Archive for September, 2013

Essentials of Mortgage Loan

Mortgage Loan Facts

Secondary Market Activities

Loans made by mortgage bankers are customarily resold to other lenders and investors in the resale market known as the secondary market. Mortgage loan bankers are engaged in the primary mortgage market when making the loan and in the secondary mortgage market in the sale of the loan.

Many of the loans made by mortgage bankers are made for particular investors such as other lenders and pension plans. They will make the loans to meet the lending criteria desired by this particular investor. Much of their activities deal with out-of-state lenders and investors who desire to make long-term loans secured by California real estate. Because of the size of our real estate market, California mortgage bankers can assemble packages of trust deeds of significant value.

Types of Property

Most mortgage bankers deal primarily in residential property, the majority of which is single-family dwellings. However, some mortgage bankers handle a variety of property and might specialize in large commercial or industrial loans. They work with lenders who desire the highest interest possible from this type of loan.

Portfolio Loans

Portfolio loans are loans held by a lender as an investment. It is rare for a mortgage banker to tie up capital in a portfolio of loans. Lending is a capital intensive activity that requires a great deal of capital or the availability of such capital.

Servicing Loans

Mortgage bankers generally want to service the loans they make and resell. Servicing loans doing the accounting necessary for a loan. The one-quarter percent to one-half percent service fee can be a significant profit center for the mortgage banker when thousands of loans are serviced.

With today's computer-servicing programs, servicing loans is no longer the labor-intensive activity that it was just two decades ago. Errors in computations have been virtually eliminated.
An advantage of servicing the loans is the control of impound accounts for taxes and insurance when it is collected in advance with loan payments. These funds, when deposited in a bank give a mortgage banker tremendous clout when they are borrowers from banks holding such funds. They are able to borrow funds at extremely attractive interest rates.
Speculating

Mortgage bankers, like commercial bankers, speculate on interest rates, if a mortgage banker believes that interest rates will rise, the mortgage banker will want to resell loans in the shortest possible time. Should rates rise, the value of loans held at below-market rates of interest will fall. Such loans will have to be sold at a discount from face value unless the mortgage banker has a firm purchase commitment from an investor.

If a mortgage banker believes that interest rates will fall, he or she will want to hold as large a loan inventory as possible.

The mortgage banker might not want to enter into firm agreement for the resale of such loans. If rates do fail, the higher interest mortgages will be more valuable on the secondary mortgage market and should sell at a premium to face value.

The top home lenders will take you to the best lender who would provide you with the best offer as far as home mortgage is concerned. You will learn more about mortgage loan on different mortgage information sites online.

What is an FHA loan ?

What is an FHA home loan?

• FHA stands for Federal Housing Administration. The program has been in place since the 1930's
• FHA's goal is to help stimulate the housing market by making home loans accessible and affordable
• An FHA loan is mortgage backed by the Federal Government
What makes an FHA loan attractive?
• Has low down payment options
• A home loan that is less restrictive to qualify for versus a Conventional loan
• Accepts credit scores as low as 620 per current guidelines (check with our professional licensed mortgage loan officer)
• Can go higher DTI (debt to income ratios)

Who can qualify for FHA loans?

• FHA loans have traditionally helped first-time buyers, the elderly, military families, disabled or lower-income families
• Borrowers that are not currently in an FHA loan that meet the qualifications can also qualify for an FHA mortgage
• Most anyone can qualify (for primary residence only)
• Check with our professional FHA mortgage loan specialists to see if you qualify

How do I qualify for an FHA loan?

• Credit history of Borrowers obtaining an FHA loan must be credit worthy with a minimum credit score of 620.
• If prior Bankruptcy has to be 2 years out with reestablished credit and 3 years out of a foreclosure
• Meet debt to income ratios to see qualifying loan amount (minimum payment debt plus total monthly mortgage payment divided by gross monthly income)
• Have seasoned assets in bank account for down payment, and closing costs (check with your FHA mortgage specialist)

What are advantages of obtaining an FHA Loan?

• FHA requires a minimum down payment of 3.5% on the purchase price of the home loan
• FHA allows use of gift funds (money gifted from a family member or non-profit organization) for down payments and closing costs
• FHA rates are usually lower than conventional mortgage loan rates

Principals To The Loan

Mortgage bankers differ from mortgage brokers in that the former generally are not third parties to a loan. They generally fund the loan with their own funds.

While at times of a mortgage banker might act in a broker capacity, particularly if the loans is for an amount beyond the capacity of the mortgage banker to fund, this would be the exception rather than the rule.

Secondary Market Activities

Loans are made by mortgage bankers are customarily resold to other lenders and investors in the resale market known as the secondary MARKET. Mortgage loan bankers are engaged in the primary mortgage market when making the loan and in the secondary mortgage market in the sale of the loan.

Many of the loans made by mortgage bankers are made for particular investors such as other lenders and pension plans. They will make the loans to meet the lending criteria desired by these particular investors. Much of their activities deal with out-of-state lenders and investors who desire to make long-term loans secured by California real estate. Because of the size of our real estate market, California mortgage bankers can't assemble packages of trust deeds of significant value.

Types of Property

Most mortgage bankers deal primarily in residential property, the majority of which single-family dwellings. However, some mortgage bankers handle a variety of property and might specialize in large commercial or industrial loans. They work with lenders who desire the highest interest possible from this type of loan.

Portfolio Loans

Portyfolio Loans are loans held by a lender as an investment. It is rare for a mortgage banker to tie up capital in a portfolio of loans. Lending is a capital intensive activity that requires a great deal of capital or the availability of such capital.

Servicing Loans

Mortgage bankers generally want to service the loans they make and resell. Servicing loans means doing the accounting necessary for a loan. The one-quarter percent to one-half percent services fee can be a significant profit center for the mortgage banker when thousands of loans are serviced.

With today's computer-servicing programs, servicing loans is no longer the labor-intensive activity that it was just two-decades ago. Errors in computations have been virtually eliminated.

An advantage of servicing the loans is the control of impound accounts for taxes and insurance when it is collected in advance with loan payments. These funds, when deposited in a bank give a mortgage banker tremendous clout when they are borrowers from banks holding such funds. They are able to borrow funds at extremely attractive interest rates.

The top mortgage brokers can help you get the home you are aiming for by taking you to the best mortgage lender. If you want to find more insights on home mortgage loan you can take the time to explore various home mortgage sites online

What Mortgage Loans Cover

Mortgage Warehousing

Some lenders want huge dollars packages of mortgages. One reason is that they might wish large packages in order to issue mortgage-backed securities. At other times, mortgage bankers might be speculating on falling interest rates which means the bankers will have a great deal of their own funds and borrowed funds tied up in loans.

Mortgage bankers borrow from commercial banks using their mortgage inventory to obtain additional capital for loans (loans secured by other loans are collaterally secured). There is a risk in mortgage warehousing in a movement of interest rates contrary to expectations. If rates fail, the mortgage banker would have a large inventory of loans which has to be sold at a price that could not only wipe out profits but be a financial loss.

Conforming Loans

Some mortgage companies makes only conforming loans. They sell to savings and loans, thrifts and other lenders who want to readily resell the loans should a sale be desirable.

Nonconforming Loans

Mortgage bankers will only make a nonconforming loan when they either have a buyer for such a loan or know that a resale will not create a problem. Examples of such loans would be larger residential loans which exceed Fannie Mae and Freddie Mac maximums.

Multiple Lenders

Mortgage bankers will at times put together large commercial loans as either the lender of loan arranger which is divided among several lenders. Sometimes the reason for such a loan is sheer size. Many lenders would shy away from a billion dollar commercial loan for a new mall, but they might like a piece of the action because of the desirable interest rate.

Mortgage bankers are often able to put together a consortium of lenders to handle such a loan. Another multiple-lender loan is a piggyback loan, where a single loan is divided into parts and the parts have varying degrees of risk. As an example, assume a million dollar loan is sought on a project valued at $1.3 million. One lender might agree to take $700,000 of the loan as the bottom portion at 9 1/2 percent interest. A second lender might agree to take the top portion of the loan ($300,000) at 12 1/2 percent interest. It is like a first and second trust deed written as a single loan. The second lender is subordinated to the first lender.

The top home lenders are the perfect people to meet every time you are looking for the perfect mortgage offer. You can find out more about home mortgage on several mortgage sites online.

The Essentials Of Mortgage Loans

Credit of Borrower

Institutional lenders want monthly payments like clockwork. They don't want problems in collections. Least of all, they don't want to end up owning the security for their loans. If the borrower has had credit problems, the lender will be reluctant to make a loan, regardless of the value of the property and the borrower's ability to make payments.

Some of the problems that would likely result in the refusal to make a loan include:

1. Judgments against the borrower;
2. A history of legal actions and judgments involving collections of debts;
3. Present loans that are delinquent in payments;
4. A history of late payments;
5. Debts which have been turned over to collection agencies;
6. A recent bankruptcy; and
7. A pattern of debt and bankruptcy

Borrower's Capacity

An institutional lender will not approve a loan for a borrower who fails to satisfy the lender's requirements as to capacity to make the loan payments. Capacity is generally measured by two ratios both of which must be satisfied for the lender to make the loan.

Although they are not cast in stone and will vary slightly as to type of loan, ratios are still the primary criteria used by institutional lenders in determining borrower capacity. However, there are two other mathematical methods of scoring to determine if a loan should be funded. These scores have been shown to accurately reflect risk.

Not everyone who shows low risk will necessarily honor their obligations and many borrowers who show high risk will honor their obligations. These scores are based upon a number of factors and lenders using them use only one, not both, scoring methods.

o FICO Bureau Scores. These scores range from 400 to 900 with the 400 score indicating likely borrower default and a 900 score indicating just a single chance of borrower default.
o Bankruptcy Score. This score ranges from 0 to 1300. With a higher number indicating a greater risk of default.

Questions about Capacity

Some lenders stay away from borrowers who have just recently achieved higher earnings, especially if the earnings are related to a new job.

They are concerned as to the likelihood of continuance of such income. Another problem is persons paid by commissions. Several months of high earnings are not likely to mean much to a lender when prior months were of much lower income.

Self-employed individuals pose another problem. Often tax returns fail to reflect actual net. In many cases a self-employed person is able to take deductions for tax purposes which distort the true income picture. Whether honest deductions or tax fraud, self-employed persons often have great difficulty in obtaining real estate financing through institutional lenders.

Self-employed tax returns often fail to reflect actual net. Private lenders are more likely to understand that tax returns are not always indicative of what a person is able to pay.

The top mortgage brokers will help you in your search for the perfect home. More information on home mortgage can be found on various mortgage sites online.