Mortgage Information
If you are planning to finance a home, the following information will help answer questions and explain the process.
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Mortgage Calculators
Annual Ownership Cost Calculator – How much will it cost to own a home?
Mortgage Calculator – How much will my monthly mortgage payment be?
Qualifying Ratio Calculator – How much can I borrow?
Rent Vs Buy Calculator – Is it better to rent or buy a home?
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Loan Pre-Approval
When you are ready to begin looking for a home to purchase, you’ll need to get pre-approved for a loan to verify the loan amount for which you qualify. You may work with your current bank or credit union or any other lending organization. I can also refer you to several local lenders who have successfully worked with previous clients…just contact me if you’d like local lender contact information. – Charles, charles@azreins.com
Your lender will need to complete this Arizona Loan Pre-Approval Form which needs to accompany any offers made on a home.
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Mortgage Process
The follow is an outline of the “Mortgage Process,” so you are aware of all of the steps involved in the “closing” of a loan.
1. Pre-qualification / Pre-approval: Utilizing employment, income, and credit information you can pre-qualify or become pre-approved for a loan.
2. Application: After becoming pre-approved, an application along with loan disclosures then need to be completed, signed, and dated. These forms need to be returned along with copies of your financial documents.
3. Loan Approval: After submitting the application, the signed disclosures, and the copies of your financial documents your loan is then fully approved. (As the financial documents support the information submitted for pre-approval.)
4. Accepted Contract: If you are purchasing a home, as opposed to refinancing a home, the buyer and the seller must agree upon the terms of the purchase and must sign a contract. At this point you can decide to lock or float an interest rate.
5. Appraisal: An appraisal is then ordered which verifies the value of the home.
6. Loan Processing: During the time a file is submitted your loan is being “processed.” Your employment, income, and assets are being verified. Escrow is opened with the Title Company and a title search is completed on the property to ensure that there are no liens on the property. And, a one-year binder for hazard (homeowners) insurance is established with your insurance agent.
7. Underwriting: Once the appraisal is complete, the entire loan packet is then submitted for underwriting. The underwriter reviews the file and approves the file. (The file may be approved but the Underwriter may request further documentation on specific issues or in certain circumstances.)
8. Closing: Once all of the required documentation has been verified and all of the loan conditions have been met, the final loan documents are drawn. Then, the buyer and the seller sign the documents at the closing. The loan is then funded and recorded at the CountyClerk’s Office finalizing the transaction.
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Mortgage Glossary
Below are some terms and their meaning, these terms are commonly used in the mortgage process.
Adjustable-rate mortgage (ARM): A mortgage with an interest rate and payment that change periodically over the life of the loan based on changes in a specified index.
Charge-off: The portion of principal and interest due on a loan that is written off when deemed to be uncollectible.
Conventional mortgage: A mortgage loan that is not insured or guaranteed by the federal government.
Credit enhancement: A method to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, corporate guarantees, or other agreements to provide an entity with some assurance that it will be recompensed to some degree in the event of a financial loss.
Credit-related expenses: The sum of foreclosed property expenses plus the provision for losses.
Credit scoring: A process that uses recorded information about individuals and their loan requests to assess – in a quantifiable, objective, and consistent manner – their future performance regarding debt repayment.
Debt security: A security in which the issuing company generally agrees to repay the principal (typically, the original amount borrowed) and make interest payments according to an agreed schedule.
Default: The failure of a borrower to comply with the terms of a note or the provisions of a mortgage.
Delinquency: A mortgage loan on which a payment has not been made by the due date.
Duration: The weighted-average life of the present value of all future cash flows, both principal and interest, of a security. It is used as a measure of the sensitivity of the value of a security to changes in interest rates.
FHA mortgage: A mortgage loan that is insured and/or guaranteed by the federal government.
Fixed-rate mortgage: A mortgage loan in which the interest rate does not change during the entire term of the loan.
Forbearance: The lender’s postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.
Foreclosure: The legal process by which property that is mortgaged as security for a loan may be sold to pay a defaulting borrower’s loan.
Intermediate-term mortgage: A mortgage loan with a contractual maturity at time of purchase equal to or less than 20 years.
Loan servicing: The tasks a lender performs to protect a mortgage investment, including collecting monthly payments from borrowers and dealing with delinquencies.
Loan-to-value (LTV) ratio: The relationship between the dollar amount of a borrower’s mortgage loan and the value of the property.
Loss mitigation: Activities designed to reduce either the likelihood of the corporation suffering financial losses on a loan or the final dollar value of those losses in the event of a borrower default.
Medium-term notes: Unsecured general obligations of Fannie Mae with maturities of one day or more and with principal and interest payable in U.S. dollars.
Modification: Any change to the original terms of a mortgage.
Mortgage: A legal document that pledges property to a lender as security for the repayment of the loan. The term also is used to refer to the loan itself.
Mortgage-Backed Security (MBS): A Fannie Mae security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the MBS holders.
Multifamily housing: A building with more than four residential rental units.
NOD Abbreviation for Notice Of Default.
Notice of Default An official notice filed and recorded by a designated trustee at the request of a lender indicating lender has commenced foreclosure action.
Non-performing asset: An asset such as a mortgage that is not currently accruing interest or on which interest is not being paid.
Pre-foreclosure sale: A procedure in which the borrower is allowed to sell his or her property for an amount less than what is owed on it to avoid a foreclosure. This sale fully satisfies the borrower’s debt.
Repayment plan: An agreement between a lender and a borrower who is delinquent on his or her mortgage payments, in which the borrower agrees to make additional payments to pay down past due amounts while still making regularly scheduled payments.
Reverse mortgage: A financial tool which provides seniors with funds from the equity in their homes. Generally, no payments are made on a reverse mortgage until the borrower moves or the property is sold. The final repayment obligation is designed to not exceed the proceeds from the sale of the home.
Secondary mortgage market: The market in which residential mortgages or mortgage securities are bought and sold.
Security: A financial instrument showing ownership of equity (such as common stock), indebtedness (such as a debt security), a group of mortgages (such as MBS), or potential ownership (such as an option).
Serious delinquency: A single-family mortgage that is 90 days or more past due, or a multifamily mortgage that is two months or more past due.
Short Refinance: Short refinance is the replacement of a mortgage, usually with a reduced mortgage, when the borrower is already in default. This is done to transition the borrower to a more affordable payment structure. The lender has to write off the difference between the old mortgage and the new mortgage, but in some cases this may be preferable to foreclosure.
Short Sale: To sell a home through negotiation with the bank or lender, who agrees to accept less than the full amount owed to satisfy the debt allowing the debt to be ‘paid off’, short. Short sales are subject to bank approval and are often used as options in lieu of foreclosure.
Underwriting: The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower’s ability and willingness to repay the debt and the value of the property.
