real estate finance - full book (500 pgs)

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Unformatted text preview: ross income. Borrower must be able to verify these sources of income. Debt Payment to Income – Generally, lenders prefer all monthly payments of debts (longer than 8–10 months), including housing expense, not to exceed 33–36% of borrower's monthly gross income. However, this rule varies from institution to institution. Down payment – From a lender's viewpoint, the larger the down payment, the less likely the borrower is to default on the payments. Buyer's Credit – Even though the property value is the lender's main security, emphasis on the borrower's ability to repay a loan is increasing. Title Insurance – In California, lenders almost always require title insurance on a property, to assure them of protection from any prior encumbrances or rights of others that could adversely affect the position of the lender and/or borrower. INCOME / ABILITY TO PAY Whether the borrower earns enough to make the monthly payments is the first consideration in determining the applicant's ability or capacity to repay the loan. There is no one answer because various lenders use different formulas, depending upon the type of loan. Conventional lenders, FHA, DVA, and Cal–Vet each have their own distinctive method of qualifying a borrower. TYPES OF INCOME There is no question that income from regular employment is included, but do lenders count income from overtime, part–time work, or sales commissions? To be counted as stable, income must normally be earned in the same or similar occupation for at least two years. This section covers how lenders look at a variety of income sources. 13-6 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 13: QUALIFYING THE BORROWER Salaries – This type of income is the easiest for you to establish and for the lender to verify. A prospective homebuyer who is employed by a company or corporation is usually paid a specific amount on a regular basis. The pay period can be weekly, biwe...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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