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U.S. mortgage process Origination

U.S. mortgage process Origination

Main article: Loan origination
In the U.S., the process by which a mortgage is secured by a borrower is called origination. This involves the borrower submitting a loan application and documentation related to his/her financial history and/or credit history to the underwriter, which is typically a bank. Sometimes, a third party is involved, such as a mortgage broker.

This entity takes the borrower's information and reviews a number of lenders, selecting the ones that will best meet the needs of the consumer. Origination is regulated by laws including the Truth in Lending Act and Real Estate Settlement Procedures Act (1974). Credit scores are often used, and these must comply with the Fair Credit Reporting Act. Additionally, various state laws may apply. Underwriters receive the application and determine whether the loan can be accepted. If the underwriter is not satisfied with the documentation provided by the borrower, additional documentation and conditions may be imposed, called stipulations.

Documentation and credit history can be used to categorize loans into high-quality A-paper, Alt-A, and subprime. Loans may also be categorized by whether there is full documentation, alternative documentation, or little to no documentations, with extreme "no income no job no asset" loans referred to as "NINJA" loans. No doc loans were popular in the early 2000s, but were largely phased out following the subprime mortgage crisis. Low-doc loans carry a higher interest rate and were theoretically available only to borrowers with excellent credit and additional income that may be hard to document (e.g. self-employment income). As of July 2010, no-doc loans were reportedly still being offered, but more selectively and with high down payment requirements (e.g., 40%).

The following documents are typically required for traditional underwriter review. Over the past several years, use of "automated underwriting" statistical models has reduced the amount of documentation required from many borrowers. Such automated underwriting engines include Freddie Mac's "Loan Product Advisor" (fka "Loan Prospector") and Fannie Mae's "Desktop Underwriter". For borrowers who have excellent credit and very acceptable debt positions, there may be virtually no documentation of income or assets required at all. Many of these documents are also not required for no-doc and low-doc loans.

Credit Report
1003 — Uniform Residential Loan Application
1004 — Uniform Residential Appraisal Report
1005 — Verification Of Employment (VOE)
1006 — Verification Of Deposit (VOD)
1007 — Single Family Comparable Rent Schedule
1008 — Transmittal Summary
Copy of deed of current home
Federal income tax records for last two years
Verification of Mortgage (VOM) or Verification of Payment (VOP)
Borrower's Authorization
Purchase Sales Agreement
1084A and 1084B (Self-Employed Income Analysis) and 1088 (Comparative Income Analysis) - used if borrower is self-employed
Closing costs Edit
In addition to the down payment, the final deal of the mortgage includes closing costs which include fees for "points" to lower the interest rate, application fees, credit check, attorney fees, title insurance, appraisal fees, inspection fees, underwriting fee and other possible miscellaneous fees.These fees can sometimes be financed and added to the mortgage amount. In 2010, one survey estimated that the average total closing cost United States on a $200,000 house was $3,741.

Market indices Edit
Common indices in the U.S. include the U.S. Prime Rate, the London Interbank Offered Rate (LIBOR), and the Treasury Index ("T-Bill"); other indices are in use but are less popular.

In the U.S., the fixed rate mortgage term is usually up to 30 years (15 and 30 being the most common), although longer terms may be offered in certain circumstances.

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