Understanding Loans and Borrowing Money
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by: nickmarino
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Date: Tue, 13 Dec 2011 Time: 10:24 PM
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which provides an incentive for the lender to engage in the loan. Some loans are guaranteed by the federal government and offers flexible repayment options
. The lender can use what is call the yield spread premium YSP through an increase in a borrower's interest rate to pay for their NRCCs non-recurring closing costs. For example on a loan amount of 3500,
Let's estimate that the NRCCs are equal to about $3500. The lender can increase the rate so they receive an additional point, this would typically require a .25% increase in rate to raise the lender's yield spread premium by one full point. . And as earlier discussed, a point equals 1% so in this case, $3,000 to cover the borrower's $3500 in non-recurring closing costs. The lender would then likely keep the additional $200 as added profit on the loan.
The FHA loan is by far the most popular and widely used of the government loan programs. As of June 2011, FHA loans accounted for about 30 percent of the overall mortgage market. Their market share was in the single digit percentages just a few years ago is issued by banks, savings and loans, credit unions, public utilities, and even merchants
The lender will let you know the decision on the loan. Your lender will look into the credit scores so to assure how financially reasoned is a borrower and based on these would settle on the rate of interest and could decline loans. Of course, the lender will assess a small fee on top of the loan amount, though this is usually not a hefty sum.
Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.
Remember that every lender is different and has specific stipulations for each loan. Depending on the use of the loan either mortgage, business, or personal.
You may find that your no closing cost mortgage may actually involve a few fees. In some cases you may still be responsible for a few closing fees like escrow and appraisal.
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