real estate finance - full book (500 pgs)

The current value of the property and the value trend

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Unformatted text preview: g for a loan. It is for the purpose of applying to a specific lender, for a specific loan, under specific terms, on a specific property, by a prospective borrower who presumably will follow through and borrow if the loan is approved. After receiving the application, the lender makes a preliminary analysis of the borrower's qualifications. If it appears that the applicant is qualified, the lender orders an appraisal of the property. Though procedures differ, many lenders begin processing applications while awaiting the appraisal report. If the borrower is not qualified based on a preliminary look at the application, many lenders may not order the approval. Dynasty School (www.dynastySchool.com) 14-1 REAL ESTATE FINANCE Lenders expect repayment of loans without experiencing collection, servicing, or foreclosure difficulties. Lenders are understandably concerned that they make loans to individuals who will repay loans in a timely manner. Therefore, employment stability, income probability, history of debt management and net worth are important considerations for the lender in evaluating a borrower's strength and ability to meet financial obligations. Even though applications may vary in format and length, they generally ask the same basic questions. The basic items in loan applications include: 1. 2. 3. 4. 5. employment, income, assets, debts, and credit history. Many lenders use the FNMA 1003 form even if the loans are not intended to be sold in the secondary market. BORROWER'S INFORMATION Helps a lender evaluate a borrower's ability and willingness to repay the loan. Employment – Gross salary, type of employment, and length of time employed are considerations. Two years full time employment in the same field is generally desirable. However, a college degree with a major in the field of employment will often be accepted in lieu of the two years employment Self–employed borrowers are usually required to provide two to three years' financial statements as well as income tax returns for lender review. Other Income – Many families today rely heavily on secondary income (part–time employment, bonuses, overtime). If this income is typical for the occupation and stable, the lender will probably lo...
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