What Do Loan Originators Feel is More Important to Clients?
Are rates more important than fees or points?
Maybe or maybe not. If your borrower intends to keep the loan for a very short period ( like two years or thereabouts), It could make more sense to get a larger rebate and take the higher interest rate.
Then again, if a borrower wants to keep their loan for a much longer time they would be better served with a lower interest rate by paying “points”. In many cases, if a mortgage applicant pay 1 point to lower the rate by .375% they will break even in approximately four years, and it hardly ever is practical unless the new owner or existing homeowner intends to use the better interest rate to pay down the loan quicker.
When it comes to fees, you have to analyze the fees from lenders (mainly loan processing & underwriting) and third-party costs (title, settlement, appraisal, recording, doc stamps).
A number of mortgage lenders and brokers have substantially higher fees, while others may have higher interest rates instead. This is exactly why, the person needs to get a written estimate of all associated fees for the proposed transaction, and then evaluate the choices.
Here’s an example: Lender A may require you to pay $1,200 for processing and underwriting, while another charges nothing. However if the “lower cost” lender’s rates are higher by .125%, it is a wrong move to go with zero cost lender.
What are the leading factors that determine who gets a loan?
A borrower’s debt-to-income ratio (DTI) is the most important thing. The DTI is calculated by adding the total house payment (principal and interest, taxes, insurance and mortgage insurance, if applicable), and all “long-term” debt obligations (only those which will continue for over 10 months), and then using that sum as a percentage of the gross monthly income.
For a conventional loan, 43% is the maximum DTI, but some loan programs like FHA may allow as much as 55% DTI.
The lender must also take into consideration the loan-to-value ratio (LTV) which is the loan amount expressed as a percentage of the home’s value. if the LTV is above 80%, the borrower will have to pay mortgage insurance or the lender will include it in the rate.
Following that, the lender must review the borrower’s income.
They will to see if the borrower been employed or self-employed in the same occupation for a minimum of two years?
Can the borrower document their income using 1040 taxes?
Lenders use the adjusted gross income from Federal tax returns, and average the last two years’ income for their monthly amount.
Lastly, the borrower will have to provide documents that they have sufficient liquid assets to complete the transaction. All large deposits on their bank statements will have to be sourced. Some buyers receive gifts from relatives and they must be documented as well.