Help Deciphering The Mortgage Jargon?
Can someone explain in laymens terms/plain english what these terms mean to an investor and the pros and cons?
State Income/Verified Assets
State Income/Stated Assets
No Income/Stated Assets
Full Doc
No Doc
No Ratio
Conforming/non conforming
conventional/ non conventional
Any others I should know?
[ Edited by The-Rehabinator on Date 12/30/2003 ]
State Income/Verified Assets-
Stated Income means just that, State what you make
Verified Assets means that the broker/lender will verify your assets listed on your application by mailing or faxing directly to them a form which they fill out that give their accounting of current status of the information you provide.
Some laon programs such as Stated, NIV (No Income Verification) or NINA (No Income No Asset verification) and others rely heavily on credit scoring. Usually the UW (underwriter) uses either the middle score of three bureaus or the lowest of two scores (generally Experian, TransUnion and Equifax) or taking the lowest score of two to conform to underwriting guidelines for the program,
State Income/Stated Assets
The meaning of this varies from lender to lender but generally one may State their Income and State their Assets and usually the decision is largly based on the credit report and the property and LTV. Some lenders will request Bank Statements to view the cash flow (screening for ability) or may not require taxes but want a Verification of Employment form without income information
No Income/Stated Assets
Requires an Excellent credit scores, usually in the 700s to 800 range
A large down payment makes a Low LTV (loan to value) < 80%
Owner Occupied usually
Stated Income must make Debt ratios conform to Underwriting guidelines specific to loan program.
Investment properties 1-4 carry their own weigth with debt service at < 75% of income.
Full Doc- there are many factors that are required for conventional -conforming, however nonconforming lenders and govys make a vastly varied exception to the following.
Prove income meets debt ratios at 28/36 ratio or if expanded ratios are desired prove compensating factors exist, credit scores are over 620 minimum, no 30 day lates for two years, debt disputes are settled judgements are paid off, NO Bankruptcy in past 2 years and restablished credit with at least 3 lines of credit with limit of $2,500 or higher for 24 months, assets, employment history, income for two years, property is worthy
No Doc
This is a nickname tossed around for NIV, NINA, some Stated, etc. It just means that less documentation is required to prove assets and income.
Remember the less you give a lender the worse the interest rate. Pain in the butt to do all the paperwork but if it saves you 100 or 300 monthly over 12 months that is neglible, however if it's over 360 months (30 years) that is 36,000 to 108,000 in excess interest payments- It may be worth the extra hour or two to save tens of thousands of dollars.
No Ratio
Disregard debt to income ratio
Usually self employed people or people with exceptional compensating factors such as 50% LTV and the property is in a vein of rapid appreciation, etc.
Conforming/non conforming-
Conforming loans are loans that conform to FNMA aka "fanniemae" guidelines or FHLMC aka "Freddiemac" and as a result the two mortgage pools will purchase the loan from the mortgage wholesaler who want to free up the cash or lines of credit so they can go solicit more loans and resell them. Its a merry go round of recycling money by buying and reselling mortgages that you know upfront will be purchased by the pools
Nno conforming loans are loans that do not conform to FNMA aka "fanniemae" guidelines or FHLMC aka "Freddiemac"
guidelines so they will not be sold to the largest pools and will be sold on to investors- some private some on wall street or others but never will they be sold to FNMA aka fannie mae or FHLMC
aka freddie mac. Nonconforming lenders have guidelines to conform to but they are different (usually more liberal) than fannie and freddie.
conventional/ non conventional
same as above conventional is conforming and nonconventional is nonconforming.
Any others I should know? One lenders underwriting manual just submitted to me for fha and va is 6-9 inches thick (over 3,000 pages) and some are only 3 inches thick and so you would have to ask me something more specific. As you can guess my response is brief and not
intended to be full disclosure as ift would be impossible to cover every single detail. But I hope this simplifies it for you somewhat.
Happy Appy (applications) to you!
With all those questions I'm confident that you will ask the right questions and using their own jargon like LTV, Debt ratios, and telling them that you are just shopping for the best Good faith Estimate and rate and term will help -
But don't let them all pull your credit as it will lower your credit score. Allow one guy to pull it and get your scores or go to www.myfico.com and order your own trimerge with scores.
MUR
Quote:
On 2003-12-30 12:52, The-Rehabinator wrote:
Can someone explain in laymens terms/plain english what these terms mean to an investor and the pros and cons?
State Income/Verified Assets
State Income/Stated Assets
No Income/Stated Assets
Full Doc
No Doc
No Ratio
Conforming/non conforming
conventional/ non conventional
Any others I should know?
<font size=-1>[ Edited by The-Rehabinator on Date 12/30/2003 ]</font>
But DO NOT LET BUT ONE PERSON PULL YOUR CREDIT OR JUST GO TO www.MYFICO.COM AND GET YOUR OWN TRIMERGE WITH SCORES
In the words of Mr. Burns from the Simpsons:
Excellent!
Thanks for taking the time to answer this, especially in a way that is understandable.
I'm going to copy and paste this response along with your other one about seasoning and print them out for my real estate references note book that I keep.
I'll be sleeping with these under my pillow so they soak into my head at night!
You should submit this kind of stuff to this site as an article for other investors to reference from.
Thanks alot!
My second question you sort of answered a bit.
In regard to shopping around for a loan, you hinted toward asking for a good faith estimate and not letting them pull your credit.
I know my rating is in the mid 700s but not sure exactly. Should I pull my own credit report at www.myfico.com and then just tell the mortgage broker that my score is ### based upon my pulling it on this day, please base your loan estimates on that number?
Will a broker go through the process and give you a good faith estimate in writing along with rate and terms without letting him pull credit, under the terms that we both acknowledge that this is only based on the credit score I am telling him or will he just want to give me ball park estimates?
Another way to look at is, as a broker what would a client such as myself have to supply a broker with in order to allow you to do your best in serving me with as close an estimate to rate, terms and costs for a given loan as is acceptable?
mur--
You should make your response an article...Happy New Year! Tim
mur, Great job..
The-Rehabinator,
It will be enough for you to pull your own credit and score. This way anyone you talk to you can give them your score and the reporting agency.
The Good Faith Estimate is just that..."If all you say is true, this is what I can do for you".
Once you decide to go through with a loan, then they will have to pull your report then.
Good Luck