Definition of "Nichification"

Joel Sheesley real estate agent

Written by

Joel Sheesleyelite badge icon

Coldwell Banker Sea Coast Advantage

Proliferation in the number of loan, borrower, property, and transaction characteristics used by lenders to set mortgage prices and underwriting requirements. Nichification is unique to the U.S. and reflects the importance of secondary markets there. Any characteristic identified by investors in the secondary market as affecting risk or cost is priced in the secondary market, and then in the primary market. The following is a partial list of factors used in pricing or in setting qualification requirements. Transaction Characteristics: Loan Amount; Desired Lock Period (in days); Down Payment (as percent of property value); Term; Prepayment Penalty (if any). Borrower Characteristics: Credit Score; Ratio of Borrower Income to Monthly Housing Expense; Ratio of Borrower Income to Total Housing Expense. Property if Not Single-Family Detached: Two-Family; Three-Family; Four-Family; Co-op (building is owned by a cooperative association in which members own shares); Condominium (borrower owns unit in a project in which some facilities are owned in common); Condominium More than Four Stories High; Manufactured (house was not built on site) Attached ('Twin,' 'Triplex,' 'Row'); Planned Unit Development (house is located in a PUD with a homeowners association that charges dues) Loan Purpose if Not Purchase for Permanent Occupancy: Purchase Second Home (Vacation Home); Refinance; Cash-Out Refinance (loan is larger than old loan balance by an amount larger than the settlement costs); Investment (home is being purchased to rent out). Documentation if Not Standard: Alternative Documentation (borrower wants to provide payroll and bank statements rather than wait for verification of information from employer and bank); Documentation for Self-Employed (borrower wants to use special documentation requirements available for the self-employed); No Income Verification (borrower doesn't want reported income to be verified by the lender); No Asset Verification (borrower doesn't want reported assets to be verified by the lender); 'No Docs' (borrower doesn't want reported income or assets to be verified by the lender);No Income Ratios (borrower doesn't want income to be used in determining qualification); Streamlined Refinance (borrower wants the reduced documentation requirements available on refinances only). Special Borrower Features: Non-Occupant Co-Borrower (one of the borrowers won't be living in the house); Subordinate Financing (there will be a second mortgage on the property when the new loan is made); Non-Permanent Resident Alien (borrower is employed in U.S. but is not a U.S. citizen or permanent resident); Non-Permanent Non-Resident Alien (borrower is not a U.S. citizen and is not employed in the U.S.); Waiver of Escrows (borrower wants to be responsible for payment of taxes and insurance). Generic Price Quotes: Casual mortgage shoppers who ask loan providers for ' their rate and points' will receive a generic price quote; one based on a series of favorable assumptions. Here are typical assumptions underlying generic price quotes: The transaction is a home purchase or no-cash refinance; There will not be a second mortgage on the property when the loan closes; The property is single-family, detached, and constructed on the site; All co-borrowers will occupy the house as their permanent residence; The FICO score of all co-borrowers is above some level, often 720-740; The borrowers can document that they have enough cash for the down payment and closing costs; The borrowers can document that they have sufficient income to meet the maximum income/expense ratios on the program selected; The borrowers are U.S. citizens or permanent resident aliens. Any deviations from these assumptions will call for a higher price.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Mortgage Terms

The amount invested in a house, equal to the sale price less the loan amount. The House Investment Decision: Lenders impose the upper limit on how much a household can spend for a house. ...

An option attached to a mortgage, which allows the borrower to pay only the interest for some period. A mortgage is 'interest only' if the monthly mortgage payment does not include any ...

Rolling short-term debt into a home mortgage loan, either at the time of home purchase or later. The Case for Consolidation: Borrowers consolidate in order to reduce their finance costs. ...

The ratio of total housing expense to borrower income. This ratio is used (along with other factors) in qualifying borrowers. ...

A lender that sells the loans it originates, as opposed to a portfolio lender that holds them. ...

The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a specific property. ...

A biweekly mortgage on which biweekly payments are applied to the balance every two weeks, rather than monthly, as on a conventional biweekly. ...

An upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., '3 points' means a charge equal to 3% of the loan ...

Administering loans between the time of disbursement and the time the loan is fully paid off. Servicing includes collecting payments from the borrower, maintaining payment records, ...

Popular Mortgage Questions