Posts Tagged ‘Atlanta real estate’

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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Relaxing Criteria for Condo Mortgages

June 19, 2015

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Considering buying a condo now?  Your timing is good then.  In recent months, mortgage market makers Fannie Mae and Freddie Mac have loosened the lending requirements for condo purchases.  You can buy a condo with a credit score as low as 620 and a down payment of 5% or more.

Understand that the underwriting process is still different for a condo purchase, but the standards are being relaxed now.  As with single family home purchasers, underwriters will review the credit score, available assets, income, and debt of condo purchasers.

In addition, underwriters review the financial stability of the complex in which the condo is being purchased.  Condo complexes assess HOA (home owners association) dues to fund expenses such as maintenance for buildings and common areas, utilities, insurance, reserves for replacing large items like roofs and parking lots, etc.  When the economic crisis hit, owners at many condo complexes became delinquent on their dues payments, causing financial difficulties for the complexes themselves.  In reaction to this, lenders imposed tighter restrictions on condo underwriting.  Now lenders are relaxing these standards.

When underwriting the condo complex, the lender will require documentation from the complex management as follows:

  1. A completed condo questionnaire reporting details about the complex.
  2. Current year HOA budget.
  3. Master insurance policy.

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Below are some key condo criteria that the underwriters consider.  The underwriters will likely deny your condo loan if the complex fails to meet any one of these items:

  1. At least 10% of the annual HOA budget set aside for reserves.
  2. No more than 10% of the units owned by a single individual or corporation.
  3. No more than 20% of the units used for commercial space.
  4. No more than 15% of the homeowners more than 60 days past due on their monthly HOA dues.

Bottom line, if you want to buy a condo in a well-managed complex that meets the above criteria, it has a good possibility of being approved; but it will require some extra work as compared to buying a single family home.  I have financed multiple condos in the last few months and we have not experienced any issues with underwriting.  If you are looking to buy a condo in Georgia, I can help you get started!

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Jumbo Loan Alternatives

May 28, 2015

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In my previous blog post, I reviewed recent home price increases and how they can lead to jumbo loans.  We also covered how jumbo loans typically have higher interest rates and down payment requirements as compared to conventional loans.

So what do you do if you need to borrow more than the $417,000 conventional loan limit and you don’t have enough cash to make the 20% down payment required for a jumbo loan?  Under certain circumstances, you can obtain a conventional first mortgage of up to $417,000 and then acquire a second mortgage for the remaining balance.  The second mortgage will have a higher interest rate than the first loan, but you may pay less in interest as compared to a jumbo loan.

Dunwoody Mortgage Services will only provide the first mortgage, but we have lending partners who work with us to deliver this type of secondary financing.  One key criterion is that the borrower must have an excellent credit score.  For example, one of our partner lenders can allow total liens (first plus second mortgage) of up to $750,000 when the borrower has a minimum 740 credit score.  This lender can allow total liens of up to about $917,000 when the borrower has a minimum 760 credit score.  In each case, the borrower must make a 10% down payment – less than the 20% down payment required for a jumbo loan.  But if your credit score is less than 740, you will not qualify.

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Clear as muddy water?  Here is an example to better explain.  Let’s assume (1) you have a 775 credit score, (2) you want to buy a house with a price of $835,000, and (3) you have $85,000 of available cash for a down payment.  So you must borrow $750,000 to buy the house.  To get a jumbo loan, you would have to have $167,000 in cash for the down payment.  And your interest rate (on the day I’m writing this) on your jumbo loan would be about ½ a point higher than a conventional loan rate.  But with only $85,000 available to you, the jumbo loan just won’t work.

But with the second loan strategy, you might be able to make an $85,000 down payment, obtain a first mortgage of $417,000 and a second mortgage of $333,000, bringing your total amount borrowed to $750,000.  Your interest rate (today) on the first mortgage would be about ½ a point lower than a jumbo rate, and you may be able to get a rate on the second loan that is comparable to the jumbo loan rate.

If you want to buy a more expensive home and you need to explore your financing options, give me a call at 770-634-0992.  Comparing different financing scenarios is just a part of the outstanding service we deliver to our customers every day.  I look forward to talking with you.

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Should we worry about a new housing bubble?

September 11, 2014

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 The last 5 years in the Real Estate market have been a real roller coaster ride. We have all seen significant fluctuations of the valuation of our homes over the last 5 years. Many have seen their home values decrease as much as 30-40% and most have seen a complete rebound in the current market. Those who bought a home since 2008 have most likely seen a significant increase in the value of that property.

 It is currently still a seller’s market with limited property available to purchase. Many ask how could we go from a significant over supply in the market to an under supply in such a short period of time?

 We have approximately 500,000 homes in the United States destroyed each year. This could be from natural disasters, fire, and demolition. We need to build approximately 800,000 net new homes to keep up with the growing population. Net new homes is the difference between new homes minus destroyed homes. Here in lies the problem.

 Between the years mid 2008 through mid 2013, only approximately 600,000 total homes per year were built. Subtract the estimated 500,000 homes destroyed, and there was only a net gain of 100,000 new homes each year.

 You do not need a math or economics degree to see the significant shortage that was created over the last 5 years. Some economists have indicated the rapid rise in housing prices may create a housing bubble again. In order to have another housing bubble, we would have to go into another over supplied market. My opinion is we are still digging out from the market being under supplied and this rapid increase in pricing is mostly a correction to the over supplied market from 2008-2013.

 Are home values going higher? The current trend is yes, home values are rising. If you look at historical data, houses appreciate on average between 4.5-6% per year over the last 30 years. I give a range because there are many ways to manipulate the data and a range is usually the best way to look at the growth.

 This 4.5-6% appreciation exceeds the average increase in income or inflation. As we experienced in the last few years, we know it can be a bumpy ride. Remember that buying and owning a home is still one the of the best investments you can make even if the value does not go straight up each year.

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Happy Holidays!

December 18, 2013

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When I think of a place to rest and relax, nothing is more refreshing than near snow covered mountains away from the noise of the city.

I can picture it now…

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Wishing you and yours a peaceful and restful holiday season!

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QE4-ever?

October 1, 2013

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Quantitative Easing (or QE) is the government’s unconventional plan to help stabilize the financial markets and the economy. This program began in late 2008 and is ongoing today. It helped push interest rates to historic lows, stabilize the financial markets, and also helped to fuel the stock market. So what exactly is QE?

Basically, it is the government buying. As the government purchased bonds, it helped stabilize and increase the value of those bonds. By doing so, it caused interest rates drop (to help housing market) and allowed the financial markets to “take a breath” instead of panicking about the current state of events.

The first round was announced in late November 2008. On the announcement, interest rates dropped half of a point. Interest rates continued to improve from there. Prior to the recession, the government held roughly $700 million of Treasury notes. Through QE1, QE2, and QE3, their balance sheet got as high as $2.1 Trillion (with a “T”). The goal was to buy bonds to stabilize everything, then slowly sell them off to get back to pre-recession levels. It hasn’t worked out that way.

QE1 gave way to QE2… then we had QE3. Then the goal was to stop QE3 by the end of 2013 or early 2014. The plan to begin taper off bond buying was announced in mid June. Note the use of the word “taper” and not “stop immediately.” How did the market react?

Remember the sudden interest rate spike in June? Well, when this “taper” plan was announced, bond prices dropped drastically. When bond prices drop, interest rates go up. Stocks dropped almost 700 points during the same time period… that is how the market reacted. By the Federal Reserve meeting in mid September, the tapering of bond buying was put on hold with no new end date announced. Stocks and bonds both improved (which is why rates got better in September).

What now? In theory, bond buying can’t go on forever. The market will eventually have to stand on its own. As you can infer from this post, the market can react emotionally at times. If you are thinking of buying a home OR wanting to refinance and think you missed out, a new window has been opened as interest rates improved with the continuation of QE3 (or should it be 4 now?!?).

How long will this window last? With the way bond buying has gone since 2008 (almost 5 years now), maybe forever… or maybe as short as the next Federal Reserve meeting in late October. Those meetings impact the markets. We have less than 30 days until the next meeting. Don’t miss this opportunity and avoid market uncertainty by starting the loan process now. I can help you start the loan process today if the home is located in GA.

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Other Types of Debt

September 24, 2013

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We conclude this series on debt and its impact when buying a home by focusing on some items that wouldn’t warrant an entire post on the topic. Let’s begin with one that almost everyone uses.

  • Credit Card Debt: some people think that credit card debt balances are used when qualifying to buy a home. When it comes to debt, underwriting only uses the minimum monthly payment. Often, credit card debt impacts credit scores themselves with too many cards, too many high balance cards, or maxed out credit cards. In terms of debt analysis, only the minimum payment is used.
  • Child Support: this is treated like an installment debt. You owe $x.xx amount over X number of months. When underwriting, is gets treated like a car loan.
  • Alimony: See above. If coming to an end within the next few months, we can ask the underwriter to ignore the debt since this court ordered obligation for underwriting purposes. The request can be denied, but if coming to an end in the next few months, child support/alimony payments won’t have an impact on making the new mortgage payment. Worst case, we wait a few months for child support/alimony payments to end.
  • Tax Liens with a payment plan: if you owe back taxes, can document an agreed upon payment plan, and then document three months of making the on-time payments of the payment plan, then this debt would be treated like an installment debt. Again, you owe $x.xx amount and will pay it back over X number of months. The key is having the documented proof of the approved payment plan AND three months of payments have been made.
  • Tax Liens without a payment plan: depending on the loan program, this may need to be paid in full prior to buying a home

Over the last several weeks, we have looked at debt and how it impacts you when buying a home. Whether buying a new home while keeping your current home, have deferred student loans, lots of credit card debt, lease a car, etc., each one of these topics have their own set of underwriting guidelines. It is imperative to work with a professional who is aware of these factors and can help plan accordingly. The last thing anyone wants is to be under contract to buy a new home, and deferred student loans get in the way.

If buying in the state of Georgia, I’m happy to help. My contact information is at the bottom of this page. Get in touch with me, and we’ll get the prequalification process underway!

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Installment Debt verus Lease Agreements

September 17, 2013

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We are in the middle of a series on debt. The first two weeks focused on the steps to take if buying a new home without selling your current home. The next posts focused on student loan debt. Today, we’ll take on installment debt.

Note that mortgage debt and installment debt are not the same thing. For example, installment debt refers more to car loans, boat loans, or a personal line of credit. This isn’t an exhaustive list, but a list to give an idea of what is meant by an installment debt.

When buying a home, installment debt is pretty straight forward. You have borrowed $x.xx amount and will pay it back over X number of months. Not much to it really. That said, there is a twist.

If there are less than 10 payments remaining of an installment loan (whether it is a car, boat, personal loan, etc.), we can ask the underwriter to ignore the debt. The logic is simple… with less than 10 payments remaining, that installment debt won’t have an impact on making the new mortgage payment. The underwriter can always say “no” to the request, but it is one that we can make.

There is one exception – Lease Agreements. The most common example is when a home buyer leases a car. Even if there is one lease payment remaining, the debt cannot be ignored. Why? At the end of the lease, the car goes back to the dealership OR it has to be purchased. Unless buying a car in cash, that means the our client looking to buy a home either leases a new car OR gets a loan to purchase a car.

Either way, an underwriter views a lease payment as a continuing debt until it is satisfied and we document that a new lease/car loan was not used to get another car.

You might be in a situation where you think your situation will improve to buy a home in a few months when a car lease is up. Depending on how you get your next car, that might not be the case. If buying a home in the state of Georgia, we can talk about installment debt (or any other debt topics) from this series. Contact me today. You can find my contact information at the bottom of this page.

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Brave New (Real Esate) World

July 10, 2013

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In case you haven’t noticed – the housing market is much different in 2013 than 2012. Over the past several years, the real estate market has been a buyer’s market due to fewer people looking to buy and a record number of foreclosed properties available to purchase. In short – too many homes and too few buyers.

That is definitely not the case now – the market shifted back in favor of sellers.

There were a few events that got us to this point:

  1. As normally happens toward the end of a year, the number of homes for sale declines. That happened at the end of 2012 like any other year. One thing that was new compared to recent years…
  2. Foreclosure rates have decreased and the number of foreclosed homes for sale dropped dramatically. Now there are far fewer homes on the market to buy than there has been in previous years.
  3. Interest rates are rising. They have been slowly edging up all year, and had a dramatic rise over the past couple of months. This has motivated buyers to get out there and find a home.

With fewer homes available, it is now a seller’s market. You can tell this because sellers are now receiving multiple offers on their homes, receiving above asking price offers, and are paying less money toward a buyer’s closing costs.

How should a buyer respond?

First – buyers need to be prequalified. If you are looking to buy a home in the state of Georgia, I’d be happy to help! Contact me, and we’ll get the process started.

Second – buyers must make offers quickly. The most common statement I hear from my clients right now is “the home is no longer available.” Good homes are not staying on the market long. When you find a home you like, instead of taking a few days to consider making an offer, go ahead and make the offer. While waiting on a response from the seller, you can debate whether or not this is THE home you want.

Waiting a day or two to make an offer on a home you like in the current market may mean you have to go out and find another home. To be ready, get prequalified and make offers quickly. Over the past few years, buyers had days (sometimes weeks) to make an offer. That is no longer the case in this brave new real estate world.

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