Myth: “I Need a Bigger Mortgage Because I Need The Tax Deduction”

We frequently tout the tax benefits that result from shifting from renting to owning, and how those tax benefits offset one’s housing payment to the point where it sometimes is less (after taxes) than one’s rent payment. What we do not tout is using tax benefits to rationalize an increase in one’s mortgage. Many borrowers […]Read More

Appraisal Comes in Low – Increase LTV and PMI to Make Deal Work

The current “hot market” results in purchases with prices that simply cannot be supported with appraisals. And because sellers often refuse to come down in price when an appraisal comes in low, we often propose the “solution” of simply increasing the loan-to-value ratio and PMI rate to save a transaction. For example: If a borrower […]Read More

Lock In Rate Now; Can Always Lock In Lower Rate And Refi In 60 Days

Borrowers are frequently reluctant to lock in a rate because they think rates may fall further in the near future. We like to remind these borrowers that they can easily refinance in the near future if rates fall, and usually at no cost. Our lending sources only ask that our borrowers hold their loans for […]Read More

REOs With Repair Needs? Options?

We frequently get purchases involving REO properties with conspicuous condition problems that appraisers cannot help but notice (and call out). When underwriters call for repairs to an REO, the bank/seller invariably refuses to do the work. This leaves three options, if the buyers still wants to close: (1) switch to a hard money or portfolio […]Read More

Do It Yourself Pre-Approval Letters for Strong Borrowers

We have numerous pre-approved buyers in our pipeline who qualify for literally twice what they want to purchase. We email such “strong borrowers” our pre-approval letters on Word Documents so that they and their Realtors can edit or tailor the letters themselves as they make offers. This is a convenience in that all pre-approval letters […]Read More

Required Employment Continuity

A Veteran, recently out of the service, came to us yesterday for VA financing. He has only been on his job as an IT Consultant for 9 months, and this rightfully concerned both him and his Realtor. After further inquiry, however, we discovered that he had not only worked in IT while he was in […]Read More

Down Payments Affect Interest Rates; Credit Score Big Factor

Down Payment size or percentage does NOT affect the interest rate for FHA loans. But, Down Payment size does affect the interest rate for Conventional loans. If a borrower’s credit score is above 740, the effect is small. If a down payment size is less than 25% (20% vs 25%), the rate might be 1/8 […]Read More

FHA Buyers: Make Sure Condos Are FHA Approved; Get FHA Approved?

  Reminder: FHA buyers making offers on Condos need to first make sure the Condo Complexes are FHA approved. This issue has been popping up time and again in recent months. Finally, it is not impossible to get a Condo Complex FHA approved, if the financials are strong (adequate reserves, owner occupancy is over 50%, […]Read More

The Entire Ardous Purchase Process – A Necessary Education

Everyone knows closing a loan is a tough process these days, but most people not in the business do not know just how much there is to do. Below is our outline of the entire “Purchase Process” that we send to all of our borrowers at the front end of every transaction so they know […]Read More

Why We Like 30 Year Mortgages Over 15 Year Mortgages

We have many borrowers opting for 15 year mortgages instead of 30 year mortgages b/c they want to pay off their mortgages. This may not, however, be the best strategy. Borrowers with 30 year loans have smaller payments and larger tax deductions (from paying more interest). If 30-year borrowers invest the savings from the lower […]Read More

No Loan Contingencies for Strong Borrowers?

Many of our pre-approved borrowers are very strong from a qualifications perspective, with substantial down payment funds, perfect credit, and very low debt ratios. These borrowers are so strong and so conservative that they do not need loan contingencies in their contracts. We are often surprised when Realtors ask us if they can shorten the […]Read More

Pre-Approved Purchase Price, Not Loan Amount; Be Careful

We are often asked for the absolute maximum purchase price for a pre-approval. For example, it might be a $600,000 price and a $480,000 loan. This might be the maximum price Fannie’s automated underwriter (“DU”) allows for (often “DU” will not let us exceed a 45% housing debt ratio for loans over $417,000). The above […]Read More

Loan Approval Does NOT Mean All is OK; 11th Hour Verifications

Many borrowers mistakenly believe that once the appraisal comes in at value and a loan is formally approved (and contingencies are released) that the coast is clear. But, that is NOT the case. We recently had a borrower lose his job after our loan was approved and after we were in the process of ordering […]Read More

Questions Realtors Need to Ask to Make Sure a Client is Viable

We watched a movie recently in which a Realtor was holding open house for a $5 million house. A young couple was showing interest in the home and the Realtor entertained their interest until…a friend of the Realtor pointed out that the couple drove a $30,000 Saab and therefore probably could not afford a $5 […]Read More

Investors/Buyers Using Rental Income to Qualify – No Seasoning

Most people are aware that sellers can use rental income from their departing residence if there is a sufficient equity cushion (conventional – 30%; FHA – 25%). Investors, with tight debt ratios, can also usually use the rent from the house they are buying to qualify. Investors need only to prove they have a potential […]Read More

Cash Out After Cash Purchase; Buy After Short Sale

Two quick reminders today: 1. Buyers who pay “all cash” for a property can refinance immediately afterwards and pull “cash out”. Investors can pull up to 75% of the value of the property (value will not be more than the purchase price in almost all cases). And owner-occupants, can pull up to 80% of the […]Read More

Seller Credit for Closing Costs: 3%, 6%, 9%; Realtor Credits?

For Conventional Loans, seller credits can only be 3% of the purchase price if the loan-to-value (LTV) ratio is over 90%. Seller credits can be 6% of the purchase price if the LTV ranges from 75% to 90%. And, seller credits can 9% of the purchase price if the LTV is below 75%. A 9% […]Read More

HARP 2.0 – Way More Flexible Than We Thought

HARP 2 is turning out to be much more flexible than we expected. And b/c so many borrowers are so far upside down in their homes and wanting to refinance, we thought we’d address HARP again. HARP 2 applies to any Fannie and Freddie loan purchased prior to June 1, 2009. HARP 2 allows for […]Read More

HARP 2.0 Works – Underwater by 250% Is OK

HARP 2.0 is the latest version of the Government program to help underwater borrowers refinance. The original version was not as effective b/c it limited loan-to-value ratios to 125%. The new version has NO loan-to-value limit, and we are surprisingly efficient at manipulating our automated underwriters (DU and LP) to get appraisals waived altogether. This […]Read More

Must Provide Either 2011 Taxes OR Extension Form

We pointed out recently that borrowers do not need to have filed 2011 income tax returns to qualify for mortgage financing. Self-employed borrowers can qualify for mortgage financing with only 2009 and 2010 tax returns and an extension form. We also pointed out that if borrowers had a very weak 2011, they would be wise […]Read More

Paying Points? Pay-Back Too Slow; Tax Deductible

We had a borrower with household income over $200,000 hemming and hawing about paying a 1/2 point (1/2 per cent of the loan amount) to get to her target rate. The 1/2 point charge was only $2,000, but she was very conservative and the amount greatly concerned her. When we reminded her that points and/or […]Read More

Rental Income; When Can We Use It? How to Calculate?

If there is sufficient equity, we can use rent from a “Departing Residence” if we show a lease, a check from the renter, and proof the check was deposited. BUT, we can only use 75% of the actual rent for income (to account for expenses and vacancies). Further, lenders request a “rent survey” from appraisers […]Read More

Must Disclose “Everything” to Us; Equity Line is a “Mortgage”

We recently had a transaction blow up about 25 days into the process because the borrower “forgot” to disclose an equity line of credit (that was not on his credit report) he had against a rental property. He might have “forgotten” because the equity line also had several late payments in the last 15 months. […]Read More

Decrease Down Payment & Pay Off Debt; Creativity

One of our borrowers made an offer for a B of A REO. As always, B of A required her to get approved by a B of A loan officer before they accepted her offer. Even though, we have her soundly pre-approved, B of A could not get her approved b/c “her debt ratio is […]Read More

Income Taxes Owed; Filing; Liens; Installment Payments

With tax season upon us, income tax issues surface so often that we feel the need to address them again, with a few clarifications. Tax Liens must be paid: Borrowers with income tax liabilities over a year old often have “tax liens” filed against them. These liens MUST be paid prior to close of escrow. […]Read More

Why FHA “Assumability” Is So Valuable

We frequently tout the fact that FHA loans are “Assumable”, meaning that buyers making an offer on a property, with FHA financing in place, can assume the existing FHA loan. If Joe Buyer wants to buy Jane Seller’s property for $500,000 and there is a $450,000 FHA loan already in place, Joe could give Jane […]Read More

Tax Deductions Even When Not “On Loan”

We frequently have family members buying properties on behalf of other family members because adverse credit issues (usually short sales and foreclosures) preclude so many from buying themselves. The family members who are not buying usually put up the down payment and agree to make all of the future mortgage and property tax payments. What […]Read More

Deeding Off Title Doesn’t Get You “Off the Loan”; What To Do?

Many borrowers suffer from the misconception that simply “deeding off the title” to a property gets them off the hook for the attached mortgage that it is in their name. Borrowers remain legally responsible for those mortgages, and those mortgages continue to reflect on borrowers’ credit reports. Borrowers will not be held responsible for those […]Read More

Skip Condo Because High HOA Dues Can Buy More House; $100 = $20,000

We recently had a buyer make an offer on a small CONDO with $470 of HOA dues. Sky-high HOA dues are not uncommon, as they seem to be climbing everywhere. The problem is that high HOA dues often make properties unaffordable for our clients. $100 of HOA Dues translate to about $20,000 more purchasing power […]Read More

Unwarrantable Condos with Litigation OK; 65% LTV for Foreigners

The “Portfolio” lending segment continues to come back to life. We now have a lender that finances “unwarrantable” condominiums (low owner occupancy; litigation, etc.) up to an 85% Loan-to-Value (LTV) Ratio. This same lender finances properties to 65% LTV for Foreign Nationals who not only lack U.S. Citizenship but also earn their livings in another […]Read More

FHA MI Increase Again – Order Case Numbers in MARCH

We mentioned yesterday in our month-end summary that FHA “Monthly” and “Up Front” MI are both going up on April 1st. Monthly MI will increase to 1.25% from 1.15%, in most cases. And “Up Front MI” will increase from 1% of the loan amount to 1.75% of the loan amount in most cases. This is […]Read More


Several Realtors have asked us to do a Month End Summary of our Comments so they have fodder for their newsletters. This is the first of our Monthly Summaries. EVENTS AND INFO REGARDING REAL ESTATE FINANCE JVM LENDING FEBRUARY MONTH-END SUMMARY. Below is a summary of some of the topics covered in JVM Lending’s February […]Read More

Private School Tuition vs. Buying Up In A Good Public School Area

We had borrowers living in Concord, CA with 3 kids in private schools. The borrowers moved from a $300,000 Concord home to a $1 million home in Lafayette, CA where the kids went to public schools. The borrowers’ total monthly payment obligations remained the same. The borrowers only wished they had moved sooner. We have […]Read More

Don’t File 2011 Taxes If You Owe Too Much Or Income Is Worse

It’s Tax Time and two issues surface often: (1) most recent year was worse than the previous year, and (2) income was good but we don’t have funds to pay taxes. If 2011 was worse than 2010, do not file until after we close. We have a borrower whose 2011 taxes look awful because of […]Read More

Foreign Citizen Financing With 50% Down Payment

We have a lender that provides competitive (not “hard money”) loans for non-U.S. Citizens living and working in other countries. These loans require verification of income and assets from the country where the borrower is employed. This lender accepts foreign tax returns for income verification. Statements or documents in another language will have to be […]Read More

Income From/In Foreign Countries Is OK

We often get borrowers who are U.S. citizens (or Green Card Holders) who work and live in foreign countries (most often Canada and China). These borrowers can qualify for Fannie Mae and Freddie Mac financing IF they file U.S. tax returns and we can verify their foreign income. FHA financing is not always available for […]Read More

ONLY 1% Down CHDAP Loan W/ Good Rates; 96/3/1

We used to discourage Down Payment Assistance programs because the lenders offering the programs either had much higher rates overall, or they required rate-increases with the use of the program. But we now have a lender with excellent rates and no rate increases required with its CHDAP program. We have a legitimate 1% Down Payment […]Read More

Rates Hold; 1 Year of Self Employment Income OK If “DU” OKs; Down Year Exception

Friday’s comments discussed the necessity of “averaging” the last two years of self-employment income when qualifying self-employed borrowers for mortgage financing; self-employed borrowers cannot simply correlate to the most recent year’s income in most cases. Savvy readers, however, pointed out two exceptions. Sometimes, if a borrower is very strong (large down payment, good credit, etc.), […]Read More

Buyers Can Sometimes Buy “UP” Immediately After a Short Sale With No Lates

Because we still get asked this so often, it is probably worth repeating. Borrowers who sell their homes via a short sale, with NO late payments up to the short sale date, can buy a new home immediately after the short sale if they “buy down”. Buying down entails buying a property that is smaller […]Read More

“Landlord Experience” Usually Not Required; Rental Income

We frequently have borrowers who are upside down in their current home and are trying to buy another home. Because they are upside down in their current home, they do not want to sell, and they cannot use rental income from their departing residence to help qualify for a new residence. Remember the rule: borrowers […]Read More

FHA MI To Go Up; Equity Lines or HELOCs

FHA Insurance will increase again sometime this year because the default rate on FHA loans is so high. It appears that FHA buyers are not averse to walking away from their properties if their equity position dries up. This is the case even if they can afford their payments. Our borrowers frequently request Equity Lines […]Read More

Qualifying for a New Home Before Selling your Old Home; Issues/Solutions

Many buyers need to qualify for a new home before selling their current home because their current home is upside down and they either cannot sell or do not want to sell. Such buyers then have problems because their debt ratios are too high because of the debt against their current home. Such buyers are […]Read More

Wells Fargo vs JVM; JVM 1/4% Lower and Faster; No Unexplained Deposits!

We frequently have borrowers go to Wells Fargo before coming to us, and we could not be happier. Today we had a borrower get quoted 4.125% for a “no points” loan at Wells Fargo. We offered her a “no points” loan at 3.875% as well as a $1,100 credit for closing costs. Our borrower loves […]Read More

Gifts or Credits from Realtors to Buyers – Be Careful!

Realtors involved in a transaction (name is on contract) cannot openly “gift” funds to buyers. They can credit commission money for closing costs any time, but they cannot cut checks to buyers. We recently had a deal blow up because the selling agent cut a $5,000 check to the buyer. The lender, of course, saw […]Read More

Credit – Do NOT Close Out Acccounts; “Rapid Re-Scores”

We had a borrower yesterday with perfect credit and credit scores in the 780s. He wanted higher scores, so he was going to close some of his accounts. We stopped him. A. There is no reason to try to push credit scores higher than 780; anything above 740 is “golden” for mortgage purposes; and B. […]Read More

Non-Taxable Income – “Gross Up” by 125%

We constantly get borrowers with NON-taxable income who are confused about how much they qualify for. Non-taxable income or income not subject to taxation (usually by both the Federal and State governments) includes: (1) Social Security Income; (2) Municipal Bond Interest; (3) Child Support; and (4) Qualified Annuities. All of this income can usually be […]Read More

No or Tighter Contigencies for Strong Buyers

We have a pre-approved “first-time” buyer with an 800 credit scores, no debt, $120,000 in income, perfect job stability and $200,000 in savings. She is bidding on $350,000 homes because she is extraordinarily conservative. This woman needs no loan contingency at all. She only needs appraisal and inspection contingencies. And because she is using our […]Read More

No MI to 95% LTV? Yes, But We Like Monthly MI Better

We frequently get Realtors and borrowers who are excited about the prospect of garnering “95% loan-to-value financing with no Private Mortgage Insurance.” We invariably pop their bubbles, and this is why. To get 95% LTV financing with no MI, we and/or the lender simply jack up the rate to get enough extra yield premium or […]Read More

Government Fees Push Rates Up; Met Life Closes Doors

We received numerous notices from various lenders yesterday, warning us that rates will climb in coming weeks. This is because Fannie and Freddie are increasing their fees to pay for the recently passed payroll tax cut (as we mentioned yesterday). We expect rates to increase by 1/8 to 1/4 of a percent, with the full […]Read More

FHA MI Required MORE Than 5 Years for Purchases; 78% of Price

Mortgage Insurance for FHA Purchase Money Loans must remain in place until the loan balance is reduced to 78% of the PURCHASE PRICE. For purchase money loans, the current appraised value of the property is irrelevant (even after 5 years). We were originally told (and many people still believe) that FHA MI can be removed […]Read More