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| CONSTRUCTING A LOAN Step 1 : QUALIFYING BORROWER Lenders look at 4 Cs formula 1) Credit Report a. Credit Score = 700+ A+ paper 660 – 700 A paper 620 – 659 A - paper Consider as a good Credit if score = 620+ Consider as a not good Credit, Subprime if score = 620- 600 – 619 B paper 500 – 599 C paper Above is just a general guide line . It varies from lender to lender. b. Credit History = any default in 30, 60, 90-days . If yes then we may need LOE (Letter Of Explanation) 2) Collateral Loan To Value (LTV) = Amount of loan / Appraised value of home < = 80% (70% is preferrable) If > 80% then we should split into 2 loans to avoid PMI 3) Capacity a. Total debt/total income (Back End ratio) < 38% (some lenders accept 50%) Back End = (PITI + Debts) / GI Where P = Principle (Monthly Mortgage) I = Interest (Monthly Mortgage) T = Property Tax (Monthly) = (Purchased Value x 1.25%) /12 I = Hardzare Insurance (Monthly) = (Loan Value x 0.35%) / 12 GI = Gross Income (Monthly) = ( $perhour x 2080hrspermonth) /12 Debts = Credit card debts + Auto loan + etc. b. Mortgage debt / total income (Front End ratio) < 28% (some lenders accept 35%) Front End = PITI / GI Where P = Principle (Monthly Mortgage) I = Interest (Monthly Mortgage) T = Property Tax (Monthly) = (Purchased Value x 1.25%) /12 I = Hardzare Insurance (Monthly) = (Loan Value x 0.35%) / 12 GI = Gross Income (Monthly) = ( $perhour x 2080hrspermonth) /12 Note : some lenders use both Back and Front End Ratios, some lenders use either one. Also, the ratio can be understood (as higher) if you have better credit score (to waive this ratio if you don’t meet) 4) Capital (Cash Reserve) : Saving, Checking accounts, 401K, Mutual Funds, Cash ,etc… Lenders prefer to see at least 4 (or 6) x monthly mortgage payments in your bank account. Step 2 : CATEGORIZING BORROWER ------------------ we request from borrowers ---------------- Application Paystub Bankstatement W2 Asset 1) Full Doc yes 2 2 2 Optional 2) Stated Doc yes na 2 na yes No Ratio Doc These 2 categories are the same. They have JOB but not enough Income. Their Income needs to be adjusted for meeting Front/Back End ratio 3) No Income Full Asset yes na 2 na yes 4) No Income No Asset (NINA) yes na na na na No Doc No Income No Job No Asset (NINJA) These 3 categories are the same, depending on what lenders want to call, it’s just a terminology . Step 3 : CHOSE LENDERS BASED ON TYPE OF LOAN (this may change since lenders keep improving their products).This research is based on June, 2003 – August, 2003 time frame. You should check with Lenders, Loan Processors, etc. for updated information. Different people has different suggestion; hence, this guide line is just provides you a general idea. 1) PURCHASE Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. 2) REFINANCE Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. 3) 1st & 2ND (Piggyback or Concurrent = 1st & 2nd are same lender, or 2nd = HELOC) Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. Step 4 : CHOSE LENDERS BASED ON BORROWER STATUS (this may change since lenders keep improving their products).This research is based on June, 2003 – August, 2003 time frame. You should check with Lenders, Loan Processors, etc. for updated information. Different people has different suggestion; hence, this just provides you a guide line. Full Doc Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. Stated Doc Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. No Doc , NINA , NINJA Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. Sub-Prime (borrower does not have good credit score) Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. Niche Product (self employed) Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. HELOC (Home Equity Line Of Credit) Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. 1st and 2nd Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. Interest Only Call CAROLINE TRAN at (408) 595 – 6416 TO SELECT THE BEST PROGRAM FOR YOU. Step 5 : LOAN PROCESS - FLOW OF THE LOAN 1) Enter LEAD then LOAN into PURITY Webloan 2) Construct the loan ( see step 1 above) then fill out loan cover letter and ask customers to fill out loan application and obtain customer’s signatures. Make sure to provide your customers GFE (Good Faith Estimate) 3) Collect all papers that fit your loan type (refer to step 2 above) 4) Submit loan package to Processor Center (Red for Purchase, Vanilla for Refinance) You can lock at this time or wait at a later time, depending on your analysis. 5) Order Pre-Lim and Appraisal as soon as possible since it takes 5-10 business days 6) Follow PURITY Webloan to satisfy conditions, to update Quote, Rate, Point, Cost, anything. 7) Update Loan status (PURITY Webloan) 8) Keep monitoring the loan process by working , cooperating your customers, lender, loan processor. Loan processor will call you to confirm : Lock at what rate,15 or 30-day, Rebate, Adjust, Point, Cost, what credit back to Borrower, etc. 9) Get Lock Confirmation 10) Ask loan processor to draw doc 11) When doc goes to escrow office, ask escrow officer to send the Estimated Closing Statement 12) Review this Estimated Closing Statement for accuracy. 13) Call Borrowers to sign at escrow office (at their convenient time) 14) Inform escrow officer about this time. 15) You or Selling agent should attend with borrowers at escrow office to show your support. 16) Funding : follow up with escrow officer and lender. My summary just gives you an idea, a brief guide line about the loan process. You should NOT rely on this summary since it may vary from day to day basis because Lenders, Processing Team, etc. , keep improving the products, the procedures. Best Regards, Caroline Tran & The PURITY Group DRE# 01334109 Vice President, CFO – The PURITY Real Estate Investment and Finance, Inc. (408) 595 – 6416, (408) 904 - 7030 CarolineTran@thePURITYgroup.com |
