1. Mortgage Financing Basics

2. Terminology Mortgage Mortgagor (example – CTX Mortgage)
Voluntary lien on Real Estate, given by the mortgagor to secure the payment of a debt or the performance of an obligation to the mortgagee.
Mortgagor (example – CTX Mortgage)
Borrower retains legal title.
Mortgagee (example – Mr. and Mrs. Bob Andrews)
Has a lien on the property securing the debt.
Mortgage Loan Instruments
Promissory Note
Amount of debt, time and method of repayment (Prepayment Penalty) & rate of interest.
Mortgage Document or Deed of Trust
Terms of note, duties of mortgagor, provisions for default, assignment of mortgage & release of mortgage lien.

3. Where does the money come from?
Major Sources of Lending
Banks, Thrifts, Credit Unions (Fiduciary lenders)
Mortgage Brokers (Middle man not a lender)
Internet Lending
Mortgage Bankers (Lender using their own $)
Secondary Mortgage Market
Loans bought and sold after they have been funded. Agencies purchase loans and assemble them into securities for sale to investors.
Agencies
Fannie Mae – Privately owned stock issuing agency supervised by Federal Government. Deals in FHA, VA and Conventional Loans.
Freddie Mac and Ginnie Mae similar agencies.

4. Types of Loans Used to be only… 30 & 15 Year Fixed 1 Year ARM
7 Year Balloon 

5. Types of Loans Now can be… 1 Month ARM 80-20 3/1 or 3/6 ARM
Full Verification
5/1 or 5/6 ARM
No Income
7/1 or 7/6 ARM
Stated Income
10/1 or 10/6 ARM
No Ratio
2/28 or 3/27 ARM
No Income/No Asset/ No Employment (No DOC)
Libor ARMS
A-Loans
T-Bill ARMS
B-C Loans
Cofi ARMS
30 or 40 Year Amortization

6. Financing Techniques Straight Loan Amortizing Loan
Term Loan or Interest Only Loan. Used to be for seconds only but now a popular first mortgage option.
Amortizing Loan
Monthly payments of interest and principal.
Adjustable Rate Mortgage (ARM)
Interest Rate and payments fluctuate. Tied to a fixed margin for the life of the loan and an adjustable index. Rate caps yearly and for the life of the loan.
Balloon Payment Loans
Lump sum payment after a period of time.

7. 4 Critical Elements of a Mortgage Application
Credit
Character
Appraisal
Collateral
Income
Capability
Down Payment
Cash

8. Credit Most important factor in lending today!
Investigates your debt repayment character
Determines how much you really owe
Tri-merge credit report – TransUnion, Equifax, and Experian are all closely looked at when approving a loan for a mortgage.

9. Credit Scores FICO Scores > 760 = EXCELLENT CREDIT
= GOOD CREDIT
= FAIR CREDIT
< 620 = POOR CREDIT
< 500 MAJOR CREDIT PROBLEMS

10. Appraisal
Determines if there is sufficient value in the property to protect the interest of the buyer & the bank
Performed by a state licensed appraiser
LTV = loan to value = (loan amount / purchase price or appraised value [whichever is less])
FHA & VA appraisals are slightly more restrictive
Drive by or cyber appraisals are common

11. Employment - Income Hourly Pay vs. Commission vs. Salary Overtime
Second Job
Disability*
Self Employed – Depreciation
Child Support*
Social Security
Rental Income
Bonus**
Car Allowance
Interest**
* = Has to continue for 3 years
** = Average of last two years

12. Down Payment Acceptable Sources Down Payment Requirements
Gift from family (w/ restrictions)
Assets (1 or 2 months bank statements)
Tax Return Money
Equity in present home 
Down Payment Requirements
Conventional = 3% - 5%
FHA = 2.25% (3% into deal)
VA =0%
Special Programs = 0% (80%/20%)

13. Closing Costs Credit Report Appraisal Fee Flood Certification Fee
Attorneys Fees
Title Insurance
Recording Fees
Vermont Property Transfer Tax
Points

14. Conclusion
The mortgage process is more of an art than a science. Putting a loan together is like breaking the components of the borrowers down to pieces of a puzzle and finding the right loan that creates a picture something like this: