What is "recording a deed"?
The involves the title company sending the deed (a deed conveys
ownership from the seller to the buyer) to the County Recorder's
Office to have it recorded. If a deed is not recorded someone
else could claim that they own the house.
Conforming loan limits:
For 2002: One unit 300,700; two units 384,900; three
units 465,200; four units 578,100
FHA Loan Limit:
FHA loan limits for High Cost areas Jan. 2002
1 unit $ 261,609
2 unit 334,863
3 unit 404,724
4 unit 502,990
normal areas $ 144,336 for 1 unit
Rate Locking: This
involves having a conversation with the loan officer during
normal bank lock desk hours (10 till 4) and asking to lock in at
a certain rate for a certain time. The thriftiest lock is for 15
days, a 30 day lock usually costs 0.25% extra points. A lock
does not occur until it is confirmed by the bank. In rare cases
the rate can fluctuate when you are asking for a lock and while
your loan officer is on hold with the bank rate lock desk the
bank may change the rate.
What is a trustee? This person is
in control of a trust or if using a deed of trust (a type of
home loan) the Trustee is responsible for forcing the
homeowner into foreclosure if the loan is in default.
What is a Trustor? The trustor is
responsible for paying the home loan. They are the homeowner
/ borrower. See Deed of Trust.
What are vesting choices?
"Vesting" is how you take title to your property. Some
examples are: Joint Tenancy, Tenants-in-Common, In Severalty,
Community Property, married person taking title as sole owner.
Consult your lawyer for the best
decision.
What are fire insurance requirements?
Must insure the home for the cost to replace the structure. So
if the 1,500 square feet building costs $ 180,000 to rebuild and
the land is worth $ 400,000 and the loan is $ 450,000 the
insurance should cover $ 180,000.
What is a quit claim deed? Used
when one conveys ownership to a co-owner (not a new owner).
Mainly used in a divorce.
Why put my house in a "family
trust"? This is an ownership entity like a
corporation which is used to own a personal residence and
personal assets. The reason to use it is to avoid probate when
the owner dies and maximize estate planning benefits. When the
owner dies, the Trustees of the trust have immediate control
with no need for a court order to convey ownership to the heirs
of the estate.
What is a "deed of reconveyance"?
This is issued by a bank when their loan is paid off. It is
recorded at the County Recorder's Office to verify that your old
loan is definitely closed out and paid off.
Why Do I Have To Wait Three Days After
Signing For a Refinance?
This is called the recission waiting
period. It is required by law to give you "cooling
off" time to be sure you like your loan.
How Can I Buy a Home at the Best Price?
Obtain a loan preapproval before
shopping. A preapproved borrower is worth more to the seller
than one who is not preapproved, so the seller may accept a
lower offer from you. Ask your loan agent for the names of best
Realtors.
Why Does a Zero Balance Second Mortgage
Need to Be Subordinated?
Why does a zero balance second
mortgage a.k.a. "home equity line of credit" (or
any second mortgage) need to be subordinated? It is a mortgage
and an old second mortgage takes priority in real estate law
over a new first mortgage. Therefore the new first mortgage
lender needs the old second mortgage lender to
"subordinate" the second mortgage. This means that the
second mortgage lender must review the first mortgage to be sure
that it is not significantly larger than the previous one, etc.
The second mortgage lender has to approve you all over again,
using a copy of the new first mortgage loan file. Subordination
takes extra time and effort. We do not charge extra for
subordination, however we ask that the borrower pay any
subordination fee. (If we are doing a "no cost" loan
we will only cover $ 50 towards subordination fee). A few
lenders charge the borrower $ 250 for subordination, however,
most second mortgage lenders do not charge for subordination.
How to Get Best Rate if I'm Buying a Home?
If buying, you may not be able to
wait months for the best time to lock the rate. So do zero cost
purchase, then refinance later with better timing you
will be able to lock in on the best day, with no pressure from
the home seller to hurry up and close escrow.
What is Fastest Way To Get a Loan?
Order the appraisal immediately and
drop everything to rush out meet the appraiser when they are
available. They work by appointment. They need daylight to be
able to photograph the house. The while waiting for the
appraisal, please fax and mail the loan application and
supporting documents such as paystubs, W-2's, bank statements.
Or Federal Express it to us.
What Are Debt Ratios?
These are the ratio of income to monthly debt service.
The suggested limit is 40% of income can be spent on debts.
(Income is usually defined as a two year average for a person
with no job changes or career changes in two years, with some
flexibility allowed for job changes).
What is a "No Doc" Loan?
This loan requires no proof of
income and no proof of savings. It costs more than a loan with
verified income.
What is an Easy Qualifier (Quick
Qualifier)?
This loan requires no verification
of income. It is designed to enable borrowers who have very
complex or wildly fluctuating income to obtain a loan with
minimal paperwork. (Usually these borrowers are self employed or
commissioned). Lenders still want to verify two years in the
same occupation, but not obtain verification of income, so be
prepared to show business licenses, etc.
Why is Income Far More Important Than a
Large Down Payment?
This is because lenders absolutely
do not want to foreclose. If a lender forecloses they are not in
the business of repairing, remodeling and then selling houses.
Usually foreclosed homes need repair work and they are usually
foreclosed in recessions when it is hard to sell a home. So the
bank has to pay six percent to the Realtor and wait eight months
to sell, plus two months to fix up the home. If it takes half a
year to foreclose and another half year to sell the bank loses a
lot of interest. It can take 25% of the home's value to cover
bank costs associated with foreclosure. Also, if a foreclosure
occurs in a recession, homes may sell for 30% below the purchase
price. So the total of spending 25% of home value in foreclosure
costs and 30% in decline in value means that 55% of the
home's value is wasted due to foreclosure. Therefore, a maximum
of 45% of loan to value is the only safe loan (in the opinion of
bankers).
The
central issue is that banks are uncomfortable with ruthlessly
throwing anybody out of a home. Would you like to be the
bank employee who kicks someone out of a foreclosed home during
the rainy season? Banks prefer to avoid the bad publicity and
emotional pain associated with this form of "economic
capital punishment", so banks refuse to lend unless a
person has plenty of income in
proportion to monthly debt payments.
Also, the law requires that banks
protect borrowers by only letting people who can afford the
payments have a loan. Over the years consumers who lost their
homes to foreclosure have urged Congress to make it illegal to
lend to someone who does not earn enough to afford the monthly
payments. So a large down payment that makes it "absolutely
risk free" for a bank is irrelevant.
What Are Cash-Out Refinance Limits?
Very important: If you took cash out
from a refinance or use of a line of credit in the past 12
months you will be categorized as a cash out refinance borrower,
even if not taking any cash out for the current refinance. Cash
out requires an extra 0.25% points fee and has a lower loan to
value ratio.
Why Do Banks Want a Borrower to Sign IRS
Form 4506?
This is because this is the only way
for the bank to really, really be certain that income data in
the loan file is true. The IRS faxes tax returns directly to
bank to confirm that your W-2's or taxes are true copies.
What Happens if My Loan is Sold? Will My
Loan Be Sold?
Some banks sell loans to pension
funds or investors after the loan closes. This does not affect
the terms of your loan.
Why Use Mortgage Broker?
They are lower cost, more flexible
about finding a good match between your qualification and the
programs that you want. A loan officer at a direct lender is
forced to "push" on you programs that may not result
in your getting the best program.
What is An Acceptable Down Payment?
These funds
usually must be in loan applicant's own bank account for three
months. "Gifts" from relatives must include copy of
donor's bank account and gift letter.
Prequalification Versus Preapproval. What
is the Difference?
Prequalification is a letter of
opinion written by a loan agent suggesting that the borrower is
qualified for a loan. A preapproval is letter stating that the
client has been formally preapproved by a bank. The preapproval
is a binding commitment subject to buying a property that meets
bank rules and of course subject to no changes in one's
financial condition.
Why Do All Owners of a Home Need To Sign
& Apply For the Loan?
All owners of a home must sign
documents and apply for the loan because a loan can only be
placed with consent of all owners.
Amortize
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