Posts Tagged ‘Georgia mortgage advice’

Waiting Periods After Derogatory Credit Items – Bankruptcies

October 30, 2017

In the last post, we looked at how lending guidelines require specific waiting periods for different types of “derogatory items” on a borrower’s credit report.  Then we zeroed in on waiting periods following a property foreclosure.  In this post, we will cover the waiting periods required after bankruptcy filings.  As with foreclosures, the different mortgage types specify different waiting periods.  The waiting periods also vary by the type of bankruptcy filed – Chapter 7 or Chapter 13.

Let’s start with Chapter 7 – the required waiting periods are as follows:

  • FHA – 2 years from the discharge date
  • VA – 2 years from the discharge date
  • Conventional – 4 years from the discharge or dismissal date
  • Jumbo – 7 years from the discharge date

The waiting period calculations get a bit more complicated with Chapter 13 bankruptcy filings.  The Chapter 13 waiting periods are as follows:

  • FHA – 1 year from the start of the payout period, as long as the borrower has made all required payments on time.
  • VA – 2 years from the discharge date, or if the Chapter 13 is in repayment, the Trustee must document satisfactory payment history for 12 months of the payout period and the court must give permission to enter into a mortgage transaction
  • Conventional – 2 years from the discharge date or 4 years from the dismissal date
  • Jumbo – 7 years from the discharge date.

So ultimately the good news here is that you don’t have to wait “forever” to apply for a new mortgage after a bankruptcy – unless of course you want a jumbo loan.  (7 years is a long time to wait.)  As always, FHA and VA loans are more “forgiving” of past credit problems.

Do you or someone you know have a bankruptcy in your past and now want to buy a home?  It may be possible to make it happen.  Be sure to work with a lender who will ask detailed questions and help coach you to the best option for your specific situation.  I’ve recently closed loans for multiple clients “bouncing back” after a bankruptcy.  It brings joy to close that loan and help my clients reach another financial milestone following their struggles.  Call me at Dunwoody Mortgage and let’s determine the best option for you or whomever you know with a past bankruptcy.

 

Advertisements

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.

 

Waiting Periods After Derogatory Credit Items – Foreclosures

October 24, 2017

Our nation’s economy has shown positive growth for several years now, following the Great Recession.  Many folks who were hit hard during the recession have rebounded and are doing well now.  Back when times were tough, they may have faced financial crises like home foreclosures or bankruptcies.  These financial crises appear as “derogatory items” on a credit report.

So let’s say your cousin Phil went through a really tough stretch financially.  But he persevered, got that new job, has been paying his bills on time and is saving some money.  He asks you if you think he can win mortgage approval now so he can buy a new home.  Like most people, you really don’t know how to counsel Phil, until now!

You can tell Phil that certain derogatory credit items carry mandatory waiting periods – he must let a specific amount of time pass before he can apply for a new mortgage.  There are different waiting periods for foreclosures, bankruptcies, and short sales.  And the waiting periods also vary by the type of loan Phil can get – FHA, VA, jumbo, or conventional.

Let’s start with a foreclosure.  Phil wasn’t able to make his home payments and the bank foreclosed.  Here are the required waiting periods by loan type:

  • FHA – 3 years
  • VA – 2 years
  • Conventional – 7 years, unless the foreclosure was part of a bankruptcy, in which case the wait is 4 years
  • Jumbo – 7 years

It is important to note that the waiting period “clock” starts when the foreclosure deed is recorded with the county.  In some cases, it may take the foreclosing bank several months to document and record the foreclosure deed after seizing the property.  So as a borrower with a past foreclosure, Phil needs to understand that the waiting period clock does not start on the date that the bank seizes the home.  I have run into situations where the bank took quite a few months to record the foreclosure deed, and this little date detail almost delayed the new mortgage.  Many times, the borrower may not know when the prior bank filed the deed after the foreclosure; however, this information is public record and most counties have the data available online now.

We will look at waiting periods after bankruptcies in the next post.  For now, if you or someone you know is like Phil and wants to buy a home, but has a past foreclosure, please refer them to me at Dunwoody Mortgage.  I will pay close attention to the details and even look up the old property online, if necessary, to make sure the borrower meets all lending guidelines.  Don’t waste time looking for a home until you have a high degree of confidence you can close!  I’ll work with you up front to give you the confidence you need.

PIWs are back!

October 10, 2017

Every few months, there are changes made to loan guidelines. Often, the changes are minute and not worth talking about very much. This time, there is something worth discussing.

Property Inspection Waivers (PIW) are back! Technically, they’ve been back for a while, but it was rare to use them. But what are PIWs? Property Inspection Waivers mean a borrower does not need to order an appraisal for the loan if they are satisfied with the value Automated Underwriting (AUS) assigns it. These have been available, but really only used with making a significant down payment (or having lots of equity if the loan is a refinance). How much is significant? Lets say 40% or more in equity.

With this latest change, Fannie Mae/Freddie Mac are saying it will be more widely used and available for clients with smaller down payments/amount in equity – even for purchase transactions.

Currently, I am working with clients on a refinance with just 20% equity and no appraisal needed. How is this of benefit to the borrower? For one, it saves money. Appraisal costs range from $450-$500, and the PIW fee is only $75. It also creates a much quicker turn time for closing. Imagine closing start to finish in under two weeks.

Lenders will not know if a loan will qualify until it gets into Automated Underwriting. That means the borrower will have to apply and be under contract on a home with the final purchase price. That said, it is always great to have the opportunity to save money and close faster! We’ll see how well this rolls out, but it’s good to have PIWs back as an option.

Helping People Qualify to Buy a House – Coborrowers

September 25, 2017

Another way for people to qualify to buy a home is finding a co-borrower on the loan.  In most circumstances, a parent is used as a non-occupant co-borrower.  They can help qualify and sign for the loan without living in the subject property.  Don’t have a parent that can assist? Today’s guidelines state that if the non-occupant borrower is not a family member, there must be an established relationship and motivation not including equity participation for profit. In other words, it is much easier when it is a family member involved, but not out of the realm of possibility if it is a non-family member.

That said, this technique can pose some challenges for the generous non-occupant co-borrower. So, when is it used and what are the drawbacks?

Non-occupant co-borrwers are often used when our buyer’s debt to income ratio is too high to qualify for the loan on their own.  Whether it’s because of student loans, needing to buy a new home before selling the current home, auto loans, etc., the situation is that the buyer’s debts make up a higher proportion of her income than permitted in underwriting guidelines. It is rarely used when assets are needed as these can be gifted to the borrower MUCH easier than adding someone as a non-occupant co-borrower.

A few years ago, Paul (not his real name) called me.  He wanted to buy the perfect new home, but he had to make an offer without a contingency to sell his current home.  So we had to underwrite him with two mortgages.  He could not qualify for both loans on his salary.  His mother, Beth (not her real name), agreed to sign on the loan with him.  So we completed loan applications for both Paul and Beth, merged the files, and submitted the joint file for underwriting review.  Beth had a great income and little debt, so the two of them together easily won loan approval.

One year later, Beth decided she wanted to buy her own home.  Now the challenge for her – Paul’s home loan showed in her credit report and had to be included in her debt to income calculation.  Now Beth was the one who could not qualify for two mortgage payments.  And this is the “drawback.”  Those who cosign are legally obligated to pay the loan on behalf of the child-the loan belongs to them both!  So cosigning affects the everyone’s credit and may impact their ability to qualify for future loans.

By the time Beth decided to buy, Paul had sold his original house, so he could qualify for a new mortgage by himself.  Therefore, we refinanced his mortgage in his name only, freed Beth from the original loan, and then won loan approval for Beth’s home purchase.

Bottom line, being a non-occupant co-borrwer can help someone buying a home with debt to income limitations, but this solution can eventually impact the cosigner’s financial goals.  It’s an option to be considered carefully.

Do you know a parent who wants to help their adult child escape the landlord and start building home equity?  Refer them to me at Dunwoody Mortgage and we will review all options.  We’ll cover the pros and cons of each option, and let that parent choose the best way to help the child.

 

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.

Beyond the Down Payment…Cash to Close

August 30, 2017

In the last post, we debunked the myth that home buyers must make a 20% down payment to buy their home.  There are many programs enabling buyers to close with 5%, 3.5%, or even 3% down payments.  But there is one other factor to consider regarding the cash you have available to buy a home…your “cash to close.”

Cash to close includes your down payment, PLUS the closing costs and prepaid escrow.  In short, you need more cash than just the down payment to close the purchase.  Here is a quick description of the other items:

  • Closing costs are the actual costs of transferring title and obtaining a mortgage loan.  Closing costs include items such as appraisal fees, transfer taxes, intangible tax, attorney fees, title insurance, etc.  Some of these costs are fixed while others increase with the home purchase price or loan amount.
  • Prepaid escrow represents the cash needed to pay the first year of homeowners insurance and to prefund your escrow account to pay future property taxes and homeowners insurance premiums.  These typically increase as the home price increases.

So what options does a buyer have when he has scraped together that 3.5% down payment, but does not have enough cash to cover the remaining cash to close?  Here’s where a proactive lender, working as a consultant to help the buyer, can make a huge difference.  Typically, the buyer has 4 options, and the lender should explore them all with the buyer:

  1. The seller can agree to contribute cash towards the closing as part of the purchase contract.  There are limits regarding how much the seller can contribute based on the loan type and down payment percentage, but a seller contribution can be a huge help.  Note that the seller contribution cannot be applied to the down payment.
  2. The buyer can choose a “no closing cost” loan.  Many buyers choose not to use this option because it involves a higher interest rate and monthly payment, but it can be a good option for some buyers who have limited available cash.
  3. The buyer can receive a gift from a relative.  We must carefully document the gift, but this is a great way for parents and grandparents to help a young adult get started building equity.  The gift can be applied to the down payment.
  4. We can combine the 3 options above to resolve a cash shortfall.

The key here is to remember (1) more cash than just the down payment is needed to close a mortgage and (2) there are creative ways we can solve a cash shortfall.

If you know a renter with a good job but not much cash, refer them to me at Dunwoody Mortgage Services.  We will work closely with your referral and his / her Realtor to structure a mortgage that best meets their financial situation.

The Truth About Down Payments…

August 25, 2017

Many young adults and other potential home buyers mistakenly assume that they cannot buy a house.  Why?  Because they believe the myth that a home buyer must make a 20% down payment to buy a home.  A recent study by the National Association of Realtors® (NAR) shows that the average down payment for 60% of first time buyers is 6% or less.  However, their research indicates that just 13% of adults age 34 and younger understand that they can buy a home with as little as 5% down, or less.  Their analysis shows that, over the last 5 years, more than 70% of non-cash, first time buyers, along with 54% of all home buyers, made down payments of less than 20%.

So why do so many Americans not understand this home buying truth?  Perhaps it is because 20% is the down payment benchmark most often quoted by “experts” in print and other news media.  And perhaps it is because that to avoid mortgage insurance on a conventional loan, you must make at least a 20% down payment.

Whatever the reason, it is time for us to spread the truth about down payments.  That truth is, the majority of home buyers make down payments of less than 20%.  Here are some quick options for folks who want to buy, but don’t have a lot of cash saved for a purchase:

  • Active duty military, National Guard, Reserves, or military veterans may qualify for a 0% down VA loan.
  • FHA loans offer minimum down payments of 3.5% with low interest rates.
  • Buyer who qualify can obtain a Home Ready conventional loan for 3% down, with competitive interest rates and discounted mortgage insurance premiums.
  • Buyers who do not qualify for Home Ready may still qualify for a 3% down payment, but possibly with a higher interest rate.  In this case, the buyer will likely receive a lower interest rate if she makes a 5% down payment.

Bottom line, many home buying options exist for folks who can afford less than a 20% down payment.  These home buyers need a mortgage expert to coach them to the best option for their financial situation.  That is the type of individualized service we deliver at Dunwoody Mortgage.  We work closely with our clients to help them obtain the mortgage solution that best meets their needs.

If you know a young adult in Georgia who has a good job, who is renting and doesn’t think she can buy her own home, suggest that she call me at Dunwoody Mortgage.  She just might be able to fire her landlord, buy her own place, and start building equity.  Don’t let her believe the down payment myths.

 

Mortgage Rates and the Second Part of the Fed’s Announcement

June 23, 2017

The Federal Reserve’s announcement last week that it was increasing the Federal Funds rate included a second statement regarding the Fed’s bond holdings.  The Fed began buying Treasury and mortgage bonds after the Great Recession to lower long-term loan rates.  In the process, the Fed increased its debt holdings by over five times the previous balance – to over $4.5 trillion.

As part of last week’s announcement, the Fed said it will allow a small amount of bonds to mature without being replaced.  The Fed also said this amount will gradually rise as markets adjusted to the process.  Experts stated, “This process could put upward pressure on long-term borrowing rates.”

With the Fed out of the bond-buying business, the overall demand for Treasury bonds and mortgage backed securities will decrease.  A reduction in the demand for these investments should cause their prices to fall.  Remember that when values of mortgage backed securities fall, mortgage rates rise.

 

That is how the second component of last week’s Fed announcement can push mortgage rates higher.  Not by increasing the Federal Funds Rate, but by no longer buying bonds (and also possibly selling the bonds they already own). We could be entering an environment of lowering bond values and rising mortgage rates.

We can assume that Fed will be careful not to shock the markets too dramatically, so we don’t expect rates to dramatically increase. The goal of the Fed would be to complete the second part of their statement without pushing mortgages rates up.

That being said, mortgage rates are currently at their lowest levels of 2017.  Now is a great time to buy a home – from a mortgage perspective.  If you are looking to buy in Georgia and you want focused service with a keen attention to detail, call me at Dunwoody Mortgage Services.  We will do as much of the “heavy-lifting” as possible so your mortgage experience is as pleasant as possible.

 

Geographic Income Limits for Home Ready Program

May 1, 2017


One potentially limiting aspect of the Home Ready program is that income limits are specified by census tract.  (Notice I said “potentially.”  We will get back to that point very soon.)  To qualify for the program, the borrower’s income must be less than or equal to the income limit set for the geographic area of the subject property.  Fannie Mae specifies and publishes the geographic income limits as part of the program.  Many areas in Metro Atlanta have an annual income cap of $67,200, but there are many other areas that do not have an income limit.  Now back to the word “potentially.”  If the home you want to buy lies in a no-income-limit area, you could make a million dollars per year or even per month and still qualify for a Home Ready loan for that house.

Two key points to remember here:  First of all, the income limits are based the subject property’s location, so you can have varying income limits in different parts of the same county.  In fact, the eligibility maps go down to the street level, which means that houses on one side of a street could carry a $67,200 income limit and houses on the other side of the same street could have no income limit.  Secondly, the income limits apply only to borrowers on the loan.  If two employed people plan to live in the home, but only one of you is on the loan, then the other occupant’s income does not count toward the income limit.  Of course that means that the sole borrower must qualify for the loan using his or her income only.   

So how can you determine whether you qualify for the Home Ready program’s low down payment / low-interest rate / low mortgage insurance benefits?  You can call me at Dunwoody Mortgage!!  We will first discuss your income and the geographic area where you want to buy.  I can look up the area online and determine whether your income qualifies for Home Ready in that area.  If you meet the geographic income limits, we will complete your loan application, pull your credit report, and run your application through our Automated Underwriting System (“AUS”).  The AUS findings will then determine if you do qualify for Home Ready’s great benefits. 

Buying a house in Georgia and curious whether you can obtain a Home Ready loan?  Give me a call and we will review Home Ready and your other loan options.  Don’t think you will qualify?  We at Dunwoody Mortgage have secured loans for many customers who initially thought they would not qualify.  Don’t assume you cannot win loan approval!  Call me and let’s discuss your situation.  We might just surprise you!!