Archive for the ‘Mortgage News’ Category

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


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!


Continuing Ed for MLOs

September 22, 2016


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!


Using Retirement Accounts for “Income”

May 23, 2016

Blog Header

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!


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.


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

October 22, 2015

Blog Header

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 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.


So How Much Money Do You Make?

September 24, 2015

Blog Header

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?

Income Image

#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!


Coming Soon: Closing Disclosure

September 16, 2015


Along with the new Loan Estimate, the current settlement statement (known as the HUD-1) will be replaced too. The new Closing Disclosure expands to 5 pages (currently 4 when including the signature page), but it too replaces some of the current documents we use today. Use this link for a preview of the new Closing Disclosure.

The Closing Disclosure includes the following information:

  • Page 1: recaps the first page of the Loan Estimate, which includes the loan amount, interest rate, other loan terms, closing costs (traditional closing costs and prepaids combined), and the cash to close.
  • Page 2 and 3: these look an awful lot like the current HUD-1 except in reverse order. The current HUD-1 shows the lump sum summary on page 1, and the itemization of fees on page 2. The Closing Disclosure references the itemization on page 2, and the lump sum summary on page 3.
  • Page 4: this page contains more details about the terms of the loan including whether or not the loan is assumable, if there is a demand feature, an escrow account, terms of making a late payment, partial payment, and whether or not the loan has a negative amortization feature.
  • Page 5: this page will replace the current truth in lending disclosure. The truth in lending itemization page should be eliminated with the itemization break down on page 2. The signature line is also on page 5.

While the Closing Disclosure expands from 4 to 5 pages, it should eliminate the current truth in lending form, the signature page, and maybe the truth in lending itemization page. For all practical purposes, we are really reducing the pages from 6 to 5. Less paper is always a great thing!

The biggest change of all will be when the Closing Disclosure is given to the borrower. The CFPB requires the Closing Disclosure to be sent three days prior to closing. If changes are made after the Closing Disclosure is sent out to the borrower, the three days could reset. This will definitely be the biggest challenge with the Closing Disclosure. That said, once everyone gets used to the process, we’ll be fine.

Got questions about the new Closing Disclosure? Contact me today to discuss. As always, if financing a home in Georgia, we can also talk about how I can help you with that loan!



Coming Soon: Loan Estimate

September 8, 2015


As discussed back in March, the new Loan Estimate disclosure is on its way! Originally, the new disclosure was scheduled to start August 1, but the CFPB move the implementation date to October 1. Use this link for a preview of the new Loan Estimate.

The Loan Estimate is a major step in the right direction compared to the current Good Faith Estimate (GFE). Why? While both documents are three pages, the current GFE is lacking key information. When I go through the GFE with clients, in addition to those three pages, I also must reference:

  • Page 2 of the loan application that shows the total monthly payment. The GFE only shows the loan and monthly PMI payment (if the loan requires PMI).
  • Page 4 of the loan application that shows the summary of the transaction. The GFE only shows the closing costs and prepaid totals. It doesn’t show the cash to close, any seller credits to closing costs, or any lender credits to the cash to close.
  • I also must have clients sign an intent to proceed with the loan disclosure because the GFE does not have a signature line on it

Some other great points about the Loan Estimate is that it will replace:

  • The Truth in Lending disclosure is now included in the Loan Estimate.
  • The Itemization of the Truth in Lending disclosures is also included in the Loan Estimate.
  • The Loan Estimate also has a section showing whether or not your lender plans to service the loan. Hopefully, this will eliminate the servicing disclosure as well.

When going through the numbers with a client, the Loan Estimate will reduce the number of pages I must reference from 10 to 3 pages. That should mean my loan packet will be reduced by those 7 pages. Anything to make the stack smaller!

Got questions about the new Loan Estimate? Contact me today to discuss. If you are financing a home in Georgia, we can also discuss how I can help you with the loan!


You Can Do It!! Part 1

July 20, 2015

Blog Header

A high percentage of Americans believe that owning your own home is a good thing.  A recent study of 2,000 adults showed that 65% of Americans believe that owning your own home is an accomplishment that would give them pride.  Another study from late 2014 showed that almost 90% of Americans wanted to own their own home.

As desirable as home ownership is in America, many people don’t investigate buying a home because they believe the many myths telling them that homeownership is not within their reach.  Let’s look at the truth here, and debunk some of those myths.

First of all, here’s a quick summary of what mortgage lenders look for when evaluating your loan application:  (1) character, (2) capital, and (3) capacity.  Some people call this this “the Three C’s.”  Let’s look at the myths regarding (1) character today.

When you obtain a loan, the lender wants to trust that you will have the character to repay the loan.  How do they measure your character?  They look at your credit score.  Your credit score serves as your track record, your history, of repaying your financial obligations.  Lenders believe your credit score serves as the strongest indicator of whether or not you will repay your mortgage.  Therefore, your credit score is very important to lenders.

Now for the credit score myth:  A high percentage of Americans believe that they must have a very good credit score to qualify for a mortgage.  What is a “good credit score” anyway?  I just ran an Internet search using “what is a good credit score?”  Answers I received ranged from 660 up to 720.

The truth is, you can get a home mortgage if your qualifying credit score is as low as 620.  The web sites I reviewed put a 620 score in the “poor” to “fair” categories.  The bottom line is you can still qualify for a mortgage when your credit score is “less than good.”

We’ll consider other mortgage myths in my next blog post.  But for now, if your credit score is 620 or higher, and you want to buy a house, just remember, “You can do it!”  If you dream of owning your own home in the state of Georgia, give me a call and let’s discuss it.  Don’t believe the myths.  We might be able to get you into your dream home sooner than you think.