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Mortgage loan qualification refers to the process of measuring the
borrowers’ financial ability to repay loan, of estimating the long-term value
of the property used to secure the loan and of estimating the borrower’s
willingness to repay the debt (credit record). These factors, ultimately, are
used to determine how much (if any) money will be advanced to a mortgage

In general, lender needs to perform a credit analysis and evaluate the
subject property for every mortgage application. The first is associated with
the lender’s measure and perception of the risk on the loan to ensure the
structured mortgage term satisfactory to both lender and borrower. The
second is to provide the present worth (and possible future trends in value)
of the subject property from the point of view of a mortgage lender.

Basic information required from a borrower to qualify for a standard
residential mortgage loan is grouped as follows:

•        Characteristics of the applicants

In general, the information requested (and therefore thought to be useful in
assessing risk) includes a statement for each of the persons involved in the
application (including guarantors) of their full name, age, place of residence,
occupation and employment history, the amount and sources of income and
other revenue which may be used to repay the debt, the number of
dependents and relationship to these, present wealth (i.e., savings, etc.)
and indebtedness, and personal references.  In addition, the amount of
equity (applicants’ capital currently invested, or to be invested, in the
property) and sources of additional financing (if these are to be used)
should be indicated.

•        Characteristics of the property

A statement of the civic address and legal description, dimensions, details of
construction, servicing and associated fixtures and equipment, and the
current real property tax and assessment are generally required.   

An appraisal report will generally confirm the estimated market value and
lending value of the property. This estimate of value does not necessarily
correspond to the purchase price, the assessed value for property taxes, or
the market value.

The appraisal of the property and the investigation of the prospective
borrowers’ credit rating are of equal importance in the decision whether or
not to lend.
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