2-14-2 TRID - Pre-Qualification, Pre-Approval and Application
2-14-2 TRID - Pre-Qualification, Pre-Approval and Application
Pre-Qualification, pre-approval and qualification calculations used by the loan originator must follow standard loan program guidelines. Whether the borrower submits an application determines which cost estimate process to use.
A prospect or applicant may provide income documentation for evaluating financing ability, but this act does not create an application. Regardless, we require all borrowers to document ability to repay through our complete application process.
BD MORTGAGE GROUP LLC
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Application Paths and Requirements
Understanding the difference between the different application paths will guide the originator as to which path to choose. The MOST IMPORTANT POINT is that a transaction is not an application until the borrower has selected a property.
Application (Closed End) Processes
Description Process
Product Discussion No Prequalification, just rates and points Get Product Discussion Worksheet Emphasize NOT application
Credit Report Property LOS Status Disposition
NO
NO Pre-Qualification No application ? simply destroy per Privacy Policy
Regulations None
Cost
None
Disclosures
Pre-Qualification Pre-Qualification Certificate
Product Discussion Worksheet Credit Authorization Pull Credit YES NO Pre-Qualification Issue Certificate or send to underwriting for denial Reg. B Equal Credit ? for denial/adverse
Estimate of Costs Form
Pre-Approval
Binding Commitment
Application
Specific Request for Mortgage
Pre-Property loan Approval (Underwriting Only) Complete Application Except Property YES
Pre-Approval, including obtain sales contract and property info
YES
NO Pre-Approval Underwriting Issues Preapproval or Denial (unless customer withdraws) Reg. B Equal Credit Opportunity - Adverse HMDA Reporting (unless withdrawn) If Product Selection is ARM ? Charm Booklet, ARM Disclosure FCRA ? Credit Score Notice
Estimate of Costs Form
YES Application Taken Issue Loan Commitment
HUD Settlement Booklet (Purchases) Servicing Transfer Disclosure ( ARMs - CHARM Booklet, ARM Disclosure Interest Only - NonTraditional Mortgage Booklet, Illustrations FACT Act Notice of Credit Score Privacy Policy Application Disclosure (appraisal and privacy notices) General Conditions Letter State specific disclosures Loan Estimate Process
BD MORTGAGE GROUP LLC
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2-14-3 Loan Estimate Step-by-Step Application Procedure
Party Borrower Loan Originator
Borrower
Step Contacts Lender Qualifies Request ? Qualification or PreQualification?
Description Expresses interest in interest rates in general Does the borrower have a specific property or loan amount? If yes:
Purchase: In a pending purchase the originator should request a copy of the sales contract. At minimum the borrower must provide Property Address Sales Price Real Estate Taxes
Until there is an accepted contract, the transaction remains in pre-qualification/inquiry status. Originator should ALWAYS list property address as "TBD-to be determined".
Refinance: In a refinance, the originator should request a copy of the deed, title insurance policy and homeowner's insurance policy. At a minimum borrower must provide Property Address Existing Loan Amount Real Estate Taxes Insurance Premium All Transactions: Borrower must provide proof of income, assets and credit history for qualification ? see Complete Application Checklist process. At a minimum borrower must provide: Social Security Number to authorize credit report Complete Legal Name Verifiable Gross Monthly Income
LOAN ESTIMATE Process IS required within 3 business days of providing information
If No:
Confirms Documentation Requirement
Originator may quote general interest rates and program information and offer to pre-qualify. LOAN ESTIMATE is NOT required Acknowledges documentation request and agrees to provide documentation Agrees to participate in qualification process.
BD MORTGAGE GROUP LLC
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Party Loan Originator
Loan Originator Loan Originator Borrower Originator Borrower
Step Performs Qualification Process (Ability to Repay)
Description Obtains credit report and reviews total obligations. Total Obligations are listed under #2 of Qualification Worksheet. See Exhibit Income is entered in #5 of Qualification worksheet. If verbal income is provided, confirm income calculation follows industry standard.
Hourly = Rate x 40 x 52 / 12 Weekly = Rate x 52 / 12 Bi-Weekly = Rate x 26 / 12
Identify Programs and Loan Amounts Eligible
Identifies Estimate Track Acknowledges Qualification Results Proceed to issue LOAN ESTIMATE Intent to Proceed
Calculate Mortgage Payment, taxes insurance, Homeowner's Association/Condo, PMI and total in #1 Divide #1 by #5 for Housing Expense Ratio ? Should not exceed program guidelines (28% Conv., 31% FHA/Modification) Divide #2 ? Monthly Obligations, by Income #5 for Total Debt Ratio ? should not exceed program guidelines (38% - conv, 43% FHA/Modification Based on current pricing, identify 3 pricing options for the individual loan type for which borrower qualifies. For Broker ? O point to borrower ? Above Par Par Price to Lender ? Par Price Discounted Rate ? Below Par If closed-end transaction ? Know Before You Owe KBYO If HELOC, Reverse, or Mobile Home - GFE Acknowledges Qualification Results ? if acceptable, proceed to KBYO LOAN ESTIMATE.
ONLY provide LOAN ESTIMATE if terms are acceptable and borrower meets program guidelines. ONLY proceed to application if terms are acceptable Borrower provides signed "intent to proceed"
BD MORTGAGE GROUP LLC
4
2-14-4 TRID - Transaction Type - Know Before you Owe OR GFE 2010
BD MORTGAGE GROUP LLC
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