Activity 1.1 The Mortgage Process

Underwriting is the correct answer because it refers to the process of evaluating a loan application and determining the risk involved in lending money to a borrower. It involves assessing the borrower's creditworthiness, income, and other relevant factors to determine if they meet the lender's guidelines for loan approval. This process helps the lender make an informed decision about whether to approve or deny the loan.

A conventional mortgage refers to a first mortgage that is not insured by the federal government. Unlike FHA and VA mortgages, which are backed by the government, a conventional mortgage is solely the responsibility of the lender. This means that the lender bears the risk of default by the borrower, as there is no government insurance to protect them. Conventional mortgages typically require higher credit scores and down payments compared to government-backed mortgages.

A principal residence where a borrower lives at least 75% of the time is considered owner-occupied because it is the primary home of the borrower. This means that the borrower resides in the property for the majority of the time and it is not rented out or used as a second home.

A condominium is characterized by ownership extending only to the interior dwelling and the shared ownership of common external areas by residents. This means that each individual owner has exclusive ownership of their unit or apartment while also sharing ownership and responsibility for common areas such as hallways, elevators, and recreational facilities. The concept of a condominium allows for a combination of private ownership and shared community living.

Brokering is the correct answer because it refers to the process of working with multiple lenders to find the best loan for a borrower. A broker acts as an intermediary between the borrower and the lenders, gathering information about the borrower's financial situation and needs, and then shopping around to various lenders to find the most suitable loan options. This involves comparing interest rates, terms, and conditions offered by different lenders to ensure the borrower gets the best possible loan. The broker facilitates the loan application process and helps negotiate favorable terms for the borrower.

After a loan closes, the entity responsible for the loan will collect the borrower's monthly payments and report the payment history to the credit bureaus. This ongoing process of collecting payments and reporting them to the credit bureaus is known as servicing. The entity ensures that the borrower's payments are properly recorded and reported, which helps to establish and maintain the borrower's credit history.

Commercial banks, savings and loans, mortgage bankers, and mortgage brokers are examples of primary mortgage market lenders. These entities directly provide loans to borrowers for purchasing or refinancing real estate properties. They play a crucial role in the primary mortgage market by originating and underwriting mortgage loans. Unlike secondary mortgage market entities, primary mortgage market lenders are involved in the initial loan origination process and directly interact with borrowers.

A processor is responsible for verifying the information provided in a loan application and organizing all the necessary documents for the underwriting process. They ensure that all the required information is accurate and complete before submitting the file for further evaluation. The processor plays a crucial role in streamlining the loan application process and ensuring that all the necessary paperwork is in order for the underwriter to make an informed decision.

The conforming mortgage limit for a single-family residence in Maryland is $417,000. This means that if someone wants to obtain a mortgage loan for a single-family home in Maryland, the loan amount cannot exceed $417,000 in order to be considered a conforming loan.

The Federal Housing Administration (FHA) is the entity that insures a loan in lieu of Private Mortgage Insurance (PMI). PMI is typically required by lenders when a borrower makes a down payment of less than 20% on a conventional mortgage. However, if the borrower qualifies for an FHA loan, they can avoid PMI because the FHA provides mortgage insurance to protect the lender in case of default. FHA loans are backed by the government and are often more accessible to borrowers with lower credit scores or smaller down payments.

The document that outlines outstanding approval conditions is known as "Condition approval." This document lists the conditions that need to be met before final approval can be granted. It serves as a checklist for the borrower and lender to ensure that all necessary requirements are satisfied. The condition approval document helps to streamline the approval process and ensures that all parties are aware of the remaining tasks that need to be completed.

Ginnie Mae (Government National Mortgage Association)

Fannie Mae, Freddie Mac, and Ginnie Mae are the three entities that dominate the secondary market. These organizations play a significant role in the mortgage industry by purchasing mortgage loans from lenders and then packaging them into mortgage-backed securities (MBS) for investors. Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that operate in the conventional mortgage market, while Ginnie Mae is a government agency that focuses on government-backed loans such as FHA and VA loans. Together, these entities provide liquidity to the mortgage market and help promote homeownership by ensuring a steady supply of mortgage funds.

The term "owner occupied" refers to a property that is owned and used by the owner as their primary residence. It is not considered an income-generating property because the owner is not renting it out or using it for investment purposes. In contrast, non-owner occupied, rental property, and investment property all involve properties that generate income through renting or investment activities. Therefore, "owner occupied" is the exception among the given options.

Unimproved real property refers to land that has not been developed or built upon. It does not include any structures or improvements such as buildings or homes. Therefore, out of the given options, "Land" is the correct answer as it represents unimproved real property.