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
Miscellaneous
• 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.)
