More importantly, a creditor holding a judgment gets paid before a later mortgage if the property involved gets sold. Lenders want any judgments or other liens, such as for taxes or other mortgages, to be paid before they will approve your mortgage. Bankruptcy may sometimes derail a mortgage application. Loan programs normally make bankruptcy filers wait two years after the case is over to apply for a loan.
For loans backed by the Federal Housing Administration, the wait is two years after discharge if you file a Chapter 7 Bankruptcy liquidation or one year after your first payment in a Chapter 13 wage-earner plan. Bankruptcies also diminish your credit history. A bankruptcy can stay on your credit report for up to 10 years. A bankruptcy will have less impact on a mortgage if you rebuild credit over time. Fair Isaac Corporation FICO , which calculates credit scores, suggests that you start rebuilding with a secured credit card, in which a bank account or a car sets your spending limit and guarantees that you will make your payments.
Christopher Raines enjoys sharing his knowledge of business, financial matters and the law. He earned his business administration and law degrees from the University of North Carolina at Chapel Hill. As a lawyer since August , Raines has handled cases involving business, consumer and other areas of the law. Your income, debt and credit history can affect your home quest. Not Enough Income You must make enough for a mortgage payment. Too Much Debt More pre-existing debt, such as credit cards, car loans and child support, means less money you have for your house payment.
No Steady Job History Keep your job or line of work unless something else pays more. Source of Down Payment Mortgage programs do not allow you to make down payments with other people's money, such as loans, or money from a real estate broker or the seller. Judgments and Other Liens A judgment is a court's way of saying you owe money.
Bankruptcy Bankruptcy may sometimes derail a mortgage application. Video of the Day.
Brought to you by Sapling. About the Author Christopher Raines enjoys sharing his knowledge of business, financial matters and the law. What Does Cosigning a Mortgage Mean? More Articles You'll Love. Letter of Explanation to Mortgage Lenders. The standard deviation represents any error associated with the model s used in generating the home valuation estimate. Although the home valuation estimates may be represented in dollars, the home valuation estimates may, alternatively, be described as point values, such as a combined point value or a zone point value.
The combined point value, provided by a home valuation estimator, is a property value estimate based on factors that contribute to property value, such as comparable housing sales, number of bedrooms, and number of bathrooms. A higher combined point value thus represents a relatively higher valued home.
Similarly, the zone point value is an estimate of the average or median property value in a zone or region, and is based on factors that contribute to average property value in an area or region, such as comparable sales and median income. A higher zone point value also represents a relatively higher average or median property value for a region.here
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To receive other information step , processor may receive, through communication channel , interest rate information. The current interest rate information may be received from a source of such information such as lenders and financial publications e. In addition to current interest rates, processor may also receive an indication of interest rate volatility described in greater detail below corresponding to the amount of interest rate fluctuation over a time period, such as 30 or 60 days.
Furthermore, processor may receive an indication of workflow required for the mortgage loan application. For example, processor may receive information indicating whether all required or necessary documents have been prepared or completed before closing, whether the appraisal has been performed, and whether a title search has been completed. To determine a likelihood indication that the received mortgage loan application will close with the locked mortgage interest rate step , processor may process the mortgage loan application information , home value information , and other information received in steps - In one embodiment, processor determines the likelihood indication in the form of a score.
The score also referred to herein as a Fallout Score provides an indication of whether the mortgage loan application may result in a closing with the locked mortgage interest rate. The score may further indicate whether closing will occur on or before a specified date, such as a closing date or the last day of, e. In one aspect of the invention, the Fallout Score is scaled into a range of to such that a Fallout Score of indicates a greater likelihood that a mortgage application will not close.
On the other hand, a Fallout Score of would indicate that the mortgage application is likely to close. Alternatively, the Fallout Score may be scaled into a range such that a lower score, e.
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In one aspect of the invention, the Fallout Score is determined based on a model as well as the received mortgage loan application information , received home value information , and other received information The information received in steps - are used to initialize or set the values of variables in the model, such as Fallout. Score model. Table 1 below lists exemplary variables that may be used in the Fallout Score model.
To facilitate explanation of the model, only a select number of variables are listed and described in Table 1. However, a skilled artisan will recognize based on reading the detailed description herein that any number of variables may be used to determine a likelihood indication, such as the Fallout Score.
For example, a borrower submits a mortgage application and is offered an interest rate e. However, during the 30 day period, interest rates on mortgages may fluctuate above or below the locked mortgage interest rate. In this example, the currently available interest rate interest may rise to 5. In the case when the currently available interest rate rises to 5. Here, the borrower is better off keeping in the lower locked rate. In the case when the currently available interest rate falls to 4.
With a 0. For example, a credit score may provide an indication of the credit risk associated with a borrower. A borrower that is a high credit risk more likely to default may have a low credit score, e. On the other hand, a borrower that is a low credit risk may have relatively higher credit score, e. Otherwise, the value of the variable Day is 0. Although the valuation estimate may be represented in dollars, it may be normalized on a point scale, such as 1 to The purpose of the loan, such as whether the loan is for a purchase, refinance, or cash out mortgage may also be considered.
Alternatively, the dollar amount of fees may be used as a variable. The LTV ratio may also be expressed as a decimal. In this case, the LTV ratio would be 0. For example, the standard deviation of mortgage interest rates may be determined over a day period. In this example, if mortgage interest rates fluctuate very little or not at all over the 30 days, the standard deviation will be relatively low.
If the mortgage rates fluctuate considerably over the 30 days, the standard deviation may be relatively higher when compared to the case when it changes very little or not at all. Larger values of the standard deviation represent a larger amount of interest rate volatility. With the Fallout Score determined, processor may provide the determined Fallout Score to an entity, such as lender , through network interface and communication channel step The Fallout Score may be provided though a network interface, such as a web browser. For example, FIG. When that is the case, lender , appraiser , or title company may allocate their resources accordingly.
For example, when the Fallout Score is below , an appraiser may perform an in-person appraisal for the subject property after performing another or second appraisal on other higher Fallout Score properties. With a higher relative score, the mortgage application with a Fallout Score above may be given priority and processed before other lower scoring mortgage loan applications. In some instances, processor may determine the Fallout Score repeatedly until the mortgage loan application closes step In one embodiment, processor may repeat steps - on a daily basis until the loan closes.
In another case, processor may perform an initial Fallout. Score determination, and then determine another Fallout Score 15 days before the proposed mortgage closing date or the end of the lock-in period. In one embodiment, an appraiser may receive one or more scores for properties requiring an appraisal. The appraiser may then perform the appraisals based on the Fallout Score. For example, the appraiser may prioritize completion of the appraisal of a property that is more likely to result in a closing, based on the Fallout Score, than another property that is less likely to result in a closing.
In another embodiment, a title company may receive one or more scores for properties requiring title searches, and then perform the title searches based on the Fallout Score. For example, the title searcher may first perform title searches on properties that are more likely to result in a closing based on the Fallout Score, than on those properties that are less likely to result in closings.
In one embodiment, processor or computing platform therein may also generate the Fallout Score model. Although the Fallout Score model is described, any type of model or mathematical transform may be used instead. The reference information may include mortgage loan application information, home value information, and any other information, such as interest rate information available before the mortgage loan closed. In addition, the reference information identifies whether each of the reference mortgage applications closed.
For example, a reference mortgage application may include a day lock, the corresponding locked mortgage interest rate, the closing date, and daily interest rate information for each of the 30 days leading up to closing. The reference information may include information that is considered reliable and, preferably, verified e. To determine the coefficients step , computing platform may process the reference information received in step based on statistical techniques, such as a logistic regression.
By using statistical techniques, computing platform may determine the corresponding coefficients or weights of the Fallout Score model, such that the model can determine a Fallout Score. Computing platform thus uses a statistical technique to determine each of these coefficients.
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In one embodiment, computing platform may use a statistical technique referred to as logistic regression to determine the coefficients of step Logistic regression models may be used to examine how various factors influence a binary outcome. An event or result that has two possible outcomes is a binary outcome e. Logistic modeling is available with many statistical software packages. The logistic regression approach permits determining coefficients for the Fallout Score model based on the reference information received in step With that general overview, steps - will be described below in greater detail.
To determine the outcome for each of the reference mortgage loan applications included in the reference information step , computing platform may determine whether the mortgage loan application closed or not i. Alternatively, the outcome may be defined as whether the mortgage closes within a time period, such as within 15 days. Computing platform thus processes each reference mortgage loan application to determine an outcome, storing the information depicted in FIG.
To determine the likelihood, computing platform may further process the reference information, using a logistic regression, to determine the odds that an outcome is possible. Before computing platform utilizes a logistic regression, the values of a, b 1 , b 2 ,. In this example, the computing platform uses six coefficients i. Although this example uses six coefficients, a skilled artisan would recognize that additional coefficients and corresponding variables may be used instead. Indeed, any other variables or factors may be used that serve as an indication of whether a mortgage application is likely to close or not.
The five variables described herein are only a select few of the many that can be used, and the selection of these five is only exemplary to facilitate explanation herein. Examples of other factors that may be used in the model include the variables of the Table 1 above or any other information included in or related to a mortgage loan application. Equation 3.
Computing platform may then determine an estimate of the coefficients of the Fallout Score model step That is, the computing platform may solve for an estimate of a, b 1 , b 2. Although computing platform may utilize a logistic regression approach as described in this example, a skilled artisan would recognize that any other approach may be used instead to determine the coefficients, such as the Probit regression approach available from SAS Institute Inc. By using equation 4, computing platform may scale the initial coefficients such that every 60 Fallout Score points doubles the odds that a mortgage application is likely to close.
Not Enough Income
The scaled coefficients may be used as the actual coefficients used in the Fallout Score model, such as the model illustrated in FIG. Accordingly, computing platform may determine one or more coefficients for the Fallout Score model based on a logistic regression approach using reference information see, e. Computing platform may then use the Fallout Score model to determine the Fallout Score.
The system may be embodied in various forms including, for example, a data processor, such as the computer that also includes a database. Moreover, the above-noted features and other aspects and principles of the present invention may be implemented in various environments. Such environments and related applications may be specially constructed for performing the various processes and operations of the invention or they may include a general-purpose computer or computing platform selectively activated or reconfigured by code to provide the necessary functionality.
For example, various general-purpose machines may be used with programs written in accordance with teachings of the invention, or it may be more convenient to construct a specialized apparatus or system to perform the required methods and techniques. Systems and methods consistent with the present invention also include computer readable media that include program instruction or code for performing various computer-implemented operations based on the methods and processes of the invention. The media and program instructions may be those specially designed and constructed for the purposes of the invention, or they may be of the kind well known and available to those having skill in the computer software arts.
Examples of program instructions include for example machine code, such as produced by a compiler, and files containing a high level code that can be executed by the computer using an interpreter. Moreover, although reference is made herein to using the Fallout Score to assess a residential property for a mortgage loan, in its broadest sense systems and methods consistent with the present invention may provide a score for any type of property including commercial property. Year of fee payment : 4. Systems and methods are provided for determining an indication that an application for a mortgage loan to secure a property may result in closing of the loan transaction.
In one embodiment, a method includes receiving application information, such that the application information includes at least borrower information, property information, and a first interest rate; receiving home value information, such that the home value information represents an estimated value of the property; receiving a second interest rate; and determining the indication based on the received application information, received home value information, and received second interest rate, such that the indication represents a likelihood that the mortgage loan may result in closing.
Field of the Invention The present invention generally relates to financial systems and to systems and methods for processing financial information. Background Information When a borrower submits a mortgage application to a lender or mortgage broker , the borrower may be offered an interest rate for the mortgage loan. In the drawings: FIG. Equation 3 Computing platform may then determine an estimate of the coefficients of the Fallout Score model step What is claimed is: 1.
A computer-implemented method comprising: identifying, using a computer processor, data corresponding to a mortgage loan application, comprising applicant data, an identification of a property, and a first interest rate;. The computer-implemented method of claim 1 , wherein the first interest rate is a locked interest rate. The computer-implemented method of claim 1 , wherein the second interest rate is a current interest rate.
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The computer-implemented method of claim 1 , wherein the data corresponding to a mortgage loan application further comprises a closing date and a number of points charged for the loan. The computer-implemented method of claim 1 , wherein the value data corresponding to the property comprises an average or median property value for a geographical region that includes the property. The computer-implemented method of claim 1 , wherein determining a likelihood that the mortgage loan application will close comprises determining a likelihood that the mortgage loan application will close before a certain date in the future.
The computer-implemented method of claim 1 , wherein determining a likelihood that the mortgage loan application will close comprises applying a fallout score model. The computer-implemented method of claim 7 , further comprising determining a product of a coefficient of the fallout score model and a corresponding variable in the fallout score model. The computer-implemented method of claim 7 , further comprising using a logistic regression analysis to determine a coefficient for the fallout score model. The computer-implemented method of claim 7 , further comprising adjusting a coefficient for the fallout score model by scaling the coefficient into a predefined range.
A system comprising: a processor; and. The system of claim 11 , wherein the first interest rate is a locked interest rate. The system of claim 11 , wherein the second interest rate is a current interest rate. The system of claim 11 , wherein the data corresponding to a mortgage loan application further comprises a closing date and a number of points charged for the loan. The system of claim 11 , wherein the value data corresponding to the property comprises an average or median property value for a geographical region that includes the property. The system of claim 11 , wherein determining a likelihood that the mortgage loan application will close comprises determining a likelihood that the mortgage loan application will close before a certain date in the future.
The system of claim 11 , wherein determining a likelihood that the mortgage loan application will close comprises applying a fallout score model. The system of claim 17 , further comprising determining a product of a coefficient of the fallout score model and a corresponding variable in the fallout score model. The system of claim 17 , further comprising using a logistic regression analysis to determine a coefficient for the fallout score model.
The system of claim 17 , further comprising adjusting a coefficient for the fallout score model by scaling the coefficient into a predefined range. Remotely defining security data for authorization of local application activity. USB1 en. Computer system to produce and communicate output data to carry out a financial transaction comprising a mortgage loan.
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