Talk:Mortgage loan

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[edit] Split of "Mortgage" from "Mortgage loan"

Intro: most of the text moved here from mortgage to allow a split between the legal device and the mortgage loan, since they are distinct concept and different levels of detail required. Grateful assistance in cleaning up.--Gregalton 15:32, 16 December 2006 (UTC)

[edit] Clarification requested for "various net worth measures" in the section "Payment and debt ratios"

Will someone who works in brokerage or underwriting clarify the vague "various net worth measures" statement? I've gathered elsewhere on the web that there are often maximum limits on net worth, to make sure loans go only to people who actually need them. Is that correct? Also, are there minimum limits on net worth?

In other words, could a knowledgeable person (LO, AE, etc) answer this (for the US market, both conforming and nonconforming):

Are there maximum net worth limits, such as "< X (where X is a positive number)"? If so, what are typical values for X?

Are there minimum net worth limits, such as "> Y (where Y is a negative number)"? If so, what are typical values for Y?

I have wracked my brain for dozens of creative Google queries trying to find even a glimmer of this info. It seems like DTI is all anyone ever talks about. Lots of info on how to figure your net worth, but none on what limits may or may not be used in underwriting decisions. Does it really not matter? Or do people just tend not to think about it?

Thanks. — Lumbercutter 16:05, 22 April 2007 (UTC)

I can't answer this for US market with certainty (although I'm familiar with it), but I can add the following in general terms (for what it's worth):
  • First use is often to look at downpayment source and funds to cover closing costs, etc. So minimum is in relation to the property and loan. Negative clearly would cause the underwriter's spider sense to tingle.
  • "Various" measures can mean underwriters/lenders may include/exclude certain assets or liabilities for lending purposes (exclude cars, certain illiquid assets, locked-up retirement accounts, etc).
  • Lenders may give better risk weighting (better pricing) to borrowers who have e.g. cash/assets buffer of three-six months or more.
  • I'm not aware of any maximum net worth limits (anywhere), except perhaps to qualify for some government programs/tax issues/subsidies. Note that certain higher levels of net worth may hit automated credit scoring flags if they appear unusual.
  • Apart from downpayment issues, use of 'minimum' net worth is not straightforward, and used more frequently for "hand-written" underwriting - much less so when credit-score/automated lending dominates. For example, someone doesn't qualify on an income basis (perhaps due to a highly variable income) may get consideration on the basis of assets. Used sometimes for non-standard products (negative interest) where income may be lumpy (and possibly driven by gains on the assets).
  • For more automated lending (e.g. with automated underwriting), net worth may be used to check for anomalies - e.g. someone who declares high income but has no/negative assets, age/asset mixes that seem odd, etc. These anomalies may simply be used to require additional documentation, or they may lead to disqualification for a certain type of loan, or recommend for manual underwriting, or just add to pricing. Since the algorithms used to find these anomalies are pretty complex, it may be impossible to say that there is a minimum - there are simply increasing possibilities of rejection or pricing effects depending on other characteristics. If the algorithm is looking for fraud-related anomalies, it may be an adaptive algorithm, and the effect could change from month to month.--Gregalton 05:05, 24 April 2007 (UTC)
Thanks. That's a great answer because it explains more than I could find anywhere else on the web. Much obliged. — Lumbercutter 15:20, 24 April 2007 (UTC)

[edit] PPOV

"The UK mortgage market is one of the most innovative and competitive in the world." Consider attributing or removing. —Preceding unsigned comment added by 24.205.143.68 (talk) 03:54, 30 November 2007 (UTC)