Financing and Lender Requirements
Who holds what
The promissory note is the promise to pay; the deed of trust is the security instrument that lets the trustee foreclose. Texas foreclosures are non-judicial, with notice of sale and a sale held on the first Tuesday of the month at the courthouse.
Loan math and vocabulary
- LTV = loan amount ÷ value or price, whichever is lower.
- One point = 1% of the loan amount; discount points buy down the interest rate.
- PMI is typically required above 80% LTV; the borrower may request cancellation at 80% and it terminates automatically at 78% of original value.
- Programs: conventional; FHA (upfront MIP plus annual MIP); VA (entitlement, funding fee, no monthly PMI); USDA (rural, income limits).
Disclosures and timing
A Loan Estimate goes out within three business days of application. The Closing Disclosure must be received at least three business days before consummation. RESPA bars kickbacks and unearned fees for settlement services.
Texas home equity (50(a)(6))
Capped at 80% combined LTV, one at a time, closed at a title company or attorney's office, with a 12-day waiting period after application, a three-day right to rescind, and no prepayment penalty.
Traps
"Pre-qualified" is not "pre-approved." Seller concessions reduce the buyer's costs; they do not change the sales price on the contract. Without a financing addendum, a loan denial may look like a buyer default.
Worked example
Price $400,000, 10% down, 1.5 points: the loan is $360,000 and the points cost 0.015 × $360,000 = $5,400.