< Back to JVM's Blog


Below is another in our series of “month-end” summaries.


Below is a summary of some of the topics covered in JVM Lending’s April’s “Daily Comments”

1. Rates Come Back 1/4 percent. Rates decreased at least 1/4 of one percent on average in March. Indications that the economy may be slowing again are the main reasons.

2. After April 15th, need 2011 Tax Returns or proof Extension was filed. Lenders do not need 2011 tax returns as long as extensions are filed. If 2011 was a “weak year” from an income perspective, we recommend not filing for as long as possible if you are seeking mortgage financing.

3. Paying points for a lower rate is usually not worth it. Paying a point or 1% of the loan amount to buy down the rate usually only reduces the rate by 1/4 of a percent. It can take up to 6 years to make up the cost of the point from the savings from the lower payment.

4. Rental income from a departing residence. Borrowers intending to keep their current residence can only use potential rental income from the residence if there is an “equity cushion” of 25% (FHA) or 30% (conventional). Borrowers also need to provide a rental agreement, a check from the renter, and proof the check was deposited.

5. Borrowers need to tell us everything. Loan officers are a borrower’s advocate. Borrowers need to share every liability and negative factoid about themselves, and then let us decide how to filter the info. If borrowers hold back on anything, there is a risk that the info will surface at an inopportune time and kill an entire transaction.

6. Decrease down payment, and pay off consumer debt. Borrowers with funds for large down payments (over 10% usually) and large consumer debt balances should make smaller down payments and use the remaining funds to pay off consumer debt. This significantly lowers overall monthly payment obligations and improves debt ratios.

7. Condo’s – things to ask? (a.) FHA approved? (b.) Owner occupancy ratio over 50% (only matters for investors)? (c.) HOA in litigation? (d.) HOA dues amount? (e.) One owner owns over 10% of units? (f.) Developer still in control of HOA?

8. Why is FHA Mortgage Insurance so “high” at 1.25% monthly, and 1.75% up front? FHA Mortgage insurance is costly b/c it needs to cover the losses from the riskier loans that FHA guarantees. Without it, there would be no FHA financing and a huge percentage of buyers would be shut out from mortgage financing and home-buying.

9. Income taxes owed. Tax liens must be paid prior to close of escrow. If there is an income tax liability for a more recent year (no lien has been filed yet), the balance must be paid in full, or an installment agreement to pay off the balance must be in place.

10. Rates do not always go down in an election year. Interest rates can go in either direction in an election year.

11. 203k loans are FHA Construction loans. They are often the only construction financing available. They are only for “owner occupants”, and not for investors.

12. Unexplained deposits are a major problem. All large deposits over $500 have to be “paper-trailed” and explained. Unexplained deposits can invalidate entire bank accounts and kill transactions. Borrowers need to think twice before just plunking large chunks of cash in the bank.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646