Underlying reason an applicant seeks a loan or mortgage
This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Loan purpose" – news · newspapers · books · scholar · JSTOR(January 2015) (Learn how and when to remove this message)
In the United States, loan purpose is the underlying reason an applicant seeks a loan or mortgage. Lenders use loan purpose to make decisions on the risk and what interest rate to offer. For example, if an applicant is refinancing a mortgage after having taken cash out, the lender might consider that an increase in risk and increase the interest rate that is offered or add additional conditions. Loan purpose is important to the process of obtaining mortgages or business loans that are connected with specific types of business activities.[1]
Pertaining to mortgages and their risk based pricing factors, the loan purpose factor is sub-categorized by purchase, rate and term refinance and cash-out refinance. Lenders assess that a purchase loan contains the least amount of risk and thus 'price' purchase loans most favorably (i.e. no interest rate increase or a risk-based pricing improvement in the order of .25%).
Rate and term refinances are priced similar to purchase loans, with no interest rate increase. Cash received by the borrower at closing may not exceed $2000 to maintain rate and term status. The purpose is, as the name implies, to reduce the interest rate, payment, and/or overall term of the mortgage.
Cash-out refinances are deemed to have a higher risk factor than either rate & term refinances or purchases due to the increase in loan amount relative to the value of the property. Risk-based pricing typically mandates a .25% to .5% increase in interest rate if a borrower needs to draw equity out of the subject property.
^"What Is Loan Purpose?". WiseGeek. Retrieved November 24, 2014.
In the United States, loanpurpose is the underlying reason an applicant seeks a loan or mortgage. Lenders use loanpurpose to make decisions on the risk...
In finance, a loan is the transfer of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is...
property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is "secured" on the borrower's property...
loan proceeds if the stated purpose of the loan becomes impossible. Such as a negative pledge. "What is a landing or a loan agreement?". Business Development...
about the borrower, amount of loan, loan grade, and loanpurpose. Investors made money from the interest on these loans. LendingClub made money by charging...
borrower as part of a term loan agreement. Their purpose is to help the lender ensure that the risk attached to the loan does not unexpectedly deteriorate...
A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies...
rates compared to secured loans, reflecting the increased risk for the lender. They are commonly used for various purposes, including debt consolidation...
frame whereas a bridging loan would be. Bridge loans are used in venture capital and other corporate finance for several purposes: To inject small amounts...
A business loan is a loan specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with...
the United States as a residential mortgage or other home-equity secured loan in an amount greater than $650,000, although lenders differ on just what...
real estate loans, which are typically handled by a different lending group at a bank. According to SMB Adviser, the main purpose of a C&I loan is to finance...
payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a short-term unsecured loan, often...
A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial banks or investment...
when taking out a mortgage loan. Its purpose is to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able...
Interlibrary loan (abbreviated ILL, and sometimes called document delivery, document supply, interlending, interlibrary services, interloan, or resource...
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt...
pricing. Lenders consider factors relating to the loan such as loanpurpose, credit rating, and loan-to-value ratio and estimates the effect on yield (credit...
Loans Act 1875 which created the Public Works Loan Commissioners and replaced the Exchequer Bill Commissioners. The purpose of the Public Works Loan Commissioners...
shortcomings of the previous Student Loan Act of 2023, which faced challenges related to governance, management, loanpurposes, eligibility criteria, application...
BASIC (Beginners' All-purpose Symbolic Instruction Code) is a family of general-purpose, high-level programming languages designed for ease of use. The...
A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage...
the loan on primary residences or face huge fines for noncompliance. Therefore, hard money lenders only lend on business purpose or commercial loans in...
approved for a PPP loan. A PPP loan is a non-recourse loan, unless the loan proceeds are used for unallowable purposes. PPP loan proceeds may generally...
The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered...
been insured by the government. The VA can make direct loans in certain areas for the purpose of purchasing or constructing a home or farm residence,...
Global Information