Self-employed mortgage applicants must prove stability of
employment and income, traditionally going back at least two years. This
regulation is a bit tougher than it is for regular salaried employees.
Traditionally, mortgage lenders have required two years federal
income tax returns in securing a mortgage for purchasing or refinancing real
Fortunately, there is a way to use just one year of tax returns to qualify for a mortgage.
This can help newer business owners, as well as those who experienced a down year in the past.
Introducing Two-X Flex 1-Year
Finance of America Mortgage has a new, proprietary product that drastically reduces the amount of documents and simplifies qualification.
Two-X Flex 1-year requires only one year of income documentation and offers borrowers more flexibility in qualifying for a mortgage.
1-year of income documentation used for qualifying
Wage earner and self-employed borrowers
Up to 90% loan-to-value with no mortgage insurance
As low as 640 minimum FICO
$100,000 minimum loan amount
Up to $3,000,000 maximum loan amount
30 year fixed
5/1, 7/1 and 10/1 ARM –fully amortizing and interest only
Primary Residence, Second Homes, Investment Properties
Up to 50% debt-to-income ratio
1-2 units, PUD and warrantable condos
In order to utilize this one-year requirement, it’s important to
understand that your tax return must reflect a full year of
For example, if you became self-employed in April 2017, that
year’s tax returns are not going to reflect a full year. If you
started your business in November 2016, then your 2018 tax returns will
demonstrate a full year of experience running your business.
Give me a call to find out more – as there are multiple alternatives that we can examine!
Believe it or not, most potential borrowers with a reliable job, that have regular income, and average credit can most likely qualify for a mortgage. Of course, there are specific regulations that must be met, but qualification isn’t as tough as many might think.
Interestingly, many potential buyers
willing to own a home don’t even try to qualify for a mortgage. Many believe
that rigid mortgage requirements will disqualify them.
Per Martin’s article: “new research indicates that consumers think it’s harder to qualify for a mortgage loan than it actually is. And many lack the facts and know-how to properly pursue home financing.”
He continues: “don’t rule out buying a home because you think you’re ineligible for a loan. Chances are that, armed with knowledge and the right guidance, you can buy that home you’ve been thinking about.”
believe guidelines are tougher than they really are
Martin references the study from Fannie Mae that
recently polled 3,000 consumers about their understanding of mortgage
requirement rules. Some findings were surprising:
Only 11 percent were aware that the minimum FICO credit score needed to obtain a
mortgage is 580. Most thought it was 650.
Over 40 percent didn’t know their own credit score.
Most people think you need to put down at least 10 percent for a
down payment. The truth is, the median is 3 percent; some programs don’t even require a down payment.
Only 23 percent of respondents were aware that low down payment programs are available.
Over three in five didn’t know that the debt-to-income ratio lenders don’t want
total debt payments to exceed is 50 percent.
Only 12 percent of homeowners and 9 percent of renters were able
to identify the correct credit score range needed to qualify for a mortgage.
The top five reasons cited for expected difficulty in getting a
(chosen by 23% of respondents)
Too much debt (17%)
score/credit history (15%)
Affording the down
payment or closing costs (14%)
Lack of job
One more thing regarding those who would rather rent than buy…the report intimates that these are the people are most unclear about mortgage requirements.
My guess is that this uncertainty is holding them back from learning more details or reaching for a goal that seems to difficult.
Give it a Try!
More often than not, there are two things get in the way of buyers seeking a mortgage: their own fears and lack of info about mortgage requirements.
Saving for a down payment can be one of the most important and most challenging facets of buying a home. The larger the down payment, the lower your loan amount – and that results in a lower monthly payment, a lower interest rate in many cases, and it could help you to avoid mortgage insurance.
But, there are some out there that can get around bringing in a large down payment. Many have family members or others who are willing to help them out – and that’s when “gifting” comes into play.
The Gift Letter
can get help from parents or other people that care about them, but they will
need to get a signed statement from that giver that the money is, in fact, a
gift and not a third-party loan.
mortgage gift letter must include the giver’s name, address and contact
information, as well as the banking information of that particular account, as
well as the recipient’s name and relationships to the giver and the dollar
cases the lender will have a template letter that will help you with this step.
A Key Piece – Documenting the Gift
together the gift letter, the giver needs to include documentation of where
that gift is coming from – this is extremely important
the lender will most likely need to see a bank statement or other form of proof
verifying that the donor has the money to provide that gift and/or paperwork
showing an electronic transfer between the donor’s account and yours.
If the person
gifting the funds is selling shares of stock or other investments to provide
the cash for a down payment, the giver will need a statement from their brokerage account showing that
importantly, as a borrower, you don’t want to add the gift funds with any of
your other finances. Doing so could complicate the paper trail and cause the
lender to reject the gift altogether.
to have the giver wire the money straight to escrow at closing – that way there
are no issues with documenting the gift.
Rules and Limits On Gifts
You might assume that you can just use
whatever financial gifts your loved ones give you for a down payment,
but using gift money is not as simple as you might think. The source of the
funds in your bank account, and the givers, will matter just as much as how
much money you actually have.
Secondly, the amount of down payment funds that can be gifted depends on the type of mortgage loan involved. If you’re getting an FHA loan with a 3.5% down payment, for instance, the entire down payment can be a gift.
On the other hand, if you’re using a conventional Fannie Mae or Freddie Mac loan, the entire down payment can only be a gift if you’re putting down 20% or more of the home’s purchase price. If your down payment is less than 20%, some of the money has to come from the borrower.
These rules are subject to change based on lending regulations,
so check with your mortgage lender to make sure that you transaction qualifies
for the use of gift funds.
If a borrower is purchasing a primary residence, they can use
gift funds for their down payment. These following regulations apply:
If it’s a single-family home, you can use gift funds without
having to contribute any of your own money to your down payment.
If it’s a multi-family home, you can get a home without having
to contribute to the down payment as long as the down payment is 20% or more.
If the down payment is 20% or less on a multi-unit home, you have to contribute
at least 5% of your own funds to your down payment.
For a second home purchase, the following regulations apply
regarding gifts and gift limits:
If you’re making a down payment of 20% or more, all funding for
the down payment can come from the gift.
If it’s less than 20%, then 5% of your down payment must come
from your own funds.
Gift funds cannot be used toward the down payment on any
Who Can Gift a Down Payment?
Depending on the type of loan, there are different regulations
on who may give a down payment gift.
Conventional Loans (Fannie Mae/Freddie Mac)
A conventional loan through Fannie Mae or Freddie Mac means the
gift must to come from a family member. Per their regulations, family is
Parent (including step and foster)
Grandparent (including great, step and foster)
Aunt/uncle (including great and step)
Niece/nephew (including step)
Cousin (including step and adopted)
In-laws (including parents, grandparents, aunt/uncle, brother-
Child (including step, foster and adopted)
Sibling (including step, foster and adopted)
With FHA loans, the list is nearly identical to the conventional
rules, including future in-laws. But, some restrictions do apply – so do check
with your lender for details.
While cousins, nieces and nephews aren’t able to give your gift
under normal family guidelines with an FHA loan, the FHA does allow for gifts
from close friends who have a clear interest in your life. This can include
extended family like cousins, nieces and nephews and even former spouses.
In addition to the ‘close friend’ guideline, the FHA also allows
for gifts from the following:
Finally, you can receive funds from a government agency or
public entity that provides homeownership assistance to low-to-moderate income
or first-time home buyers.
Please reach out to me for more information on gifts and mortgage qualification, as it would be my pleasure to help you!
Let’s get this straight and right up front: every real estate transaction will have closing costs – title fees, origination fees for a loan (if you need to finance the property), and recording fees, just to name a few.
So, how can a buyer purchase a house without actually paying those closing costs? Well, read on for more!
What this really means is that the closing charges are folded into the loan balance — if the house can appraise for the selling price plus the closing costs.
And there are pros and cons to doing this, as will be highlight later.
It’s also likely that not every single closing cost can be rolled into your loan. The buyer will most likely still be required to pay some fees at the settlement table. Those specifics will vary by lender.
“Closing costs” is a
collective term for the various fees and charges you’ll encounter when buying a
home. Some of these fees come from the lender and others come from third
parties that are involved in the transaction, like home appraisers, homeowner
associations (HOAs), and title companies.
How much are closing costs
On average, homebuyers pay closing costs ranging from 2% to 5% of the purchase price. Unfortunately, this is only a ballpark figure, as there are many variables in each individual transaction. You can find out more specifics on closing costs here…
Many lenders will require that you apply for a loan prior to receiving a more precise estimate of closing costs; however, some lenders are more transparent with their available options and will do the necessary legwork to provide you a better idea of those costs.
Can you buy a house with no
The reality is that closing
costs have to be paid one way or the other – and by some or all parties in the
transaction. Your decision will be whether you pay them with cash when you sign
your loan, or as an added expense in each monthly mortgage payment.
How a no closing cost purchase
works – it’s all in the financing
Per Bundrick in his article: “lenders can structure no closing cost loans in two ways. The differences between them are subtle, yet the result is the same.”
finance the closing costs. In
this case, the lender will add your closing costs to your total loan balance.
Your monthly payments will be slightly higher, and you’ll be paying these
closing costs, with interest, for the full term of your loan — so, for example,
over a period of 15 or 30 years.
lender will absorb the closing costs in exchange for a higher interest rate. Again, you’ll pay a bit more each
month, and your total interest cost will be greater over the life of the loan.
Either way, your
monthly payment rises slightly. You’ll pay less at the closing table, but more
over the long term.
Is a no closing cost
mortgage a good idea?
The answer is….it
If you are a little low on cash and have found your dream home, then yes – rolling $4,000 to $8,000 into your mortgage is a good idea. It won’t increase your monthly payment by much and generally doesn’t impact qualification.
Also, if you plan on
moving, selling, or refinancing in the short term, wrapping your closing costs
into the balance can be a good strategy.
However, if you’re
going to live in your new home for the long-term, you will pay more over the
life of the loan by financing your closing costs or accepting a higher interest
So if this is your forever home and you plan on keeping the mortgage for 7+ years, it’s probably best to pay the closing costs up front.
I’ve got a really good friend that does some excellent work with pitchers – his name is Jordan Zimmerman – and he runs a program called ZB Velocity that is helping players get stronger, throw harder, and stay healthier!
This program isn’t about using weighted balls and focusing solely on arm strength. Instead, its a holistic approach to strengthening the core along with proper mechanics that brings about a noticeable change in velocity.
Why ZB Velocity?
Many of his players see an increase in 3 to 5 miles-per-hour after an 8 week session with ZB Velo – and more importantly, these pitchers are staying healthy because of it!
I’d invite you to click on the video below to take a look at what Jordan and his group are doing….
April 2016 was the launch date of their DVD set and online video series of pitching instruction, velocity training and other baseball related product. ZB Velocity is now offering individual and group pitching instruction to youth, high school and collegiate players.
Below is a list of what is currently offered:
One on one instruction Group instruction Video analysis Speed and conditioning training Strength training Arm health Velocity training Pitch grips Mental side of the game College recruitment
Jordan is a retired MLB pitcher and played 11 years of professional baseball before his official retirement in 2005. Prior to his arrival in professional baseball, Jordan played for the Canadian National Team multiple times.
He was drafted out of high school by the Los Angeles Dodgers but decided that going to college was the smarter choice at that time. While attending Blinn College, Jordan received All State and National awards as a pitcher. In 1995 he was drafted and signed by the Seattle Mariners. In 1999, Jordan got the official phone call and was called up to the Major Leagues with the Mariners.
Today Jordan resides in Surprise, AZ with his wife Jennifer and 4 children. He is the owner of ZB Velocity strength training and the pitching coach for Shadow Ridge High School.
Contact ZB Velocity
You can find out more on Jordan and ZB Velocity here, here and here – and I highly recommend reaching out to him if you, or anyone you know, is a pitcher and is looking for proper mechanics and strengthening!
It’s a good idea to put together a list of questions to ask potential lenders in order find out which one will be best for you. These and other questions should help you choose the right lender and the best home loan.
How do I obtain pre-approval?
One of the best ways to
ensure a smooth home buying process is what you do before you begin
your home search.
without the pressure of a closing date, is easier than trying to engineer a
full approval from the ground up. And having a pre-approved mortgage means you
can close faster when you’re ready to buy.
This question will help you know if you’re talking to someone who wants to sell you a loan quickly — or a trusted loan advisor who will be looking out for your best interest.
When you ask, “What are my
options?” for a particular type of loan, the mortgage lender should dive deeper
into your situation and ask YOU questions about your financial goals. You can really gauge the professionalism of
the lender by the questions he/she asks.
What’s your communication style?
Mortgage lenders can communicate with you in
multiple ways – including by phone, email and text. Some are tech savvy and
others prefer traditional methods.
The point is to be clear about what you
If you respond more quickly to text messages
versus voicemail – tell your loan officer. Often times, there are time
sensitive issues that arise during the loan process, so it will make everyone
happy if your loan officer knows how to get questions answered, additional
documentation etc. in a timely manner.
How often will I be updated on the loan’s progress?
should be introduced to all parties that will be involved with your loan – from
the originator, to the processor, and any other assistants. Have their contact information handy during
the loan process.
will you be updated on the progress: by email, phone or an online portal? How often?
recommend that you share your service expectations upfront, and check to see if
the lender you are working with has these types of processes in place that meet
your requirements. If not, move on!
How much down payment will I need?
A 20% down payment may be nice, but borrowers have multiple choices. Qualified buyers can find mortgages with as little as 3% down, or even no down payment, depending on the property location.
Again, there are considerations for every down payment option and the best lenders will take the time to walk you through the choices, based on your stated goals. You can find out more about down payment requirements here….
Will I have to pay mortgage insurance?
If you put down less than 20%, the answer will probably be “Yes.” Even if the mortgage insurance is “lender paid,” it’s likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment.
Underwriters review loans and issue conditions
before approving or rejecting a loan. Ask
if the lender handles its own underwriting and does their own approvals. This can be a make or break proposition if
you need to close the loan in a timely fashion.
What other costs will I pay at closing?
Fees that are charged by third parties, such as for an appraisal, a title search, property taxes and other closing costs, will be paid at the loan signing. These costs will be detailed in your official Loan Estimate document and your almost-time-to-sign Closing Disclosure.
course, you want to know what your target closing and move-in dates are so you
can make preparations. And just as important: Ask what you should avoid
doing in the meantime — like buying new furniture on credit and other
Is there anything that can delay my closing?
Well, buying a home is a complex process with many stages and requirements. While delays are normal, the best way to avoid them is to stay in touch with your lender and provide the most up-to-date documentation as quickly as you can. If you have any past credit issues or job related changes, let your lender know immediately to avoid any last minute delays.
Unless all of your clients are cash buyers, mortgages are an integral part of any real estate agent’s business. Knowing some basics about mortgages will make you a better adviser to your clients and a more effective agent.
With that in mind, here’s a brief list of topics that real estate agents should understand in order to best help and advise their clients.
Although it is by no means necessary to become a mortgage expert, the following five mortgage insights will increase your value as a real estate professional.
The minimum down payment is not 20%
Most agents already know this, but a 20% down payment is the amount necessary for a buyer to avoid paying private mortgage insurance (referred to as PMI) on the loan. There are many conventional loan programs require as little as 5% down.
For first-time homebuyers, recent conventional loan programs introduced to the market allow buyers to get a loan with only 3% down. If you work primarily with first-time homebuyers, you should also be aware of down payment assistance programs offered by local governments and municipalities.
Even move-up buyers should get a mortgage pre-approval
Many of the first-time buyers I work with get pre-approved so they
know how much they can afford to spend on their new home. But not all realtors
encourage move-up buyers to seek pre-approval, and I think they should.
The situation may have changed from the time their clients
originally took out a mortgage. Even if they’ve built up a lot of equity, it
may not help the buyer if their income or credit is not aligned with the price
of the property they hope to buy.
Oftentimes, people who have qualified for a mortgage at one time
are surprised by new and current restrictions and underwriting standards. For
this reason, real estate agents should encourage their clients to speak with a
mortgage broker even if the client thinks they already know the ropes.
This can help avoid surprises or disappointment further down the
line and save time for agents and their clients.
Shopping around for a mortgage will not hurt your credit score
Shopping around for a mortgage with multiple
lenders is highly recommended, and even though credit inquiries do impact a borrower’s
credit score, there is an exception when it comes to credit inquiries from
All such inquiries made in the 30-day period
prior to scoring your credit are usually ignored. Furthermore, inquiries
outside of that 30-day period that fall within a typical shopping period are
counted as only one inquiry.
If you’re working on a condo deal, it is in
your and your client’s best interest to work closely with the mortgage loan
officer to make sure the property meets the lender’s underwriting criteria.
This is typically done through a condo questionnaire.
If you are the seller and state on your listing that the property can be conventionally financed, I highly recommend that you have the HOA documentation ready for the prospective buyer.
Among other things, they will be looking out
for things such as pending litigation against the condo association, the
percentage of units that are owner-occupied and whether any part of the
building is used for commercial activity.
Many condo transactions are either seriously
delayed or completely derailed by last-minute surprises that should have been
discovered early in the process.
Some realtors encourage their clients to shop around for rates at
the last minute or promise mortgage interest rates to clients that they have
seen online. This can often lead to frustration because not everyone will
qualify for those advertised, ultra-low promo rates and there may be additional
stipulations such as a quick closing or mortgage insurance.
That’s why I personally don’t promise rates until I have a
completed application and all supporting documents. No two files are the same,
so it’s best not to promise something over which we have no control.
There is a lot more to know when it comes to mortgages – and like I stated early, there’s no reason to become a mortgage guru! With that said, these five tips will help you look like a more that capable advisor in the eyes of your clients.
Many consumers are shocked to find out that their Credit Karma or other online scores do not match their true FICO score when it’s finally run by their mortgage lender.
This happens quite often – and it’s important to understand
the differences and reach out to your mortgage professional first.
Unfortunately, many would-be buyers have an incorrect view
of their actual credit worthiness and begin looking at homes too soon in the
To repeat, the key thing to remember here is to reach out to your mortgage professional to get your official FICO score.
I’d invite you to find out the particulars here – as the free online credit products and the FICO score used in mortgage qualification process are noticeably different. Essentially, they use different algorithms to come up with their own score.
Most lenders determine a borrower’s creditworthiness based
on FICO® scores, a Credit Score developed by Fair Isaac Corporation (FICO™).
This score tells the lender what type of credit risk you are and what your
interest rate should be to reflect that risk.
FICO scores have different names at each of the three major
United States credit reporting companies. And there are different versions of
the FICO formula. Here are the specific versions of the FICO formula used by
Equifax Beacon 5.0
Experian/Fair Isaac Risk Model v2
TransUnion FICO Risk Score 04
The Key Takeaway
The major takeaway is that your Credit Karma score will be different than your FICO score…and in most cases, the free, online score is better than the FICO score – at least that has been my experience.
Paying cash for a house has its advantages. Purchasing with cash rather than getting a mortgage could help you as the buyer win a bidding war when buying a new home. You may even be able to negotiate a lower price on the home if you’re paying cash.
After all, cash in hand is a sure thing, and a mortgage approval can take some time and isn’t always guaranteed.
Delayed financing is a specific program that allows the buyer to take cash out on a property immediately in order to cover the purchase price and closing costs for a property they had just purchased with cash.
How Delayed Financing Works
Delayed financing is a mortgage that is originated on a property after you already own it, in comparison to a typical mortgage that is used for the acquisition of a property. The delayed financing mortgage option allow buyers to compete with all-cash buyers when purchasing the property.
By financing the property after the initial cash transaction, the borrower/buyer is able to regain their liquidity because the money isn’t tied up in the house after the delayed financing is completed.
in mind that the value of the property might not the same as the purchase
price. Borrowers will need an appraisal done by their new lender to determine
the value. Moreover, your new loan can’t
be more than what you paid for the property plus your closing costs and lender
Why Delayed Financing?
Delayed financing is generally helpful for:
Investors who want to compete with all-cash buyers’ short timelines
Investors who want to have more bargaining power because they’re paying with cash
A property that has multiple offers and the seller doesn’t want to wait on financing
Investment properties, vacation homes, and primary residences
An investor who wants to take their cash out and buy another investment property
The primary reason to utilize delayed financing is that buyers can stay liquid. Investors use delayed financing to recover their cash and be able to purchase another property.
delayed financing is right for an investor who wants to take advantage of all
of the benefits of purchasing a home using all cash. They can often negotiate a
lower price, close faster and compete with multiple other buyers. An investor
who doesn’t immediately qualify for conventional financing may also opt for
An Investor’s Point of View
this case, the buyer is an investor and purchases a property using all cash. The buyer then wants to free-up some cash
back to buy another property.
buyer can then delayed financing to recoup the cash and take a loan out on the new
property, utilizing the cash back from the initial transaction!
A Primary Occupancy Borrower’s Point of View
buyer can also use this option to compete with all-cash buyers and negotiate
better terms. Delayed financing can be done as quickly as three weeks after
purchasing the property, which is different from a standard “cash-out
refinance” transaction, where the borrower must wait six or more months.
How Long Do You Have to Wait to Refinance?
If you’re doing a delayed financing transaction on a property you purchased in the last 6 months, you’re allowed to take cash out immediately without any waiting period.
Under normal circumstances, if you bought a home with a mortgage
instead of cash, you have to be on the title at least 6 months before you can
take cash out and refinance your home, so delayed financing is a notable
are certain qualifications that need to be met in order to qualify for a
delayed financing transaction. Most
specifically, the property must have been originally purchased using all cash.
Lenders generally have the following qualifications for this type of transaction:
Arm’s Length Transaction: You can’t be related to or have a personal relationship with the seller
Closing Documents: Closing statement from the property purchase
Proof of Funds: Showing where you got the funds to purchase the property
New loan amount can be no more than the actual documented amount of the borrower’s initial investment in purchasing the property plus closing costs.
Appraisal: Ordered by the lender and paid for by you, generally $500-plus
There can be more needed and other regulations may apply, but these listed above are most standard.
Although you may have just ordered an appraisal when you originally purchased the property, as mentioned previously, the lender will want to conduct their own appraisal before they approve your loan.
It would be my pleasure to help any borrower with a delayed financing transaction, so don’t hesitate to reach out to me for more information or to get started!
One of my favorite baseball instructors is Steve Springer, of Quality At-Bats fame. If you haven’t read much or followed Spring, you really should. He’s one of the best in the business when it comes to baseball instruction.
His specialty is the mental game, although his mechanical teaching is fantastic, as well.
The topic of the video that I’m sharing has to do with players that don’t find themselves in the starting lineup regularly. This is a must-see video on how to handle being a bench player and the right mind set that must accompany this position.
Some key quotes:
“Don’t be that guy where it’s all about me”
“Take batting practice like it’s your game…take ground balls like it’s your game…take fly balls like it’s your game and be ready when the coach calls you.”
Take Steve’s advice to heart – there can only be 9 guys in the lineup – and teams carry 25+ players, so do the math. There’s not a starting spot for everyone.
Steve Springer’s baseball hitting lessons incorporate the mental side of hitting along with increasing bat speed drills and coaching improved hitting mechanics. Players and coaches of all levels – youth little league, high school, college and pros agree – Quality At Bats™ is one of baseball’s best hitting programs.
Thomas Eugene Bonetto
Mortgage Loan Originator
About The Coach
Tom Bonetto has been helping his customers and players achieve their best for nearly 30 years. His goal is to provide both a superior customer experience and tremendous value for both his business associates and his players alike.
This is not a commitment to lend. Prices, guidelines and minimum requirements are subject to change without notice. Some products may not be available in all states. Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision. Any materials were not provided by HUD or FHA. It has not been approved by FHA or any Government Agency. A preapproval is not a loan approval, rate lock, guarantee or commitment to lend. An underwriter must review and approve a complete loan application after you are preapproved in order to obtain financing.