Archive for the ‘Loan Programs’ Category

Tools to Access Your Home’s Equity

January 11, 2018

Home owners often seek to use their home equity as a source of cash.  They can use this cash for renovations, paying off other high interest debt, funding college educations, etc.

Owners typically access their equity by either (1) paying off their current mortgage and obtaining a new, higher-balance mortgage using a “cash out” refinance or (2) obtaining a home equity line of credit (HELOC).  Each option has some pros and cons.  The new federal tax law somewhat changes the pro / con dynamic.

Under the 2017 tax law, mortgage interest paid on loan balances up to $750,000 remains deductible on your federal taxes.  However, the tax law eliminated the mortgage interest deduction on new home equity loans and lines of credit.  But note that this only affects home owners who itemize their taxes.  And with the doubling of the standard deduction under the new tax law, the number of households that itemize deductions is expected to drop from 34 million to 14 million.

So, if you are considering accessing your home equity, first think through whether this tax change will affect you.  If you are a single filer and your itemized deductions including mortgage interest would be less than $12,000, the interest deductibility will not affect your decision.  If you file jointly and your itemized deductions would be less than $24,000, interest deductibility will again not affect your decision.

Here is my list of benefits for each option:

Cash Out Refi:

·        You can obtain a fixed rate loan.  The monthly principal and interest payment will never change.  HELOC rates are variable and your payments will increase when market interest rates increase.

·        You can deduct all interest (on loan balances up to $750,000) as part of your federal tax calculations as described above.

·        You reduce your outstanding loan principal with every payment.  The monthly payments reduce your outstanding principal every month.  HELOC payments are interest only.  For people who don’t have the financial discipline to pay down HELOC balances, the cash out refi forces you to reduce the loan balance monthly.


·        You can access more of your home’s equity.  HELOC’s typically allow up to 85% loan balance (first mortgage plus HELOC) to home value or loan to value “LTV.”  Cash out refis only allow a maximum 80% LTV.

·        You pay less for the loan itself.  Closing costs are typically lower for a HELOC than for a mortgage.

·        You can pay less each month.  Required HELOC payments are interest only.  By not paying down part of the principal each month, your monthly payments will likely be lower with a HELOC versus a traditional  mortgage.   

Next post, we will cover some “rules of thumb” when choosing between a refi and a HELOC.  Own a home in Georgia and want to access some equity?  Give me a call at Dunwoody Mortgage and let’s review your options.  We can consider the advantages of each as we guide you to the best solution for your situation.


My (FHA Loan) Christmas Wish List

December 19, 2017

FHA loans are great for certain borrowers.  I look to FHA loans when my clients have credit scores of say 680 or less, little available cash for a down payment, and want a 30 year mortgage.  FHA loans also can help a home buyer who has a higher level of other outstanding debt, as FHA guidelines allow slightly higher debt to income ratios.

FHA loans typically offer lower interest rates than conventional loans, but they do have some limitations.  But now there is some movement in Washington to change some of these limitations.  Let’s pretend that the federal government is Santa Claus.  Here’s my FHA mortgage wish list:

  • Rep. Maxine Waters, D-Calif has introduced the Making FHA More Affordable Act.  This bill would repeal the “life of the loan requirement” for FHA mortgage insurance.  Right now, if a borrower closes an FHA loan with a less than 10% down payment, the mortgage insurance is permanent – it never goes away.  In contrast, the mortgage insurance is cancelled automatically on a conventional (non-FHA) mortgage when the outstanding principal balance reaches 78% of the home’s original value.  In my opinion, this would be a good change for consumers who need FHA financing.  I don’t think they should have to pay the mortgage insurance after they have 22% equity in their home.
  • Under Ben Carson, the federal Department of Housing and Urban Development (HUD) issued a report signaling an easing in FHA requirements for condominiums.  Currently, to close a FHA loan on a condo, the condo complex must be on the FHA approved list.  Condos apply for FHA approval based on a number of FHA-specified criteria.  If the complex is not on the FHA approved list, a buyer cannot obtain a FHA loan and must obtain conventional financing.  The National Association of Realtors reported that of the 614,000 condo sales in 2016, only 4% were closed with FHA financing. 
  • In addition to loosening FHA condo complex approval guidelines, the administration is also indicating that it wants to revive FHA’s “spot loan” program.  This program allows homebuyers to purchase a  condo in a complex that has not been approved for FHA financing.  Some estimates have claimed that without the spot loan program, 90% of condo projects cannot have buyers with FHA mortgages. 

We mortgage lenders must work within the rules defined by the regulators – we don’t make the decisions.  But I think the above changes would be very positive, as they would make home and condo ownership less expensive and more realistic for buyers who need the FHA loan program. 

If you know a potential home buyer in Georgia who wants to know if they are on Santa’s, sorry, FHA’s, “good list,” have them contact me at Dunwoody Mortgage.  We will work within FHA guidelines (and explore other potential loan options) to make sure they get the best deal on their mortgage, and hopefully enjoy some FHA guideline “gifts” from Washington soon.

Merry Christmas and Happy Holidays!!

Georgia’s TV and Film Industry is Booming. Forget Hollywood! Put Down Roots Right Here.

October 26, 2017

On your commute today, you probably passed a yellow TV or movie production sign – they are that common around Atlanta these days.

Look at the numbers:

  • FilmLA says Georgia is the #1 filming location in the world.
  • 320 film & TV productions will be shot here in 2017, generating $9.5 billion in direct spending.
  • The Motion Picture Association of America reports that more than 28,600 Georgians are directly employed by the film industry, while an additional 12,500 people work in production-related jobs.

The movie business may be kind to Georgia, but the mortgage industry traditionally hasn’t been kind to movie makers.

Film and TV studio workers may earn great livings, but they often have irregular employment schedules. Their employer of record can change with each project, and that’s a big red flag for mortgage underwriting. When it comes time to get financing for a home, regularly employed studio employees may be denied because they can’t demonstrate the stable income underwriters demand.

Until now.

I have access to a new loan program that can ease the way to home ownership for film & TV union members. The qualification requirements are simple.

Union members:

  • Who receive W-2s as salary employees
  • Who have two full years of filed tax returns in the film & TV industry

Underwriting will view the union as the employer, rather than the studio, and the union will be able to verify length of employment. The qualifying income will be based on the monthly average income. The borrower will still produce pay stubs to document current year earnings.

If you know someone in the film & TV industry who complains about renting or apartment life, please forward this email.  They may finally be able to put down roots in the new movie mecca.



Helping Relatives Buy a Home – Cash Gifts

September 19, 2017

Our recent posts have debunked home buying myths and reviewed tools that can help young adults (or any other home buyers) buy a home.  To recap, buyers can often win mortgage approval with down payments of 5%, 3.5%, and even 3%, if the buyer qualifies.  If the buyer is short on cash to close, there are multiple ways to help cover the cash shortfall.  In this post, let’s review how a home buyer can receive a cash gift from a relative.

First and foremost, the gift must come from a current relative such as a spouse, parents, siblings, grandparents, aunts, uncles, etc.  I have encountered a situation where an ex-spouse was willing to give money for closing, but that is not allowed.  The ex-spouse is no longer considered a “relative” so that will not work.

Secondly, the cash provided must be a gift given to the home buyer.  This cannot be a loan.  Both the giver and recipient must sign documents declaring that the cash is truly a gift and no repayment is expected.  We call this the “gift letter” and it specifies details about the giver, the recipient, the relationship, the gift amount, the gift date, and the source of the gift funds.

Thirdly, we must document a “paper trail” to win underwriting approval.  The documents required depend on HOW the gift is delivered to the recipient.  In all gift situations, the giver must submit their most recent bank statement showing that they have the funds to make the gift and that the account truly belongs to them.  In addition, other documents can be required depending on the gift delivery, as shown below:

  • The giver can wire the funds directly to the closing attorney.  In this case, only the gift letter and the bank statement described above are needed.
  • The giver can electronically transfer the funds to the recipient’s bank account.  In this case, the giver must show a bank account activity listing showing the funds transfer and the recipient must show a bank account activity listing showing the deposit, in addition to the gift letter and bank statement.
  • The giver can write a check to the recipient.  In this case, the borrower must submit a copy of the gift check in addition to all other gift documents described above.

The key here is advance planning to make sure all documents are ready and submitted in a timely manner so the loan can close on time.

Do you know a parent of an adult child who wants to help that child buy their first home?  Refer them to me at Dunwoody Mortgage. We will make sure document the gift right the first time, so everyone can be happy with an on-time closing.


VA Loans: Bonus Entitlement

August 23, 2016


Bonus entitlement is extra entitlement that a VA loan applicant can use to buy a home under some specific scenarios. For example, let’s say someone plans to buy a new home as a primary residence prior to selling their current home secured by a VA loan. Another example would be the entitlement the borrower can use after they may have cost the VA money from a short sale or foreclosure on a previous VA loan.

So how does it work? Well, I can’t give you complete details. There is a down payment requirement for sure, but the amount of the down payment is actually determined by the loan amount and how much of their previous entitlement was used either through a loss on a short sale or foreclosure OR how much of the entitlement was used on the purchase of the previous home.

The VA provides a worksheet to use when qualifying buyers, and it varies. For example, earlier this year I worked with someone who had to use bonus entitlement due to a short sale. They also needed 100% financing. Their max purchase price wasn’t the allowable $417,000 using the normal entitlement, but was around $230,000 using their bonus entitlement. Anything above that price point would require money to be contributed as a down payment.

Another client I had this year purchase a home using a VA loan at $170,000. Based on the amount he lost the VA on a previous short sale, 100% financing wasn’t even an option at any loan amount. After using the worksheet, he needed to make about a 6% down payment on that purchase price of $170,000. Even with the short sale from several years ago, he could still buy a new home with a VA loan. While the down payment was higher (about 6%) versus an FHA loan (only 3.5%), the VA loan was a better deal for this buyer. He qualified for the VA loan without needing the funding fee, and there is never mortgage insurance on a VA loan. He would have to make mortgage insurance payments on the FHA loan.

Assuming our VA loan applicant has a qualifying credit score and meets the income requirements, bonus entitlement can be used so long as they have enough to meet the down payment requirements.

While this post doesn’t give complete specifics about how to proceed, the purpose was to let veterans and VA loan applicants know it exists and can be used.

Wanting to buy a home but denied because of entitlement? Is the home in the state of Georgia? If so, contact me today. I’ve closed clients with VA loans that were denied at other lenders by using their bonus entitlement. Make sure all of your options are exhausted before giving up.



VA Loans: Funding Fee

August 16, 2016


VA loans do not require mortgage insurance, but they do have a VA funding fee… which is another way of saying an “up-front” mortgage insurance. The funding fee amount is based on the down payment being made, whether the borrower is considered a veteran or a reserve, and if the borrower has used a VA loan in the past.

There is no way to get around the VA funding fee unless the VA deems you to have a disability from military service. If so, then the fee is waived entirely regardless of whether or not the VA loan applicant makes a down payment. There are a few good things about the funding fee. First, the VA loan applicant doesn’t have to pay this fee at closing. Much like FHA up-front mortgage insurance, the funding fee is rolled into the loan amount. Second, the amount of the funding fee can be reduced by making a down payment. For example, let’s assume this is the first time a veteran has used a VA loan to buy a home.

  • With no down payment, the up-front fee is 2.15% of the loan amount. This fee is rolled into the home loan, so it is not required to be paid by the VA loan applicant at closing.
  • The funding fee drops to 1.50% when making a 5% down payment
  • The funding fee goes down to 1.25% if making a 10% down payment.

Again, this example is for VA loan applicants qualifying as a veteran status. There are different amounts if qualifying as a reserve status. The funding fee can also increase when using a VA loan on buying your next home. The subsequent VA loan use jumps to 3.30% if making no down payment, but drops back to 1.5% when making a 5% down payment. While no down payment is required, you’ll save thousands of dollars by making as little as a 5% down payment.

Regardless of the down payment, there is no monthly mortgage insurance payments ever on a VA loan.

Are you a veteran looking to buy a home? Is this home in Georgia? Regardless of the loan program you plan to use, contact me today. We can get you prequalified, look over all your loan options, and get you on your way to home ownership!




VA Loans: How to qualify

August 9, 2016


VA loans are loan programs designed for those who have served our country as part of the Armed Forces. VA loans require no down payment, a 620 credit score, and one can purchase a home up to $417,000 without putting any money down.

VA loan applicants can purchase a home above $417,000, but must make a down payment of 25% of the money over $417,000. For example, let’s say someone is buying a $500,000 home. The first $417,00o doesn’t require anything for a down payment. The only money down would be 25% of the remaining $83,000, or $20,750. If you qualify, a half million dollar home could be purchased with just over $20,000 down… less than a total 5% down payment!

Who exactly qualifies for a VA loan? It is more people than you’d think.

  • Active service for at least 90 days during wartime
  • Active service for at least 181 during peacetime
  • 6+ years in the national guard
  • Spouse of a soldier who has died in combat OR died as a result of a service related disability
  • Also some personnel of Public Health Service officers and coast guard

Qualifying for a VA loan isn’t restricted to only to veterans. In fact, I closed a loan for someone earlier this year who was never in the service, reserves, ROTC or anything… he worked for the CDC in the Public Health Core of officers.

I know what you may be thinking… “Great, I qualify, no what?”

There are lots of reasons to use a VA loan if you qualify for one.

  • VA loans do not require a down payment
  • Even at 100% financing, there is no monthly mortgage insurance payment
  • The interest rate is better than a conventional loan

That is why I’ve yet to have a client not use a VA loan if they qualified for a VA loan. The only potential drawback to an FHA loan is the funding fee. More on that next time.

How do you know if you qualify for a VA loan? If you are buying in the state of Georgia, contact me today. Provide a copy of your DD214, and we’ll order your Certificate of Eligibility and get the loan process started!



Jumbo Loan FAQs

June 7, 2016


Now that we’ve talked about having the best of both worlds when it comes to Jumbo rates, let’s discuss some other questions people have about Jumbo loans.

Q: What is a Jumbo loan?
A: Any loan amount over $417,000.

Q: How large can Jumbo loans get?
A: There really isn’t a limit, but our office focuses on loan amounts up to $2,000,000.

Q: How much money do I need for a down payment?
A: You can apply for a Jumbo loan with as little as 10% down. The rate is higher, so ideally you’d want to make at least a 20% down payment.

Q: Are the closing costs higher for Jumbo loans?
A: The short answer is yes. The longer answer is this… while Jumbo loans, VA loans, FHA loans, and Conventional loans have some of the same fees associated with the loan program, some of these fees are based on the loan amount such as title insurance, discount points, and in the state of Georgia, the transfer taxes. For example, one transfer tax is 0.001% of the purchase price. That means on a Jumbo purchase of $1,000,000, the fee is $1,000. If it is a conventional loan purchase of $400,000, then the fee is $400. If an FHA purchase of $225,000, then the fee is $225. So while the fees are essentially the same name, some are just much higher than others due to the purchase price/loan amount differences.

Q: Are Jumbo loans harder to qualify for if you are self-employed?
A: No, they are not. The same basic documentation is needed for the loan application. The main parts of underwriting are to ensure the income is stable for all borrowers. This is just looked at more closely for self-employed borrowers, but not any different than applying for a conventional loan.

Q: Are reserves needed for Jumbo loans?
A: Yes.

Q: Ok then, how much reserves are needed?
A: It depends on the loan program. Some require 6 months on the subject property. Others require 12 months. Some even require 6 months on all properties owned. The key is asking your Loan Officer the specifics of the reserve requirements up front so there are no surprises later in the loan process.

Q: Can the reserves be from retirement or other non-liquid accounts?
A: Yes, retirement and other asset accounts can be used. That said, some Jumbo loan programs limit the amount of reserves that can be used from those accounts. Again, ask your Loan Officer for these details.

Looking to buy a home that will require a Jumbo loan? Buying in the state of Georgia? If yes, I can help you get started. Contact me today and we’ll discuss these questions and more.




Lower Jumbo Rates

May 23, 2016


For those out there looking to buy a home with a Jumbo loan, which is a loan amount over $417,000, there are a couple of broad options.

  1. Go with great customer service, but maybe a higher interest rate.
  2. Use one of the big banks who, at times, “discount” the Jumbo interest rate if also opening a checking account at their institution. The larger banks do this sometimes with their Jumbo loan rates as a “loss leader”…. discount the rate to secure a financial relationship with other investment accounts.

So those are the broad options… dealing with some of the potential downfalls with a big bank for a lower rate OR great service but at a higher rate. If there were only a way to combine the two. Well, there is!…

We now have access to one of the larger bank’s Jumbo loan program, which works like this:

  • their Jumbo rates are some of the best in the market, and there is a way to make them even lower.
  • if you open a checking account and agree for the mortgage to be paid via auto draft from that checking account, the interest rate is lowered an additional 0.250% in rate.
  • you get to work directly with a smaller licensed lender at Dunwoody Mortgage Services. I would be your direct contact from start to finish. You would never have to phone a call center or be placed on hold waiting to speak to someone.

It is the best of both worlds!

Looking to buy a home and needing a Jumbo loan? Wanting to avoid call centers and being on hold to get updates on your loan? If you are buying in the state of Georgia, contact me today. I can help you get started toward your home ownership.



Declining Asset Loan Option

May 16, 2016

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In the last post, I commented on a situation where a retiree with over half a million dollars in a brokerage account could not count his $4,000 monthly withdrawals from that account as “income” for a mortgage qualification.

So here’s what he can do with his current assets….I represent an investor who will do a “declining asset” loan for this retiree.  (Not all lenders will do this type of loan.)  We start with his account balance and multiply by 70%.  This is to adjust the balance for potential stock and bond market fluctuations.  That gets him to $350,000.

Then to fit this amount into a 10 year monthly income forecast – I divide by 120 months.  That yields about $2,915 per month in available income.  And that is all the “income” I can use based on his assets.

Retirement Income

This retiree told me that he had been “prequalified” by another lender for the full $4,000 “income” that he withdraws every month.  I asked, “Did that lender ask you any questions about HOW you earn your income?”  His response was, “No.”

We at Dunwoody Mortgage are trained to ask important questions up front.  By digging in just a little bit, we might discover potential underwriting road blocks early in the process.  Then we can either determine a way to work through the road blocks or stop the process early, before the buyer and the Realtor waste a lot of time and the buyer’s money (for home inspections, appraisals, etc.) on starting the home purchase process when they cannot win underwriting approval.  His Realtor was very appreciative that I helped him avoid wasting a lot of time searching for houses that this retiree could not afford.

If you know a retiree who is thinking about buying a home in Georgia, tell them to carefully consider how their assets are allocated and how they receive their income.  Not all assets and income are treated equally.  Have them call or email me at Dunwoody Mortgage Service.  We will discuss their options and we can even help them coordinate with their financial planner if necessary.  I can help them structure the deal right the first time – without wasting their time on homes that they cannot buy using their current asset accounts.