1,599,375

3) family $1,288,800, $1,933,200

4) family $1,601,750, $2,402,625

What are the 4 types of mortgage that require counseling?

1) First-time Homebuyers

2) Negative amortization (i.e. interest only)

3) reverse mortgages

4) High cost mortgage

MIP Durations

FHA loans

1. Down payment less than 10% (aka LTV > 90%) : MIP Remains for the duration (life) of the loan

2. Down payment greater than or equal to 10% = MIP can be removed after 11 years

What is the Upfront mortgage insurance premium factor?

175 basis points AKA 1.75%

What are the 10% tolerance between the LE and CD?

According to TRID Rule,

-recording fees

-charges for services not paid to land home

-Third party charges where the provider is the same as the service provide list

What does the Government National Mortgage Association do? (GNMA)

Participates in the secondary mortgage market, guaranteeing securities based on pools of loans made under the federal government programs.

When must an LE be provided to borrowers

Within 3 business days of receiving a completed 6 pieces of info (ALIENS) mortgage application

What year did TRID Rule go into effect?

October 3rd 2015

What is the definition of self-employment?

Having ownership interest of 25% or more

USDA DTI ratio requirements

• HTI: 29%

• DTI: 41%

Gus may approve higher ratios

US DA Seller Concessions

6% of the sale price

USDA Credit score requirements

• Gus approved: 620 min

• Manually approved: 640 min

• Other (lower) can still qualify by providing alternative credit references

What is the USDA annual Fee %?

0.35% of the remaining loan balance

What types of insurance do USDA loans require?

• USDA loans require a guarantee fee in lieu of mortgage insurance

• This upfront fee is 1% of the loan amount

• Can be rolled into the loan balance rather than paid at closing

What is a purchase money second?

• “piggyback loan

• secondary mortgage

• simultaneous loan

*classes simultaneously with 1st mortgages, takes second lien position

eliminates need for PMI

What types of mortgage insurance do FHA loans require to protect lenders against default?

1. Upfront mortgage insurance premium
   - 1.75% of the base loan amount
   - Can be paid at closing OR financed into the loan

2. Annual mortgage Insurance premium (MIP) *Divide into monthly payments and added to regular mortgage payment
   - Ranges from 0.45% to 1.05% of the loan
   - Rate depends on the loan term, loan amount, and down payment

What are the 3 types of reverse mortgages?

Single purpose mortgage home equity conversion mortgage proprietary mortgages

Standard income qualifications for a salaried borrower applying for a conforming loan typically includes

Paystubs for the most recent 30-day period and w-2s for the most recent 2 years

What are the 4 type of payment options for a reverse mortgage

1. Line of credit

2. Term

3. Tenure

4. Lump sum payment

Age requirement for a reverse mortgage?

62 +

What are the 3 common indices for an ARM?

1. Secured overnight Financing Rate (SOFR)

2. Cost of Funds Index (Cofi)

3. Treasury Bill

What are the 3 types of ARMS?

1. Hybrid

2. Interest - only

3. Payment option

What is a title to a property vs. a deed

• Title to a property is a document that provides evidence of conveyance (like a receipt) - must be recorded in public records

• A deed, a written agreement transferring property from one person to another (like a birth certificate) - must be submitted to the courthouse for filing

Debts on Credit report included in DTI

• auto loans (>10 payments remaining

• car lease payments

• installment loans

• student loans

• credit cards

• store credit cards

• mortgages not being paid off

• timeshare loans

Income approach

• investment property

• property’s potential income and is primarily used for commercial, investment, and multi-unit properties

Cost approach

• construction

• some home improvements

• unique

adds land value, subtracts depreciation + properties with limited comparable sales

What monthly debts are NOT included in DTI

• Utility payments (gas, electric water)

• cell phone bills

• car insurance premiums

• monthly food expenses

• life insurance premiums

• childcare/ daycare costs (except VA)

• internet service

• cable/ tv service

Debts not on credit report included in DTI

• alimony payments

• child support obligations

• privacy held loans with documented terms