Archive for the ‘Loan Programs’ Category

Type of income and prequalification

June 29, 2010

“Why does it matter how I’m paid as long as I get paid?”

I’ve received that question numerous times over the past several years being in the mortgage industry. The question does make sense – as long as income from a job is coming in on a regular basis, why does it matter if someone is self- employed, a W2 employee, or a 1099 contract worker?

Unfortunately, for the self-employed or individuals paid on a commission or bonus structure, it does matter. Why? Due to the up-and-down nature of running a business or income based on monthly/annual performance, underwriters want to see a historical record of income that is earned over the course of up to two years.

Unless you are a W2 employee whose salary will be the same every month regardless of the economy or sales, the only way to document your income is through annual federal tax returns. By reviewing tax returns for the past two years, an underwriter can see documented monthly income for 24 months to gauge expected future income.

Here are some examples of different ways one might be paid and what steps are necessary to document the income:

  • W2 salaried income – this is the easiest to document. All that is needed is the past 30 days of pay stubs. If recently moved to a new job in the same field still as a W2 employee, a pay stub reflecting 30 days on the job with an acceptance letter to the new position should do it.
  • W2 base pay with commission/bonus income – if commission/bonus income is less than 25% of the total salary, then the same rules apply as above should apply. If more than 25% of the total salary, then up to two years of tax returns will be required to document the income.
  • Full commission income – up to two years tax returns will be required. Note that any business expense write offs on the tax return will lower the income that can be used to qualify you for the loan.
  • Self-employed – two years of tax returns will be required. Again, any claimed business expenses (personal or for the business itself) will reduce the income that can be used to qualify you for the loan.
  • Bonus income – two years documented bonus income will be required along with documenting its continuance.
  • Same job at the same company but change from W2 salary to commission/bonus income – This is happening more frequently in the business world. Positions that were once salaried are becoming positions with base pay plus commission. If the base salary is sufficient to qualify for the loan, then only pay stubs are required. However, if the commission is also needed to qualify for the loan, then up to two years of tax returns would be required.

Loan programs such as stated income and no documentation loans are no more due to the credit crunch. This means all income must be verified and documented – making how one gets paid all the more important.

If you are looking to buy a home or refinance an existing one and you are not paid as a W2 salaried employee, it is imperative to speaking with a mortgage consultant to ensure everything is order before you are ready to make an offer. If you are in the state of Georgia, I would enjoy the chance to review your situation and help qualify you to buy a home–give me a call!

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Fannie Mae HomeStyle rehab loan

May 19, 2010

I regularly receive requests for loan programs that will allow borrowers to make repairs on a home and roll those costs into the loan. Due to the financial crisis and the risky nature of these loan programs, conventional rehabilitation loans virtually disappeared.

The only consistent option was the FHA 203k program, which is a great loan program, but only allows cosmetic/non-structural repairs on a buyer’s primary residence. It would be great if there was a program that allowed both buyers and investors the flexibility needed to do more than just cosmetic repairs… and now there is!

Introducing the Fannie Mae HomeStyle loan program. This is a renovation program like the FHA 203k program, and they share some similar traits.

  • Both programs allow for cosmetic remodeling/repairs
  • The funds needed for the work on the property is rolled into the loan
  • Available on primary residences for purchases & refinances
  • Work must be completed by a licensed contractor

There are similarities, but definitely note the differences.

Fannie Mae HomeStyle:

  • Available for borrowers (10% minimum downpayment) and investors (20% minimum downpayment) on purchases and refinances
  • Structural repairs/changes/improvements allowed
  • Luxury items such as pools, hot-tubs, fences, etc. allowed
  • minimum repair amount of $5,000 required

FHA 203k:

  • only 3.5% down payment required
  • No minimum repair amount required
  • Available for primary residence purchases & refinances only
  • No structural repairs/upgrades OR luxury items allowed
Who can benefit from either of these loan programs? Anyone looking for a loan program that will allow you to knock out a wall or two OR investors looking for a way to cover remodeling costs OR even someone looking for a way to pay for carpet and paint in their new home.
If this is you, program options are now available! Don’t hesitate to contact me to learn more or get prequalified for either of these great programs.

3% down and no PMI

April 22, 2010

Yes, you read that correctly. Conventional loan, 3% down, no private mortgage insurance, and to top it off… no appraisal required! The program is known as HomePath Mortgage by Fannie Mae and is available to borrowers looking for a primary residence OR an investment property.

Investors using the HomePath Mortgage program need a 15% down payment, but will not be required to get private mortgage insurance or an appraisal on the investment property. Also, the limit on the number of total properties financed in an investors name is waived.

Fannie Mae designed this loan program to facilitate the sale of their foreclosures. There are numerous properties available, and you can search for them here. However, before you find a home and get ready to submit an offer, remember this is a foreclosed property and there are some things to keep in mind:

  • the property is purchased “as is”
  • the property may require some repairs
  • definitely get an inspection!
  • no contingency offers (on the sale of a current home) allowed

All offers must include a prequalification letter. If you are looking to get prequalified, learn more about interest rates this program, total monthly payments, etc., feel free to call or email me. It would be glad to help you through the mortgage process!

Here today…

April 8, 2010

The deadline for the tax credit is fast approaching. If you haven’t started the process, don’t worry, there is still time!

Unlike the first go around, you do not have to be closed by the deadline – you only have to be under a binding contract by the end of April. You then have 60 days (end of June) to complete the purchase.

This is ideal for all of those fence sitters out there! 🙂

For more details on the tax credits, check out this previous post. Some quick points:

  • First time home buyer (or not owned a home in 3+ years) tax credit of $8,000 extends through April 30, 2010. Home must be under contract by that date and closed on or before June 30, 2010.
  • A “moving up” tax credit of $6,500 is available for current home owners buying a new primary residence.  To qualify, home owners moving up must have lived in their current residence for 5+ years at the date of the binding contract to buy the new home.

If you have ever thought about buying a home to earn one of the tax credits, it isn’t too late to get started. Begin by talking with a mortgage professional, then find a home.

The tax credits are here today, but won’t be for much longer.

Refinances available up to 125% LTV

March 12, 2010

Over the past several months, I’ve had the privilege of helping home owners refinance their home using the Making Home Affordable Program. The design of the program allowed home owners to refinance their home even if they were underwater on their mortgage.

Initially lenders only allowed home owners to refinance up to 105% LTV (Loan To Value – determined by the current mortgage balance versus the appraisal value of the home).

Fortunately, we are now able to offer home owners the opportunity to refinance up to the Making Home Affordable Program’s maximum limit – 125% LTV

The question now becomes, “do I qualify?” Let’s find out!

  • The current mortgage cannot have Private Mortgage Insurance. Why? While the program allows up to 125% LTV, private mortgage insurance companies are not currently insuring loans with that high of an LTV. If the current mortgage has PMI, sad to say, I coudn’t help with a refinance.
  • If there is a second mortgage, it may prevent being approved for a refinance. Why? The second mortgage can’t be paid off in the refinance, so the second mortgage would need to be subordinated behind the new first mortgage. If the home is underwater, there is a good chance the second mortgage company will not approve the subordination behind the new mortgage.

For more information on second mortgages and how they can stop a refinance dead in its tracks, see this recent post from one of my colleagues.

If the current mortgage does not have PMI and there is no second mortgage, there is only one thing left to check.

  • The Making Home Affordable Program only applies to mortgages owned by Fannie Mae or Freddie Mac. So, who owns your mortgage? To find out, search for your mortgage using Fannie Mae’s online loan lookup tool. If not found, try Freddie Mac’s online loan lookup tool.

In short, if your mortgage does NOT have PMI, you don’t have a second mortgage, and the first mortgage is owned by Fannie Mae or Freddie Mac, you are eligible and I can help you refinance!

Let’s get started now talking about details, options, qualifying rates, etc. while we are still enjoying these historically low interest rates.

Holding onto the past

October 29, 2009

The past can hold a lot of great memories… birthdays, wedding day, graduation, one’s favorite TV show that was cancelled by FOX… OK, that last one was a personal example, but you get the idea.

Some people I talk to still reminisce about the “good old days” of buying a home when it was easy to get financing. By fixating on that thought, one may begin to believe that no one can get financing now. That is simply not true!

Banks are still lending money, but they now prefer “safer and more predictable” loans (in other words, fixed financing) instead of the no doc, stated income/stated asset, subprime, etc. programs that helped usher in the current financial crisis we are all struggling through.

Borrowers can still qualify to buy homes with little money down, less than average credit, and can choose from a variety of loan programs. Some examples:

  • Borrowers only need 620 credit score to qualify for an FHA loan
  • A down payment as little as 3.5% can get someone into a home with an FHA loan (5% for a conventional loan)
  • Some foreclosed homes are eligible to be bought with only $100 down, and still others are available with no money down
  • Adjustable Rate Mortgages (ARMs) are also available with as little as 5% down
  • Interest Only ARMs do exist, but the down payment requirement is now 20%

If you are looking to buy or refinance your current home, get in contact with me. We can discuss “how things were” vs. “how things are” and make sure you are ready to move forward with your next loan.

Sometimes it is just best to let go of the past no matter how tough it may be… If we stay in the past, we might miss out on the best buyers market (low rates and lower home values) in years.

One might also miss out watching an actor from their favorite TV show star in his new show on ABC.  If that were true for me, I would have missed this great Halloween episode moment when he paid tribute to his character from the cult TV show FOX cancelled 5 years ago – Malcolm Reynolds from “Firefly”. Enjoy!

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I’ll be back? It is back!

October 15, 2009

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Like a futuristic machine that won’t quit, conventional loans have fought back against the credit crunch. I’m not saying it’s over, but there is at least one positive sign –  5% down payments* on conventional loans are back!

* – This news is a few weeks old, but  I intentionally pushed off writing about it in case PMI companies changed their mind – they have been known to do that!

The real question… who qualifies for a conventional loan with 5% down? Borrowers with at least:

  • a 5% down payment
  • 720+ credit score
  • and a debt to income ratio of less than 41% – in other words, buying a home one can afford

Anyone out there who doesn’t have a 720+ score of 5% down?  Don’t worry!  Even though there is a credit crunch (less money available to loan), there is still money available to loan! 

FHA loans only require a 620+ credit score with a 3.5% down payment.  There are other loan programs available that one could be eligible to buy a home with less than a 3.5% down payment (see this recent post for more information on these programs).

Looking to buy a home with 5% (or less) down?  Call or email me.  I would enjoy reviewing your situation, explaining the pros and cons of the different loan programs, and helping choose the right loan for you. 

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The passing of time

September 18, 2009

Time.  Where does it go? We never seem to have enough of it… We typically wonder if the time is “right”… and for some of us, time is beginning to run out.

Tax credit for first time home buyers – In order to qualify for the $8,000 tax credit, the home must be purchased before December 1, 2009 – which means November 30th. 

You may be thinking “there is still plenty of time.” While there are still 10 weeks remaining, if you haven’t started the process, it’s enough time, but not a lot of time to spare.

Think about it… You’ll need to find a realtor. Then find the time to start looking at homes for sale. After looking at several homes, you’ll make an offer AND wait for the offer to be accepted.  Then you will need to apply and get approved for a loan.  Finally, after all of that, you are ready to buy the home.

Typically the entire process can take somewhere between 6-8 weeks.  Whew, two weeks to spare! However, remember there is a major holiday that will limit the number of closing times available at the end of November. 

Oh, don’t forget about fence sitters who will make the move to buy a home.  Now all of the sudden realtors are busier than normal, closing attorneys are booked, and lender underwriting times may be longer than normal.

The moral of the story – plan on closing at the beginning or middle of November to be sure not to miss out on the tax credit.

Refinancing a home – Rates are at historical lows.  As of this post, a 30 year fixed rate is under 5% and a 15 year fixed rate is in the low 4’s.  That being said, rates won’t stay there forever.  Don’t believe me? Remember late May of this year when rates went from the mid 4’s to almost 6% in about two weeks?

I don’t know when rates will go up, but they will at some point.  If you are thinking about refinancing your home, let’s talk now and see if it makes sense so you don’t miss out.

sand clock

Time… we never seem to have enough of it and wonder if it is the “right” time.  If you are looking to buy a home and get the tax credit OR refinance your existing home, now is the time! I’d enjoy the opportunity to speak with you about your options.

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Little or no money down? No problem!

August 26, 2009

Gone (long gone in fact) are the days of easy 100% financing. Conventional loan programs using 80/20 combo loans or 100% financing with Private Mortgage Insurance are a thing of the past. In fact, the minimum down payment for a conventional loan in Georgia is now 10%.

Think about that figure for a minute. On a $250,000 loan, the minimum down payment is $25,000. While conventional loans do allow gift funds, many buyers do not have that much money available for a down payment (especially first time home buyers).

So… conventional loans require 10% down. That is good to know, but what about the borrowers who do not have that much for a down payment? I’m glad you asked! There are several programs available that require little or no down in order to buy a home.

  • FHA loans: FHA loans require only a 3.5% down payment along with lighter credit and cash reserve requirements.
  • FHA 203K Streamline: This program also requires a 3.5% down payment, but there are provisions allowing borrowers to finance an additional $5,000-$35,000 for non-structural repairs/updates to a home (new roof, carpet, paint, siding, remodel kitchen/bath, etc.)
  • $100 HUD Homes: Many foreclosed homes owned by HUD are available to buy with only a $100 down payment using an FHA loan. The offer must be at the property’s asking price, and if accepted, the down payment would only be $100.00!
  • VA loans: VA loans allow 100% financing. Traditionally, these loans are available to U.S. Veterans and their spouses. However, the VA Vendee program allows borrowers to purchase VA foreclosed homes using a VA loan regardless of their U.S. Veteran status.
  • USDA/Rural Development loans: USDA loans also allow up to 100% financing. Property eligibility is based its location. If a property lies outside of a metro-area, there is a chance it would be eligible. To know for sure, you can go here to check.

Even though the current lending environment is definitely not what it used to be, options remain for borrowers with little or no money down. While some of the loan programs depend on the property itself, a 3.5% down payment can get borrowers into most homes on the market. Feel free to contact me for more information on any of these loan programs.

It’s nice to know that even now, you don’t need to break the bank in order to own a home!

It’s nice to know that even now, you don’t need to break the bank in order to own a home!

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.

Hard to say goodbye

May 28, 2009

Sometimes we just don’t know how good something is until it’s too late. Gone are the days of no credit requirements for FHA loans, and it appears the requirements will only get tighter.

Once upon a time, borrowers with bad or no credit turned to FHA loans to buy a home.  FHA did not have minimum credit score requirements and even allowed non-traditional forms of credit such as rent and/or utility payments, college tuition payments, etc. 

Today most FHA programs require a minimum credit score of 620 with a negative rate adjustment for credit scores under 660.

How long will it be before FHA minimum score is 660?!?  Think that sounds crazy? Who would have thought there would have been any credit requirements for FHA loans two years ago?

It is hard to say goodbye to great things, but at least this is a feeling we can all relate to in life. We’re in this together!

Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services, Inc. and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.”  Dunwoody Mortgage Services seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing.  For more information about Dunwoody Mortgage and available programs, please visit www.dunwoodymortgage.net.