Do you have the mortgage lender analysis? When a mortgage lender reviews real estate loan application, the primary concern for the two loan applicants, the buyer, and the mortgage lender is to approve loan calls that have a high probability of being repaid in full and on time, and to reject the applications that are expected in default and possible foreclosure.
How is the mortgage lender’s decision?
The mortgage lender starts the loan analysis process by clicking on the property and the planned funding. Use the address and the legal, an expert is commissioned with drafting an appraisal of the property and a title search is ordered. These measures are taken to determine the market value of the property and the condition of the title. In the event of insolvency, the security of the lender must go back to the recovery of the loan.
If the loan application is in connection with a purchase, than the refinancing of an existing property, the mortgage lender will know the purchase price. Typically, the home loans are based on the estimated value or purchase price, whichever is lower. If the estimate is lower than the purchase price, the usual procedure is to require the buyer to make a larger cash deposit. The mortgage lender doesn’t want over-loans because the buyers are simply too much for the property.
The year the house was built is useful in determining the term of the loan. The idea is that the length of the loan should no longer serve the remaining economic life of the structure as security. However, keep in mind, chronological age is only part of this decision, because age is in terms of maintenance and repair of the structure and quality of its construction.
The mortgage lender further looks at the amount of the borrower’s advance payment, so as not to prompt the size of the loan, and the amount of other borrower’s financing plans to use. This information is then in loan-to-value ratio. Usually, the more money the borrower places in the transaction, the safer the loan is for the mortgage lender. On an uninsured loan, the ideal loan-to-benefit ratio for a home owner lender is 70% or less.
This means that the value of the property would have dropped more than 30% before the claim would reduce the value of the property and thereby encourage borrowers to no longer make mortgage loan payments. Due to the almost constant inflation rate in housing construction since the 1940s, very few residential properties have 30% or more in value.
Loan-to-value ratios of 70% to 80% are acceptable, but they put the mortgage lender at greater risk. Lenders partially compensate for them by paying slightly higher interest rates. Loan-to-value ratios of over 80% present even more default risk to the lender, and the lender will either pay interest on these home loans or require that an insurer.
Mortgage closing settlement funds
The lender would then like to know if the borrower has sufficient funds for settlement (closing). Are these funds currently in a control or savings account, or are they from the borrower’s sale of current property? In the latter case, the mortgage lender knows the current loan is dependent on another conclusion.
If the takeaway and settlement funds are on loan, then the lender will want to be extra careful, since experience has shown that the less of his own money a borrower puts into buying, the higher the likelihood of default and foreclosure.
Purpose of mortgage loan
The lender is also in the proposed use of the property. Mortgage lenders feel most convenient when a loan for the purchase or improvement of a property actually occupies the loan applicant. This is because owner-residents usually have pride-of-ownership for the preservation of their property and also continue to make monthly payments during the poor economic environment. An owner-occupier also realizes that if he / she keeps paying, they will have to vacate and pay protection elsewhere.
If the applicant’s loan intends to rent an apartment as an investment, lenders will be more careful. This is because at times of high vacancy rates, there may not be enough income to make the loan payments. At this point, a strapped-for-borrower is likely to be reset to default values. Also keep in mind that lenders generally avoid loans through purely speculative real estate. If the value of the property is below the amount, the borrower may no longer be in the logic of loan payments.
Finally, the mortgage lender assessed the borrower’s stance on the proposed loan. A casual stance, such as “I’m buying because real estate is always going up, or an applicant who doesn’t understand the obligation he’s going to bring bad ratings to companies here. Much more welcome is the loan applicant , shows a mature attitude and understanding of the mortgage loan, the commitment and shows a strong and logical desire for property.
The borrower’s analysis
The next step is the mortgage lender to do an analysis of the borrower, and if there is one, the co-borrower. At a time when age, gender and marital status play an important role in the lender’s decision to lend or not. Often the young and the old have struggled to get the home loan, like women and individuals who are single, divorced or widowed. Today, the Federal Equal Credit Opportunity Act prohibits age, gender, race, and marital discrimination.
Mortgage lenders no longer allow discount income from women, even if they are part-time jobs, or because the woman is of childbearing age. Of the home applicants choosing to disclose, child support, separate maintenance, and child must be fully credited. Young adults and individuals cannot be turned because lenders believe they don’t have “the roots”.
Seniors cannot be rejected as long as life expectancy exceeds the start of the loan term and the collateral is reasonable. In other words, the focus in borrower analysis is now focused on job security, decent income, asset and credit rating.