Category: Housing Market (Page 29 of 38)

Investor Specific Mortgage Option – Debt Service Coverage

September 25, 2017 / Tom Bonetto

It’s finally possible for self-employed borrowers or independent contractors who have difficulty documenting their income to actually get a stated income loan to buy a non-occupant property for investment purposes.

The “debt-service-coverage” loan program helps these investors, house flippers and landlords who have multiple expense write-offs on their tax returns to buy investment properties without having to document their income.

The new option – use the anticipated monthly rent as income to qualify for the loan.

No Income Stated or Verified

If you have been aggressive with deductions on your tax return but have adequate cash flow, this type of loan may be for you.

The debt coverage ratio measures the ability to pay the property’s monthly mortgage payments from the cash generated from renting the property.

Lenders use this ratio as a guide to help them understand whether the property will generate enough cash to pay the mortgage expense.

The debt coverage ratio is calculated by dividing the property’s month net operating income (NOI) by a property’s monthly debt service. The monthly debt service is the total of the mortgage principal and interest payment, taxes, insurance, and any HOA fees.

Investors can qualify if the net operating income from the property is equal to or greater than 1.0 times the monthly debt service.

So, if you have a property that can generate $2,000 per month in rent, investors can qualify with an “all-in” mortgage payment of $2,000!

Debt Service Coverage Ratio (DSCR) Investor Loan

Loan-To-Values up to 80%
Credit Score down to 600
Qualification based upon cash flow of subject property
Interest only option available
5/1, 7/1, and 30-year fixed options available

Non-Owner Occupied and Investment Purposes Only

This is only for Non Owner Occupied properties for investment purposes. You will be required to sign a statement that states you live in another property that you own.

Please do contact me for more specific information regarding qualification!

Home Purchasing Is Easier Than You Might Think

September 10, 2017 / Tom Bonetto

I hear frequently from potential buyers in today’s market – and many are fearful of taking that leap into homeownership. Some are intimidated by the process, expecting a never-ending slog through their financial history.

Actually, the homebuying experience can vary depending on your preparation, and the team you have at your side. The lender you choose, the real estate professional involved, and other factors can make a big difference when buying a home.

You may even know someone who’s recently been though a less-than-pleasurable home buying experience, you may be apprehensive about the process.

I’ve got some good news….buying a home is easier than you probably think.

The key is understanding what it takes to get approved for a mortgage, and being properly prepared. These things will make all the difference in the story you will soon be telling your friends.

Source: Craig Berry and The Mortgage Reports

First Things First: Get Pre-approved

One of the best ways to ensure a smooth home buying process is what you do before you begin your home search.

First, check your credit report and know your credit scores.

Taking this step early in the process will tell you which loans may work better for you. Checking your credit will also give you time to clear up any possible errors or issues you find.

Mortgage pre-approval, 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.

If you’re pre-approved, you will have less to worry about when you begin your home search. You will know you’re a qualified buyer, and your offers will get more respect from sellers and their agents.

Please reach out to me to discuss the pre-approval process and how I can help!

Loan Approval Guidelines Have Loosened

The good news? Loans originated in May 2017 increased to more than 70 percent from the prior year. This is great news for homebuyers, as it means more approvals for mortgage applicants.

A common myth is that most folks buying or refinancing a home have a near-perfect credit score. In reality, the average FICO score on all closed loans is 723, and for FHA mortgages, it’s just 684. Many homebuyers are purchasing homes with considerably lower scores.

Mortgage Approval is Now Easier

Changes in the mortgage industry are making it easier for applicants to get approved and buy homes.

Recently, the Consumer Protection Financial Bureau (CFPB) determined that of the millions of consumers with medical collections on their credit reports aren’t as likely to default on future credit accounts as those with other types of collections. For this reason, many loan programs now treat medical debt differently.

Another major reason that homebuyers put off buying a home is that they think they don’t have enough money needed for their down payment.

In fact, many programs require very little down — from zero to five percent. You can find out more here. Even better, down payment assistance programs can help with grants or loans. Many who qualify have no idea this kind of help exists.

Again, you can find out more by vising The Mortgage Reports – but do know that I’m here to coach you through the entire process, from start to finish!

Photo Credit: Cafe Credit via Flickr, under the Creative Commons License

Rental Income and Qualification for Investors

September 2, 2017 / Tom Bonetto

I receive a fair amount of questions from real estate investors, asking about rental income and how that is calculated in their overall income that will enable them to qualify for mortgage.

The amount of rental income that may be used and how it is calculated will depend on multiple factors – such as when the borrower obtained the rental property, when rents were collected, and what how many units there are with the subject property.

Underwriters are looking for the likelihood that the rental income will continue, as well as any potential losses too.

If your rental is producing a net loss, it will absolutely be factored into the debt-to-income ratios that are used for qualifying.

Here are some of the standard guidelines for determining rental income.

Calculating rental income when the property is being purchased

If the property is leased, then copies of the current signed lease agreements may be required.
If the property is not currently leased, then the lender may use “market rent” information provided by the appraiser.
When there is no rental income for the subject property on the borrowers tax returns, the rental income will be reduced to 75% of the gross rental income provided on the lease.

Calculating rental income when the subject property is being refinanced

Copies of the fully executed lease agreements must be provided (assuming the home is currently rented).
If the borrower owned the property during the previous year, they will need to provide tax returns. The lender will use the information provided on Schedule E to determine the net rental income/loss.
If the property was rented for a portion of the previous year, the lender will still need to provide a copy of the tax returns, including Schedule E. The borrower will also need to explain (and document) why the home was not rented for the full year. For example, was the home recently purchased or out of service to be renovated.
Rental income will be averaged based on the months the home was in service the previous year.
The lender may also rely on “market rent” data from the appraisal.

What if you’re converting your existing home into a rental to buy another home?

The rental income may be used if you can provide:
- A fully executed lease agreement – and this lease may be month-to-month
- proof of security deposit from the tenant and first month’s rent (cancelled check); and
- a bank statement showing the deposited security and rent deposit.
- 75% of the verified rental income can be used to offset housing expenses

With that said, there are other options – outside of the standard conventional products for investors. Some enable borrowers to use only the expected rental income to qualify – without providing income or tax returns. Contact me for more information, as it would be my pleasure to help!

New Regulatory Changes Help More Borrowers Qualify

August 13, 2017 / Tom Bonetto

I have some good news for those looking to get a mortgage in the near future — as 20% of U.S. consumers could see their credit score increase this fall.

Credit Changes

The nation’s three major credit rating agencies, Equifax, TransUnion, and Experian, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete.

Because of the combination of these two dramatic changes, many potential borrowers that did not qualify for a home loan might now be eligible under these new regulations.

These credit bureaus will also be restricted from including medical debt collections. If the debt isn’t at least six-months old or if the medical debt was eventually paid by insurance, it can’t be listed.

The reason is that medical debts, unlike that of credit charges, are unplanned and doctors and hospitals have no standard formula for when they send unpaid debts to collection.

Debt-to-Income Changes

In addition to the FICO changes, mortgage titans Fannie Mae and Freddie Mac are allowing borrowers to have higher levels of debt and still qualify for a home loan. Both are raising their debt-to-income ratio limit to 50 percent of pretax income from 45 percent. That is designed to help those with high levels of student debt.

This move by the mortgage leaders will dramatically increase the number of people who will now be able to qualify for a home loan. Most industry experts agree that this is a welcomed and much needed change for millennials and first-time homebuyers.

If you have been considering a home purchase or refinance, now is a great time to take a look at it.

Contact me to find out if these changes might benefit you or someone you know!

Home Buyers Should Know These 5 Things for 2017-2018

August 6, 2017 / Tom Bonetto

There’s a lot of advice online for homebuyers these days. But, hey, who’s got the time to do all of that research. So I’ve selected five things prospective buyers should know about purchasing your house in the next 18 months.

The real estate market is getting more competitive by the day, due to limited inventory. On the other hand, mortgage qualifications have loosened a bit and rates are still near historic lows.

Home prices have risen steadily in recent years, and they continue to do so. Mortgage rates are expected to inch upward in the coming months. Most analysts are predicting a rate increase by the fed in the fall of 2017.

With those things in mind, let’s take a look at 5 key issues:

Mortgage rates are expected to slowly climb into 2018

The Federal Reserve will be reducing the amount of mortgage-backed securities in their portfolio relatively soon – and they have hinted at another rate increase or two over the next 6 months.

In its latest forecast, the Mortgage Banker’s Association economists predicted that the average rate for a 30-year fixed mortgage loan would rise to 4.5% by the fourth quarter of 2017. Looking beyond that, they expect 30-year loan rates to rise above 5% by around the middle of 2018.

With that said, these rates are still extraordinarily low compared to historical standards.

Home prices are rising

According to Zillow, the real estate information service, the median home value across the US has risen by over 7% in the last year – and many experts see that pace staying consistent. Most economists expect prices to rise by another 6% over the next 12 months, extending into the summer of 2018.

As a result, homebuyers will encounter higher housing costs than those who purchased over the last couple of years. So be sure to research the market ahead of time, work with the right real estate agent, and go into it with a realistic view of what you can afford.

Mortgage qualification is easier today

The mortgage industry has loosened up a bit over the last two or three years. Mortgage giants Fannie Mae and Freddie Mac have relaxed debt-to-income ratios. As a result, it’s slightly easier to qualify for a mortgage loan today than it was in the past.

For example, many first-time homebuyers think they must have 20% or more ready for a down payment. But that isn’t true at all. Today, there are mortgage programs available that allow for down payments as low as 3%, or even 0% if you’re military or live in rural areas.

Don’t make assumptions about your ability to qualify for a home loan. Reach out to me, and we’ll review your situation to determine if you’re a good candidate for a home loan.

Housing inventory is getting tighter

The reason why home prices are rising has to do with inventory – or the lack of it. It’s just supply and demand at work, really.

In most cities across the west, the current supply of homes is falling short of demand.

What does this mean to the homebuyer? It means you should be prepared for some competition, and be ready to move quickly when the right house comes along.

It’s a sellers market right now

Due to the lack of inventory, this will directly impact you as the buyer. In 2017, most of the major cities across the state are experiencing sellers’ market conditions. In short, there aren’t enough homes for sale to meet the current level of demand.

This is an important factor to remember when it comes time to make an offer and negotiate with sellers. This is where the right real estate agent can really help.

The reality is that current real estate market conditions favor sellers over buyers.

My opinion is that it isn’t worth your time to haggle with the seller over the small stuff. When you find a home that meets the majority of your criteria and falls within your budget, you should move quickly with a legitimate, competitive offer.

In conclusion

With that said, this is my reading on current trends in the real estate and mortgage marketplace. The continuation of rising home prices and more-than-likely mortgage rate increases makes a compelling argument for buying a home sooner rather than later.

As always, please do contact me for more, as it would be my privilege to help you!