Factors that Influence Rate, Points, and Mortgage Insurance

1. FHA loans

Loan term (30-year or 15-year)

LTV ratio

2. VA loans

Active Duty Veteran or National Guard/Reservist

LTV ratio

Purchase, rate reduction refinance, or cash-out refinance

First use of VA mortgage benefit or subsequent use

3. Conventional loans

Loan Amount (jumbo loans and small loans are more expensive)

Credit score

• 700+ may lower price a bit

• Less than 680 can increase price

• Less than 620 will increase rate

LTV ratio, combined LTV if there is a second mortgage

• High LTV ratios increase points and mortgage insurance premiums

• LTV less than 70 percent can lower price

Rate lock-in period (15 days, 30 days, 45 days, 60 days,

120 days)

Debt-to-income ratio Use of loan

• Purchase

• Rate reduction refinance

• Cash-out refinance Occupancy

• Owner-occupied

• Second home

• Investor property (not occupied by owner)

Structure type

• Single-family home

• Townhouse

• Condo

• Co-op

• Highrise over four stories

• Manufactured housing

• Rural property

• Mixed use property (residential and commercial)

Number of units – One, two, three, or four

Location – State (rates may vary from state to state even with same lender)

Documentation (See Chapter 1, limited documentation can cost more)

• Full doc – Verified income, verified assets (VIVA)

• Stated income – Stated income, verified assets (SIVA)

• Stated assets – Verified income, stated assets (VISA)

• Stated/stated – Stated income, stated assets (SISA)

• No income or no ratio – Income is not provided (NIVA)

• No income, no asset – Two-year employment history is verified (NINA)

• No doc – Lender relies only on credit rating of borrower and value of the asset

FIGURE 5.2 Step 1: Determine Your Needs

Step 1: Determine Your Needs


• Borrower residency – Resident alien, diplomat, foreign national

• Prepayment penalty – None, hard, soft, three-year, five year (see Chapter 6)

• Interest-only option or buydown

Mortgage Data Form

The first step in shopping for a mortgage is documenting precisely what you need (see Figure 5.2) so that you can answer some of the basic questions lenders will ask you.

A sample Mortgage Data Form in Figure 5.3 includes most of the information that you should have at your fingertips for your initial contact with lenders. Appendix D has a blank form for you to fill out.

In the example in Figure 5.3, Mr. and Mrs. Homebuyer need a $225,000 mortgage to purchase a home for $250,000. The home will be their primary residence, and the LTV ratio will be about 90 percent. (They already have prequalified for this loan amount at prevailing interest rates.)

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