Archive for the ‘Mortgage News’ Category

Conforming loan limits rise (again!)

December 4, 2018

For the third year in a row, conforming loan limits are increasing.

  • In 2017, the limit increased from $417,000 to $424,100.
  • In 2018, the limit increased to $453,100.
  • In 2019, the new conforming loan limit will be $484,350.

Over three years, the max limit has increased by roughly 16%. This is quite a change as the limit stayed at 417,000 from 2006-2016. One thing though, I gotta say, what is the deal with no rounding up or down?!? I think it would be a lot easier to just say $453,000 or $484,000. Is the extra $350 going to make that big of a difference? Oh well…

Why the increase? Conforming loan limits are set by the Housing and Economic Recovery Act passed in 2008. This set the baseline loan limit of $417,000, and stated this baseline cannot increase until home prices return to pre-housing decline levels. With home prices still on the rise across the country, it is fitting the limit increased. Now a home buyer can purchase a $500,000 with roughly a 3% down payment. This opens up more homes for buyers who have stable jobs/strong income, but may be lacking in assets for a larger down payment. Congratulations!

We can also expect FHA mortgage limits to rise too. Currently for metro Atlanta, the limit is $359,950 (again, round up. Is $5 going to make that big of a difference :-). If we see a similar increase in 2019 as we did in 2018, expect the new FHA loan limit in metro Atlanta to be roughly $385,000. Expect a new blog post once FHA makes the official announcement.

Higher loan limits are great for consumers as housing prices continue to rise due to demand and low inventory levels. Looking to buy a new home in the new year? Is that home in Georgia? If yes, contact me today. I can get you prequalified in a matter of minutes and on your way to making an offer in no time!

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Government impact on housing

August 7, 2018

Sometimes the government gets involved in areas, and things get worse. Here is one area where inaction would be really bad – flood insurance.

On the last possible day, Congress avoided a lapse in the federal flood insurance program when the Senate voted to extend the program through the end of November. The National Flood Insurance Program would have expired July 31 without this action. So the program has been extended, but still doesn’t include any reforms to the program. Despite years of debate and proposals to reform the program, reforms have stalled. In lieu of any changes, Congress has kicked the can down the road another few months. We’ll get to do all of this again in a few months.

This isn’t a case of “they’ll do anything to prevent a lapse of flood insurance coverage.” Congress has let the national flood insurance program lapse some in the past few years. Here is hoping the next change/extension/reform won’t be at the very last minute, but something tells me it will be.

In other mortgage news from the government, it appears the current set up for FHA mortgage insurance will remain the same. There will be no decrease in the monthly premium AND the insurance will still be permanent for the life of the loan.  FHA’s insurance program works differently from private mortgage insurance, which typically falls off after a certain amount of time.

The FHA’s policy wasn’t always this way. The FHA’s previous policy required borrowers to pay mortgage insurance premiums until the outstanding principal balance reaches 78% of the original home value, but the FHA instituted the life of loan policy back in 2013. This action was part of the effort to improve the status of their mortgage insurance fund. While there were some good years of rebuilding the fund, the decline of the funds balance in 2017 caused FHA to pause in potential changes to mortgage insurance.

Currently, the mortgage insurance is so high on FHA loans that it rarely makes sense for a borrower to consider using an FHA loan unless they have really low credit and/or a very high debt threshold. Good credit, low debt, but short on the down payment? Conventional loans allow only a 3% down payment (compared to FHA’s 3.5% down payment). Hopefully FHA can update their mortgage insurance policy in the near future to provide more options for well qualified borrowers.

Looking to buy a home before the end of the year? Ready to have a new home for the holidays?!? If you are purchasing in Georgia, contact me today. I’ll get you ready to make an offer in one quick phone call.

Changes to loan guidelines

May 15, 2018

Guidelines for getting approval on a home loan can seem like a moving target – they always seem to be changing. While that isn’t true, technically, what is true is this… there are so many guidelines in terms of a buyer’s qualifications (assets, credit, income, etc.) that small changes do tend to happen often. Here are some changes that we may have missed.

IRS Tax Payment plans – this one can be handy when looking to buy a home BUT a larger-than-expected tax bill comes due. As long as there is not a federal tax lien filed, the borrower can move forward with the home purchase using an accepted IRS tax payment plan. The borrower would provide the monthly tax payment, proof of IRS tax payment plan acceptance, and the reminder payment coupon for the second payment. Only one payment needs to be made. In regards to qualifying, the monthly payment is calculated as if it were any other debt such as a monthly car payment, student loan payment, etc.

Sourcing funds – all of those cash or check deposits made into a bank account… during the crash, it seemed we would need to document any deposit that was over $100. It was a nightmare. Fortunately, it has relaxed now. The guideline is any deposit that is less than half of monthly income can be ignored. This means the number of deposits that need to be documented dramatically decreased. One caveat to this is the number of deposits. If no individual deposit is over half of monthly income, but there are multiple deposits adding up to over half of the monthly income, and underwriter can request all of the deposits be documented to ensure no one gave our home buyer extra money as an incentive to purchase the home. While this caveat can be used by an underwriter, it is rare.

Liquidating retirement funds – in some cases (depending on the amount being liquidating and/or loan program), we no longer need to document the liquidation of retirement assets for funds to close. We just need to show the money exists and is accessible to our borrower.

IRS Tax Transcripts – we’ll begin and end with the IRS… IRS tax transcripts are no longer required in a majority of loan situations now. There are some programs that still require it, but tax transcripts are no longer ordered for every single loan. This helps speed up the process of buying a home. Over the past few years during the IRS busy season (think April 15th and Oct 15th), getting copies of transcripts could be delayed. That, in turn, could cause delays for getting loan approval.

In all of these examples, the requirements for loan approval has lightened up some from the housing crash, which is especially helpful during the home buying process.

Wanting to buy a home this year? Looking in the state of Georgia? If so, contact me! I can get you prequalified and well on your way to owning your new home.

 

New guidelines for PMI

March 5, 2018

Not that long ago, conventional loan guidelines began allowing borrowers to have a back debt to income ratio as high as 50%. The “back” ratio is the new housing payment + all other debt / monthly income. The limit was 45%, so the increase allowed  borrowers to carry a slightly higher debt threshold. This is closer to what FHA allows (up to 55%).

Private Mortgage Insurance companies observed the change, and then began making changes of their own. As of this post, all but one of the major PMI companies have changed their guidelines to reflect the following requirement. For borrowers with a debt to income ratio at 45-50%, their credit score must be over 700. For all other borrowers with a debt to income ratio under 45 %, credit scores can go as low as 620. While this change won’t impact a majority of home buyers, it is significant. Basically, if a buyer has a higher debt to income ratio and  a credit score under 700, then they must use an FHA loan to buy a home (or VA if they qualify for a VA loan). For now, conventional loans may not be an option.

Guidelines change frequently, and this could be temporary to see how conventional loans with a debt to income ratio of 45-50% perform. Hopefully that will be the case, but for now, it is in place.

Planning on using a conventional loan to purchase a home, but have a high debt to income ratio? If you are buying a home in Georgia, let’s talk sooner rather than later and make sure no changes need to be made to current plans.

Conforming Loan Limits going up!

December 5, 2017

For the first time since 2006, there is a significant increase in the conventional loan limit. The new maximum loan amount for conventional loans will be $453,100. Technically there was an increase from 2016 to 2017 (from $417,000 to $424,100, which is less than a 2% increase). This time the maximum limit gets a more significant increase.

What does this mean?

Buyers can purchase a $477,000 home with only a 5% down payment. If using a 3% down conventional loan, then the buyer can purchase a home as high as $467,000 in value. Prior to the increase, if a buyer wanted to purchase a home at $500,000 and avoid a Jumbo loan, then the down payment needed to be 15% to get the loan down to $424,100. Now a $500,000 home can be purchased with less than a 10% down payment.

This increases the purchase power for home buyers, and these new conventional loan limits can be used now! The start date for the conforming loan limit increase is January 2018, but the loan process can start today and close after the start of the new year!

Looking to buy a home in the state of Georgia? Wanting to use a conventional loan to purchase $500,000 or so home using a small down payment? Now you can! Contact me today and we’ll get going on your new home!

 

Mortgage Loan Limits Rise

December 6, 2016

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After some discussion on raising limits last year (that didn’t happen), mortgage loan limits are increasing for the first time in over a decade. Starting January 1, 2017, the loan limits for single family residences are increasing to:

  • Conventional Loan: $424,100 (up from $417,000, which is roughly a 2% increase)
  • FHA Loan: $358,800 (up from $342,700, which is roughly a 5% increase)
  • VA Loan: will match conventional loan limits just as these loans have been doing for years

Borrowers can now purchase a $438,000 with as little as 3% down. That is up about $9,000 from the old limits. FHA loans can now be as high as $372,000 (up from about $355,000). The increase on FHA loans is great for first time home buyers purchasing in the metro Atlanta area.

Remember, these limits start on January 1st. So if you need a little more room to keep a conventional loan, or make a higher FHA purchase, the loan process will need to start in early January.

Looking to buy a home in the Spring? Needing to get prequalified and start the process? If you are buying in Georgia, contact me today to get the process going!

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Continuing Ed for MLOs

September 22, 2016

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The fall is here, and I know what that means… time to complete annual Continuing Education so I can keep my Mortgage Loan Originator (also called MLO) License.

I am happy to say, I’ve completed the steps for another renewal. Yeah! But what exactly goes into a renewal if you do not work for a bank? It is a good question that I’ll happily address.

For Mortgage Loan Officers working for non-depository institutions (such as mortgage brokers or licensed mortgage lenders like I am at Dunwoody Mortgage Services), there are several hoops to jump through each year:

  1. Need to complete an approved 8 hours continuing education course.
  2. Must authorize a background check every other year. If a felony is on an employee’s record, then their license is revoked. Georgia will not allow felons to have a license to work as a MLO. The background is done on a regular basis since an arrest could occur after the initial background check.
  3. Must authorize a credit report check that looks at more than just a credit score:
    • Any unpaid judgements will result in a license suspension and possible revocation.
    • If a MLO is behind on child support or alimony, it will cause the license to be suspended and possible revoked.
    • Must be current on mortgage payments and student loans.
    • Foreclosures are also a big no-no.
    • Bankruptcies and other debt delinquencies can cause problems on a license renewal

In short – to be licensed to work in the mortgage industry, the MLO must not be a felon, pay their bills, and not be behind on any child support/alimony/court ordered payments.

What about MLOs that work for banks? What do they need to do to keep their license? That is up to the bank really as the only requirement for their MLO license renewal is to be employed by a bank. It is the bank’s responsibility to address the continuing education and vetting of their employees. Technically, that means MLOs that have a felony on their record (The Georgia felony requirement doesn’t apply to nationwide banks, but does apply to local Georgia banks such as Resurgens Bank), or are behind on the child support, have their own home foreclosed upon, etc. can still work with clients to purchase a home if a large bank is willing to hire them.

It turns out that the most educated and vetted individuals working in the mortgage industry actually don’t work for banks.

Want to buy a home in the state of Georgia? Want to work with a professional that is educated, vetted, and has a decade of experience originating mortgages? Contact me today. I am more than happy to help you get going!

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Using Retirement Accounts for “Income”

May 23, 2016

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Prior posts have focused on how to use brokerage account assets to qualify for a mortgage.  Now let’s review using retirement account assets for “income” purposes.  The focus here is retirement accounts recognized by the IRS, such as IRA, Roth IRA, 401K, etc. accounts.

If the borrower can obtain distributions from the qualified retirement account without incurring an IRS penalty, then distributions from the retirement account can be considered as stable qualifying income if the income is expected to continue for at least 3 years.  Assuming that the borrower, “Don,” from my last two posts had his $500,000 in a qualified retirement account, here’s how we would calculate his “income” for a mortgage application.

Now if Don’s retirement portfolio includes stocks, bonds, and / or mutual funds, we start by multiplying the account balance times 70% to adjust for market volatility.  That gets us to $350,000 in usable asset value.  Don has been receiving $4,000 monthly distributions and wants to continue that, so we divide his $350,000 balance by his $4,000 distributions.  The result is 87.5.  So Don can continue these distributions for over 87 months.  The required minimum is 36 months (3 years).  Therefore Don can use his monthly distributions as “income” for his mortgage application.  Let’s go find that house he wants!

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Now let’s assume that Don only has $190,000 in his 401K.  The result after adjusting for market volatility is $133,000.  Assuming Don must pay $12,000 in cash at closing (down payment, closing costs, etc.), his available retirement account balance after closing on his home purchase would be $121,000.  That would allow for only 30 months of distributions at $4,000.  So we would have to adjust Don’s income for mortgage purposes down to about $3,360 and then look for a house he could afford with that monthly income.

There are other guidelines that also apply.  It gets complicated, but that’s why experienced mortgage lenders can really help.  If you know a retiree who is thinking about buying a home in Georgia, recommend that they talk to an experienced lender before planning a home purchase price.  Have them call or email me at Dunwoody Mortgage Service.  We will discuss their asset allocations and determine how much of an “income” they can use on their loan application.  I can help them structure the deal right the first time, making their loan experience as smooth as possible.

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Q: How Do You Earn? A: Salary or Hourly

October 22, 2015

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If you saw my last post, you’ll remember that, in the mortgage world, how you earn your income is almost as important as how much income you earn.  See http://bit.ly/1KT9Snx for a quick refresher.

So let’s unpack how we underwrite the different types of income earning methods.  I’ll start with the easy ones first.

Salary Income:  If you earn a salary, we will need to know your gross monthly income.  That is, your monthly salary before taxes and withholdings.  We basically take your annual salary and divide by 12 months.

Underwriting will review your 2 most recent pay stubs and W-2 statements.  Don’t worry if you just started a new job.  So long as you are in a W-2 salaried job and you did not have a job gap of more than 6 months prior to your current job, you can qualify once you have 30 days of pay stubs.

Hourly Income:  If you are paid by the hour, underwriters will base your income on your average earnings over the last 24 months.  We will obtain a “Verification of Employment” (VOE) from your employer to document your income.  This employer-provided VOE is ultimately what underwriting will use when reviewing your application.

I know, it sounds confusing and very detailed.  That’s why it’s my job to know the details, understand the guidelines, and walk you through the process so you know exactly where you stand with underwriting.  I love handling the details and coaching my clients so that they can buy the home of their dreams.  If you are looking to buy in the State of Georgia and you want great mortgage service plus great rates, email or call me today.  We will make buying your dream home as easy as it can be.

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So How Much Money Do You Make?

September 24, 2015

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It pretty much goes without saying that everyone needs an income and most people need a job to qualify for a mortgage.  “No duh, Sherlock, right?”

Some people can qualify for a mortgage if they have an income and no job.  For example, retirees who have income from Social Security and retirement assets can use income from these sources to qualify without a job.

But the majority of us must be employed and earning a regular paycheck to qualify.  So here are some important income questions underwriting will want to consider when you apply for a mortgage.  #1:  What is your income?

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#2:  How do you earn your income?  Your answer to that question dramatically impacts your ability to qualify for a mortgage and the documentation you must provide to verify that income.  It also affects how we calculate the monthly income that we enter on your mortgage application.

Below is a quick summary of different income earning methods we frequently see in the mortgage world.  In future posts, we will review in more detail how underwriting verifies each different method of earning your wages.

  1. Salary income
  2. Commission income
  3. Hourly income
  4. Bonus and overtime income
  5. Part time job, second job, and multiple job income
  6. Self-employment income
  7. Rental income
  8. Child support, alimony, maintenance income
  9. Asset based income
  10. Social security / survivor and dependent benefit income
  11. Tip income

Not sure whether your income will qualify for a mortgage on your Georgia dream home?  No worries, just give a call to Dunwoody Mortgage Services.  We will ask you the right questions to make sure that your eligible income is recorded correctly for underwriting.  Give me a call or send me an email to start the process.  We will make sure that we do this right the first time!

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