An Overview of Home Financing

Follow the money to understand how it all works.

After your loan has closed, it is sold to Wall Street where it is packaged and pooled with other loans into large bonds. These bonds are typically backed by government agencies such as FNMA (Fannie Mae), FHLMC (Freddie Mac), and GNMA (Ginnie Mae for FHA & VA loans). Since these agencies are guaranteeing the mortgage bonds, they are very particular about setting the requirements for each loan that goes into them. These requirements are called "Underwriting Guidelines".

All underwriting guidelines address the following four criteria:

  • Collateral


    Each mortgage loan is secured by the home as collateral. To help determine the value of the loan collateral, lenders must obtain an independent home appraisal.

  • Income


    It is very important to make sure that home buyers are able to afford the monthly payments. To determine this, lenders are required to verify current and likely future income by reviewing tax returns, W-2's, and pay statements.

  • Assets


    The agencies require that the lenders verify that home buyers have enough money for the down payment and any closing costs associated with purchasing a home. In some cases, the agencies require some money left after closing for reserves. This is accomplished by reviewing bank statements, retirement, and investment statements over a period of time.

  • Credit


    A mortgage is typically a person's largest financial obligation, and is designated for borrowers who have demonstrated an ability to manage their finances. To determine this, lenders are required to review a borrower's credit report. But some customers are in the process of building or re-building their credit. Not to worry. Shea Mortgage's Customer Plus+ program can help put you on the correct path, so that you may be able to buy your dream home.

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