Posts Tagged ‘retirement income’

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.

 

Home Buying Preparations – Income

January 5, 2016

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Welcome 2016! This time of year, people are busy making new year’s resolutions. Popular resolutions are losing weight, eating healthier, saving money, quit smoking, travel, spend more time with family… all of these have one thing in common. If you don’t have a plan, you won’t succeed. For example, no one would make the goal of exercising more on January 1st, and then run a marathon on January 2nd!

Buying a home involves a very similar process. You don’t just find a house and make an offer on it. You need a plan. You need to make sure your financial “house” is in order. Otherwise, you could be wasting time and risking your hard earned Earnest Money. Over the next few weeks, this blog will focus on three main aspects of preparing to buy a home through the prequalification process. Those aspects include income, credit, and assets for the down payment.

This week, we’ll focus on income by linking a few posts my colleague, Rodney Shaffer, wrote toward the end of 2015 in terms of qualifying to buy a home and income. These posts are not all inclusive as income from employment, bonuses, commission, self employed, 1099, child support, alimony, retirement, annuities, trust, disability, social security, tips, part time, asset-based income can be used when buying a home. Covering all of those at once would be an EPIC post, so we’ll stick with some common ones.

Overview – So How Much Money Do You Make

Salary or Hourly – Q: How to you earn? A: Hourly vs Salary

Commission* – Q: How do you earn? A: Commission income

*Note self employed and bonus income documentation is similar to commission with one exception. Self Employed borrowers can get by with only one year of tax returns instead of the two years required of commission and bonus income.

For non-traditional forms of income, such as child support, alimony, retirement, annuities, trust, disability, social security, the main qualifying aspect of these is stability. Currently, income “stability” for these types is considered to be any income stream lasting for 3 years after the closing date. Each one I just mentioned may have one small detail different from another, but the BIG unifying theme in all of these is the three-year continuance.

Don’t see your “type” of income listed? Have questions that aren’t answered? You are in luck. Contact me today, and we can discuss. If you are buying in the state of Georgia, I can help you get prequalified and ready to buy your new home.

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Loan Prequalification – Income

June 17, 2014

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Today is the third part of a four part series on the prequalification process. We started with credit scores, continued on to down payments, and today will focus on income. Generally speaking, I’ll divide income into three types – W-2 salaried employee, all other employment income, and other. We’ll start with the easy one.

W-2 salaried employees only need to provide pay stubs covering a 30 day period to qualify for a loan. Even if you just changed to a new job, as long as a 2 year continuous work history is established AND you have 30 days of pay stubs from the new job, you can qualify for the loan. Note that the loan process can start without the 30 days of pay stubs of pay stubs from the new job. Until the pay stub is available, an offer letter can be used for the initial underwriting of the loan.

What about “all other employment” income? Maybe the easiest way to separate the two is this… if you are a W-2 salaried employee working for a non-family member, 30 days of pay stubs are needed. If income from your job comes from anything else, chances are tax returns may be required. Examples would include W-2 employees who are employed by family member, rely on commission, or bonuses. The “all other” category would also include 1099 contract employees, full commission income, and self-employed borrowers. When tax returns are required, with today’s underwriting guidelines, you could not use year to date income to buy a home. The income that can be used is the amount filed on previous years tax returns. Since we are 2014, the tax returns for the years 2013 and 2012 could be used. In order to use income from 2014, those returns will need to be filed (meaning the earliest 2014 income can be used is the Spring of 2015).

The “other” category would include non-employment income such as social security, child support, alimony, investment income, retirement income, pensions, etc. Each of these are underwritten with different guidelines. Some of these, such as investment and retirement income, could have their own loan program. When planning to use income from a source other than current employment, definitely let your mortgage professional know.

I would be a great resource for the home buyer who is using income outside of the W-2 salaried category. For years, I would pre-underwrite my loan files prior to submitting them to underwriting. I know the differences between using investment income for buying a home versus the amount of investment assets that can be used for reserves. By knowing specifically what to look for when reviewing tax returns, bank statements, divorce settlements, etc., we should know prior to underwriting if there could be a problem with the loan. If you are buying in Georgia, contact me today to get going!

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Asset Based Loan Program

March 25, 2014

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Looking to purchase a new home as a recent retiree with no history of receiving retirement income from your portfolio? What about someone who wants to purchase a home, but recently started their own company so there is no history of income from their business?

An asset based loan program might be just the thing you need.

Here are the details on how assets can replace monthly income when qualifying to purchase or refinance a home:

– Combine all forms of retirement assets into one lump sum. Retirement funds from an IRA, 401k, SEP and/or Keogh can be used so long as the borrower can withdraw assets from these accounts without penalty.
– Take 70% of the balance of those combined accounts.
– Finally, divided out the reduced balance by 360, and use that figure for a monthly income to qualify for a mortgage.

Example: A borrower has a total of $600,000 in qualifying retirement assets. Taking 70% of that balance, the figure to use for qualifying purposes is $420,000. Divide that number by 360, and the monthly income to be used on a mortgage application is $1,167.

There is no need to document currently receiving retirement income or a need to show a three year continuance. The asset based income can be combined with social security and other qualifying income for the loan. To get started, borrowers also need a 620+ credit score and a minimum of a 30% down payment/equity in the home. This loan program can be used to purchase or refinance a home (rate term refinance only; cash out refinances are currently unavailable for this program).

To learn more about qualifying for a mortgage from assets OR to get started on a loan application, contact me today. I’d be happy to help you get started.

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