Salary + Commission: Need History of Commissions

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We have a borrower who averaged $160,000 over the last two years in a commission sales job. He just started a new job with an $85,000 base salary, but with much more commission potential. We may be able to use the average of his previous years’ commissions even though they were earned at a different […]Read More

Closing Cost Credits for Impounds and Transfer Taxes Too

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We frequently remind Realtors that credits for closing costs can be for both recurring and non-recurring closing costs. Credits should always just be for “closing costs” without delineating “recurring” and “non-recurring” costs. Recurring costs = Interest, Property Taxes, Insurance, HOA Dues; Non-recurring costs include all one-time fees such as escrow, title insurance, appraisal, notary, underwriting, […]Read More

Missing Floor Coverings & Issues In Foreclosed Property

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We have a borrower trying to buy a foreclosure with condition issues that include missing floor coverings, missing cabinet doors, and a missing stove. Whether or not repairs have to be made prior to close has to do with: (1) are the issues “health and safety” related; and (2) is a “built in” item missing. […]Read More

Can Use 75% of Rents for Income; 85% for FHA

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We discussed rental income in previous blogs and had questions in regard to how much of the rental income we can use. For a refinance, we use the income from the Schedule E on a borrower’s tax returns, irrespective of market rents. We can add back “non-cash” expenses like depreciation. For conventional purchases, we use […]Read More

Using Rental Income to Help Qualify for Purchase; Market Rent

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Buyers can use future rents to help qualify for purchases whether they are buying single family or two, three or four unit properties. * Borrowers can use the market rents, and not actual rents, for income in most cases. * Borrowers buying a 2 to 4 unit property as owner-occupants can use the market rents […]Read More

Financing “Fixers;” What to Look For? Avoid? Options?

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When it comes to buying “fixers” in relatively poor condition, either FHA or Conventional financing can be used. As long as there are no glaring condition issues (major leaks, sloping floors, water damage, etc.), and as long as no reports or issues are referenced in the MLS or the contracts, “fixers” can be financed. And […]Read More

Closing Cost Credits Too Large? What To Watch For & Do?

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Yesterday, we mentioned that closing cost credits can equal 6% (or even 9%) of the purchase price. Hence, for a $500,000 purchase, it is completely acceptable to have the seller credit $30,000 for closing costs, from a lender’s perspective. Issues arise when closing cost credits exceed actual closing costs. This often happens when there are […]Read More

Closing Cost Credits Can = 6%; 2% for Investors; Commissions Too

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Sellers can credit up to 6% of the sales price, in most cases, as a credit for ALL closing costs – including non-recurring and recurring fees. This includes transfer taxes. Closing cost credits should just be for “closing costs” and not for “non-recurring costs” only. Many people think closing cost credits cannot exceed 3%, but […]Read More

“Pre-Qualification” vs. “Pre-Approval;” No Mas “Big Banks”

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A Realtor sent us a pre-qualification letter yesterday from another lender for one of our borrowers. The letter was shockingly vague and non-committal. It was written that way b/c the lender had not actually gone through the borrower’s complete file. We have gone through the borrower’s file with a fine-tooth comb. The other lender was […]Read More

Condo vs. PUD/Townhouse

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We were asked today about the differences in financing in regard to Condos vs PUDs/Townhouses. “PUD” stands for Planned Unit Development. Condo owners do not own the land underneath their units. Many condos, in fact, do not sit on land but “float” on 2nd or higher floors. PUD/Townhouses always sit on land, as “ground floor” […]Read More

Cash Purchases with “Delayed Financing;” No Gift Funds For Cash

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This is a reminder that buyers who purchase properties with 100% cash can obtain cash out loans against those properties immediately after close of escrow. This is called “Delayed Financing.” Delayed financing requires that buyers use ONLY their own funds. If buyers use gift funds for a cash purchase, they must wait 6 months from […]Read More

Condo in Litigation? Not a Deal Killer

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We closed a transaction last week on a condominium with a Homeowners Association (HOA) that was involved in litigation. The litigation had to do with some mold in a building that was not attached to our subject property’s building in the same complex. In any case, if litigation does not involve the structural integrity of […]Read More

Using Higher Rate To Pay for Closing Costs; Lender Credits

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Many homebuyers are tight on cash and barely able to come up with down payment funds. We often offer such buyers lender-credits for closing costs. Closing costs for a “no points” loan (both recurring and non-recurring) can vary from $7,000 to $15,000. Closing costs, of course, depend on the purchase price, loan amount, the time […]Read More

Condo Owner Occupancy Ratios Re-Visited; 2 to 4 Units – All But One

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We had many questions on Monday about Owner Occupancy Ratios and condos, so we want to reiterate this: If a buyer intends to occupy a condo, his financing will not be affected by the owner occupancy ratio. This is the case no matter how low the occupancy ratio might be. The occupancy ratio will not […]Read More

Do Sellers Care About Buyer’s Intentions? Yes. Great Story

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One of our Realtors told us a great story yesterday. His potential buyer ran into a seller during a home-viewing, and the buyer mentioned to the seller that he intended to rent out the property. The listing agent later told our Realtor that his buyer’s bid was the highest and best, but the seller did […]Read More

How To Lower Debt Ratios 101

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Experienced Mortgage Analysts (or Loan Officers) have many tools to lower debt ratios to help borrowers qualify for a larger loan. Here are a few that all loan officers should know: 1. Put less money down, and use down payment funds to pay off consumer debt. Mortgage debt has lower payments than consumer debt b/c […]Read More

How Much Does Paying “1 Point” Lower Your Rate?

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We are often asked what a borrower gets when he pays 1 point. A “point” is just a % of the loan amount. 1 point = 1% of the loan amount. Typically, borrowers lower their rate about 1/4% if they pay a point, although it varies depending on how “steep” the yield curve is. There […]Read More

Not Counting Departing Residence PITI Once It Is Pending

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We discussed how to buy a new home before selling an existing home last week (bridge loans, equity lines, FHA financing, renting out home) and we forgot to add one very important point: Ignoring PITI on an existing home once it goes “pending.” Some lenders will ignore the PITI on an existing home (it will […]Read More

How to Buy New House Before Selling Old House

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We often have borrowers in a hurry to buy a new home before they sell their existing residence. Here are the options for borrowers not wanting to sell their existing home: 1. Bridge Loans. These are temporary loans against a borrower’s current residence that can be used to help finance (provide down payment funds mostly) […]Read More

Very Strong Pre-APPROVAL Letter Necessary! Calling Listing Agents

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We received a copy of another lender’s “pre-qualification” letter today that was laughably weak. We seriously doubt that lender’s buyers will ever get an offer accepted b/c the letter was so vague and so weak. In this highly competitive marketplace, it is essential that all borrowers actually get 100% “Pre-Approved” and that borrowers get a […]Read More

“Seasoned Funds” Revisited; Looking for Seasoned Funds

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We defined and addressed “Seasoned Funds” in Monday’s comments, and our trainer astutely pointed out that we missed a couple of significant sources for “Seasoned Funds.” This is especially important during tax season. This is also important b/c some loans (Investment property loans for example) allow for no gift money. Below is a list of […]Read More

60% LTV Financing, Based on Cash Flow of Property; Not Hard Money

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We offer financing on investment properties up to 60% LTV that is NOT based on income. It is based on the cash flow of the property and debt service coverage. Hence, buyers and owners with limited or no income on their tax returns can qualify for this financing. It is not hard money. The rates […]Read More