A loan scenario is made up of the basic attributes of a loan, so rarely are any two mortgages exactly alike. Changes in your scenario may end up affecting the cost of your loan, which is why we rely on the higher accuracy of a personalized quote to a generalized rate. Keep reading to understand the different parts to a scenario.
This is the actual amount of money being loaned, and can affect the availability of loan products.
Your loan maximum can be influenced by the property’s county, value and type.
More about Loan Types ›
The property value, or its worth in the current housing market, is affected by your loan purpose.
If certain criteria is met, you might be eligible to receive an appraisal waiver, meaning the provided property value or purchase price will be used.
This is the ratio of the Loan Amount to the Property Value. For example, if your property is worth $100,000, and you are taking out a loan of $80,000, then your LTV would be 80%.
The LTV ratio can affect the loan cost, mortgage insurance requirement, and your maximum loan amount. Most loan products have an LTV maximum, with pricing typically worsening the higher it goes.
Private Mortgage Insurance (PMI) in conventional loans is required when the LTV exceeds a certain amount (usually 80%.) PMI protects the lender in case of default, and can be paid either as a monthly amount or in an upfront, lump sum. You can request PMI removal once your LTV falls below 80%, or wait until it’s automatically removed at 78% LTV
A Mortgage Insurance Premium (MIP) is required on all FHA loans as a monthly amount in exchange for easier loan qualification. Unlike conventional loans, the only way to get rid of an MIP is to refinance into a conventional loan or pay off your FHA loan.
If you’re looking for a new property, your loan purpose is to purchase. If you’d like to change your current property loan, your loan purpose is to refinance.
There are two types of refinances. The first type, where you refinance your current mortgage principal, is known by a few names: Rate and Term, Limited Cash Out, Straight or Standard Refinance. You may be able to roll refinance fees into the loan amount, but you’re limited in the amount of cashback you receive.
A "Cash Out" refinance is when you use your home equity to take out a loan larger than your current principal amount. Mortgage interest rates tend to be lower than most non-mortgage loans, which makes your property a great tool toward your financial goals. If the amount you request is less than your initial loan, you may be able to take out cash and lower your monthly payment at the same time. Note that HELOC and non-mortgage debt consolidation is mostly considered a cashout.
More about the Purchase Process ›
More about the Refinance Process ›
A lien is a publicly recorded notice that a creditor is entitled to a possession as collateral if the loan defaults. Once the loan is paid off, the lien is removed.
Properties can have more than one lien and are ordered into lien position based on when they’re taken out. If the property has an insurance claim or is foreclosed, the loans are paid in order, so many first mortgage lenders won’t allow a mortgage that is not in first position.
If you have another lien on your property, like a HELOC or solar lien, you will need to subordinate or pay it off to complete a refinance of your first mortgage.
When the first lien on a property is paid off, any other liens move up in position. In order to have the new mortgage take first place, all other liens must agree to subordinate, though this can take some time and add extra costs.
In purchases, any liens the seller has on the property will be paid off during the transaction, usually with sale proceeds.
Property occupancy indicates the property’s use and its inhabitants. Here are the main three types:
The property type shown on real estate listings might not be the same as what’s listed on your title and mortgage documents. For example, you might be shown a townhome referred to in documents as a Condo or Attached Planned Unit Development (Attached PUD)
Fannie Mae, Freddie Mac, VA, and FHA all have guidelines for property types and their mortgage/loan product eligibility.
Single Family Residence (SFR): A property intended for use as a dwelling built on its own land. These property types aren’t usually connected to neighboring buildings, though it’s possible. SFRs do not have HOAs, but local laws and ordinances may control things like landscape maintenance requirements.
Condominium (Condo): Condos are defined by ownership and zoning laws. Condo projects are composed of individually owned units, where owners also jointly own common areas. However, they may not own any of the outside walls or structures of their building. Condos can visually come in many forms, but there’s always an HOA maintaining common areas and amenities. HOAs also provide HOA master insurance, which cover common areas, and can sometimes include unit interiors. Condos are almost always zoned as condos.
Planned Unit Development (PUD): PUDs are also defined by ownership and zoning. These units can be attached or detached, and owners generally own the structure and the land it sits upon. There is always an HOA, which may or may not need to be reviewed during a mortgage application.
Multi-Unit: A 2-4 Unit property. Common terms for these types of dwellings use the number of units such as: duplex, triplex and fourplex. You can buy a multi-unit as a primary residence and then rent out the other unit(s) as a way to start a property investment.
Manufactured Home: A home built as a complete dwelling offsite and then affixed to a permanent support structure. The US Department of Housing and Urban Development (HUD), which controls the building codes for these dwellings, used to call them mobile homes. Manufactured builds have extra requirements for conventional loan eligibility, like needing to be permanently fixed to a foundation.
Modular Homes: A dwelling built in pieces offsite and then assembled together on the piece of land where it’s attached. These buildings must meet local building code as if they were built completely on site. If the land and the dwelling are sold separately, this type of property may not be eligible for a conventional loan.
A number calculated to predict the likelihood that you’ll pay back loans or credit on time based on your credit report information. You have more than one credit score, which can vary across the credit reporting agencies (CRA), commonly known as credit bureaus.
Credit bureaus collect the data that becomes your credit report. The three main bureaus are Equifax, TransUnion, and Experian.
These agencies have created different scoring models, such as FICO and VantageScore, for turning the data on your credit report into your credit score. Scoring models are regularly reviewed and updated to keep them from stagnating.
Time plays a big factor in your credit score. Creditors report data to bureaus at different times, so it’s likely changes won’t reflect until a few days or even weeks later. Additionally, the scoring model used when your credit is run may affect your score, even if the data is the same.
One True Loan does not pull your credit score without written permission! Our advisors will discuss with you when plan when to pull your credit score
When getting a mortgage, you can choose to pay into an escrow account in addition to your monthly Principal and Interest payment. The funds in this account are used to pay your homeowner’s insurance (HOI) and/or tax bill upon their due date.
The loan is referred to as being impounded if you select this option, which is why you may see the terms Escrows and Impounds used interchangeably.
You can choose to impound your HOI and/or your tax bill if you choose to have an escrow account. However, lenders may require some types of extra insurance to be impounded, like flood insurance.
Each year, your escrow account will be reviewed for any bill changes, and your monthly payment will be adjusted. If an excess has been collected, you’ll receive a check, and if not enough has been collected, you may be required to make a catch up payment and/or your monthly payment will increase.
Because escrow accounts can not be transferred between lenders, a new escrow account must be opened when you refinance. Funds from your current account will be returned to you, usually as a check, after the transaction.
Lenders create rate tables showing the base prices offered for each rate on each product; prices change daily, sometimes multiple times. Locking your loan makes the pricing on that rate table, not just your selected rate, available for a set amount of time. The amount of time is usually in 15 day increments and generally starts around 30 or 45 days.
Longer lock periods cost more, but provide more time to close the loan. Shorter lock periods cost less, but you need to provide documentation as soon as possible. Shorter locks may only be available for specific scenarios and lock periods can vary by lender.
When you’re ready to lock, One True Loan sends regular, updated rate sheets for your comparison.