What Is A Qualified Mortgage?

 

As this video explains,  Federal laws put into effect in 2014 and  supervised by the Consumer Financial Protection Bureau define lending practices and loan terms for a new category called “Qualified Mortgages.”

They provide stable loan features for consumers and improve legal protection for lenders who follow the guidelines.

These guidelines require lenders to assess each borrower’s ability to repay their mortgage loan.

As of 2014, guidelines require that a borrower’s monthly DEBT – including mortgage – be no higher than 43% of their monthly gross INCOME

The laws also define unacceptable loan terms:

  • interest-only loans
  • terms over 30 years
  • negative-amortization loans that increase principal over time
  • most balloon loans

do not meet the Qualified Mortgage guidelines.

The laws aim to provide consumers with objective guidance  about reasonable debt from the CFPB and in return, to grant lenders who follow that guidance with higher levels of protection from lawsuits.

Ask your lender about Qualified Mortgage options for your home purchase.

 

What Is A Rate Lock?

 

Mortgage rates change constantly through an unpredictable combination of government policies and economic conditions. This video explains the common term ‘rate lock.’

A “Rate Lock” is a guarantee that a lender will honor a specific combination of interest rates and points for a given period of time. A lock protects a buyer from rate increases but commits them to a higher rate if mortgage rates fall below the locked rate.

As of 2014, rate locks aren’t usually an option until a purchase offer for a specific property – new-home or resale – has been accepted by the seller. The borrower’s credit score, the loan-to-value ratio property type, location and other factors plus, of course, market rates and market conditions will also affect rate-lock decisions.

Decide whether to lock or “float” based on your capacity for risk and your best rational knowledge about construction and closing schedules. If your rate lock expires an extension might be available but both you and the lender will be looking at current mortgage rates to decide the best option.

 

What Is A Certificate of Eligibility, or COE?

 

What Is A Certificate of Eligibility, or COE?

The COE is the key document that verifies to lenders that someone is eligible for a VA-backed loan.

Servicemembers, Veterans and National Guard and Reserve members may apply online or through their lender; most lenders have access to the system and can verify eligibility IF the VA has records on file.

The VA also maintains a hotline for assistance.

Surviving Spouses can use VA Form 26-1817 to request determination of their eligibility for VA Loan Guarantees.

Your lender may be able to assist with processing or contact the VA for information this video did not address.

Understanding Your Loan: Additional Information Can Be Important

 

Page 4 of your Closing Disclosure is important. It is NOT just standardized form information that is identical for every loan.

Review these terms:

  • Assumption: can this loan be transferred to another person if you sell or transfer the property?
  • Demand: can the lender require early repayment of the loan?
  • Late Payments: what penalty, after what period, applies?
  • Negative Amortization: does this loan schedule or allow payments that do NOT fully cover the interest due, resulting in increased loan principal?
  • Partial Payments: what is THIS lender’s policy?

You should also review Escrow Account details to understand whether you will pay additional property costs via regular Escrow Account payments or handle them yourself directly.

Understanding Your Loan: Closing Disclosure Page 1

 

The first page of your Closing Disclosure documents:

  • The Loan Amount – the total you will actually borrow
  • The Interest Rate – which does NOT include the fees factored into the APR on Page 5

If this loan has a penalty for pre-payment or includes a balloon payment Page 1 will summarize the terms.

Projected Payments will show the chief cost components – Principal & Interest, Mortgage Insurance and estimates of your Escrow Payments over the life of the loan. You may see different columns for different periods if changes in terms such as mortgage insurance change payment totals.

Closing Costs summarizes your loan closing expenses, and Cash To Close adds the additional amounts due to give you the cash balance you will need in 3 business days.

What Are The Major Types Of VA Loans?

 

What Are The Major Types Of VA Loans?

Major Veterans Affairs loan programs described in this video include:

1) Purchase Loans.

These help eligible parties buy a home at competitive interest rates with little to no down payment and little or no private mortgage insurance.

2) Cash Out Refinance Loans which enable taking cash out of home equity to pay off debt, fund school or make home improvements.

3) Interest Rate Reduction Refinance Loans also called Streamline Refinance Loans can help veterans obtain lower interest by refinancing existing VA loans

Other programs include:

4) Native American Direct Loans to help eligible Native American veterans finance homes on Federal Trust land.

And

5) Adapted Housing Grants to help veterans with service-connected disabilities buy, build or modify a home suited to their disabilities.

Many states offer additional resources to veterans, too.

Talk to your home lender about your situation.

What Are VA Home Loans?

 

What Are VA Loans?

As the video says, the name is misleading – they’re not loans FROM the VA.

The VA – short for “US Department of Veterans Affairs” – is the Federal military veteran benefit system.

The VA administers benefits and services for Servicemembers, Veterans their dependents and survivors.

Programs related to home loans are one of their key services.

The VA is not a bank; they do not provide home loans themselves.

But they do guarantee a portion of home loans provided to veterans and other eligible people by banks and mortgage companies.

These guarantees enable lenders to provide more favorable terms.

They are are commonly called “VA Loans”.

They cover buying, building, repairing, retaining and adapting homes for personal occupancy by eligible Veterans and survivors.

Understanding Your Loan: Cash And Transaction Summaries

 

Page 3 of your Closing Disclosure will compare cash requirements from your Loan Estimate to your actual final charges. If “Did this change?” is “YES” notes for changed sections should be provided.

The bottom line final “Cash to Close” is the money you will need in-hand in three business days.

If your transaction has a Seller the summary table will show a line by line comparison of Borrower to Seller transaction details.

If there is no Seller you may see a Payoffs and Payments table instead.

Review the summary tables to understand the transaction and your financial commitments at loan consummation.

Understanding Your Loan: Closing Cost Details

 

Page 2 of your Closing Disclosure details specific closing costs.

Section A includes: Origination charges collected by the lender Origination fees paid to brokers, loan officers or other parties and Discount Points – prepaid interest. These figures should match your original Loan Estimate.

Section B covers services for which you could NOT shop. The total of these should be within 10% of the total from your Loan Estimate.

Section C covers services you could shop. If you chose providers from the lender’s written list, costs should be within 10% of Loan Estimate. The set of services you can shop may vary on different loans.

The Recording Fees in Section E should be within 10%; other costs in E, plus F, G and H, may vary from your Loan Estimate without tolerance limits.

This page will also break out the costs YOU will pay, before or at closing; the costs the Seller will pay, any costs paid by others and any credits from your Lender.

Your Rights And Rules For Closing Disclosures

 

The Closing Disclosure documents the actual terms of your loan transaction. You should receive it no later than 3 business days before consummation. It must be in writing – paper or digital.

If the loan terms or costs change prior to consummation, your lender must provide a corrected disclosure AND an additional 3-business-day waiting period until loan consummation.

Waiving the 3-day waiting period is only permitted in certain circumstances, and only when the waiting period would cause a bona fide personal financial emergency.