Understanding property values is essential to the mortgage lending due diligence process because it helps you make wise lending decisions. Estimating loan sums for house mortgage loans and home equity loans is driven by property valuations. Making two loan valuation decisions—the equity and loan-to-value ratios—requires calculations of related but not identical concepts.
Equity is the homeowner’s total investment in their home. The appraised value of a home is subtracted from the current mortgage balance to determine equity. Homeowners with more equity qualify for larger loans than those with little or no equity, as long as they have good credit scores and overall financial profiles.
The loan-to-value ratio, expressed in whole percentage amounts, calculates how much a homeowner still owes on their mortgage. By dividing the current mortgage balance by the home’s appraised worth, the loan-to-value ratio is determined. A loan-to-value ratio of 70 per cent or less is typically required for a home equity loan to be approved.
Mortgage appraisals, specifically
While there is no denying the importance of this data, manual processing can be time-consuming. Fortunately, automated tools can help simplify the process of estimating loan balances more precisely.
Property Assessed Clean Energy (PACE) reports identifying property owners who have PACE loans, along with tax information, information about liens, the amount of money available for improvements, and other useful loan information. The PACE loan data set gives a thorough overview of which properties would benefit most from financing or energy-efficient upgrades. To more accurately calculate the Combined Loan-to-Value (CLTV) and better understand the owner’s property-related debt, PACE loans in the DataTree databases are linked to the property and connected to other voluntary and involuntary liens.
Reports from Fusion Valuation combine computerized data on house valuation with the expert opinion of a qualified evaluation official. The fair market value of an asset being used as security for a loan application is the collateral value. Generally, the offered collateral must equal or exceed the loan application’s requested amount. Calculating the value of the collateral is referred to as collateral evaluation. There are no underwriting rules for collateral evaluations; each lending institution creates its own collateral evaluation procedures.
Fusion Inspector Exterior and Fusion Appraiser Exterior are the two levels of Fusion reports that DataTree offers to mortgage lenders. The reports contain the names of the field agent and appraiser as well as the report’s effective completion date and offer a hybrid solution combining automated data and expert evaluation:
Fusion Inspector Exterior Reports include market information in addition to a property inspection and value opinion provided by a licensed real estate agent or broker. A certified or licensed appraiser prepares the final value reconciliation.
Fusion Appraiser Exterior Reports include a property inspection and value by a professional or licensed appraiser, comprehensive information on a specific property, and an assessment of the neighborhood’s condition.
Lenders can manage their portfolios while adhering to the Interagency Guidelines for Evaluation content thanks to Market Analysis and Condition (MAC) reports. These reports, which qualified inspectors create, provide market area data and uniform assessments of a property’s physical condition. Each MAC report advises property appraisal and loan terms, including collateral and loan balance. When used with an Automated Valuation Model (AVM), MAC reports are a perfect tool for lenders to use when making decisions about home equity loans that comply with Interagency Guidelines for Evaluation regulations.
The MAC report for each client includes the findings of an exterior property inspection, photographs of the property, information specific to the property, and a condition rating. A section for free text comments is included in MAC reports, along with neighborhood details like street views, location maps, and aerial map addendums.
How to Control Account Entry for Loan Repayment
A loan payment is recorded as a credit to cash, a debit to the interest expense, and a loan payable when it is made in your account.
Your liability account in Loan Payable should be reflected in your lender’s records. By comparing your principal loan balance to your bank statement, you may ensure that your loan Payable is accurate.
This duplicate entry will be shown as a credit to the company’s current liability account (or Loans Payable) for the payback amount and a debit to the company’s current asset account for the amount that the bank placed into the company’s checking account. There may be a small difference between these two sums due to bank fees and prepayment interest.
Do Loan Payments Count as Expenses?
A loan payment frequently consists of a principal reduction payment and an interest payment. The principal part reduces a liability like Loan Payable or Notes Payable, whereas the interest portion is recorded as an expense.
Rather than recording the interest expense as soon as the payment is made, the accrual method of accounting records interest liabilities and costs after each accounting period. This can be accomplished by amending the entry to align the interest expenditure with the relevant period. This results from the company’s obligation to pay interest as of the balance sheet date.
Does an Income Statement Include Loan Repayment?
Your income statement will only show an interest expense for the interest component of a loan payment. Your business’ income statement will not reflect the main payment of your loan.
This payment is a reduction of your liabilities, which are shown on your company’s balance sheet as Loans Payable or Notes Payable. The Statement of Cash Flows also lists the principal payment as a cash outflow.
Should I consult a lawyer?
The individual who might be able to help you with any ongoing foreclosure troubles you are encountering is also an expert foreclosure lawyer. If you have a skilled foreclosure lawyer representing your interests in a house mortgage foreclosure, your chances of getting the best result are the highest.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.