Posts

Rent Backs; Gift of Equity; Appraisal Seasoning; 3% Down vs FHA

Here are a few “Mortgage Minders.” Rent Backs. Most lenders allow sellers to “rent back” the home they just sold for as long as 60 days. If the term exceeds 60 days, however, “owner occupancy” comes into question for the buyers. Gift of Equity. Down payments can be a “gift of equity” alone (with no […]Read More

Borrower Education: Most Important Part of Process In 2015

This is excerpted from a borrower email we received last week: “Thanks for your email, Sean! I read almost everything in it … The Homebuyer’s Memo was so informative and comprehensive; I really liked how everything was explained…I read the reviews, but what really makes me feel confident in JVM is all of the great […]Read More

Min. Credit Scores in 2013; FHA: 580; Conventional: 620 to 660

We are frequently asked about “minimum credit scores” for obtaining financing. Here are general guidelines for minimum scores for our office in 2013: FHA: 580 Conventional < $417,000: 620 Conventional > $417,000: 660 Jumbo: 680 Pricing hits/rate increases for lower credit scores are now larger than ever. For example, lenders that accept FHA borrowers with […]Read More

Lock “Periods” – When to Lock? How Long to Lock

Most lenders allow borrowers to lock for 60, 45, 30 or 15 days. Longer lock periods are associated with higher rates or more discount points. This is relatively well-known. What is not well-known is that the “spread” for the difference in cost for the different lock-periods varies depending on market conditions. Typically, the additional cost […]Read More

What Not to Do After Getting Pre-Approved – Important!

Every time we send a “pre-approval” letter, we also send an accompanying list of suggested actions to avoid. We call it our “Don’t List”. This list is essential to prevent borrowers from creating a lot more work for themselves or from jeopardizing their pre-approval status altogether. Below is our “JVM Don’t List” for pre-approved borrowers […]Read More

Borrower Cannot Submit Loans to Different Lenders Without Disclosing

We often have buyers interested in purchasing two properties at the same time, or borrowers interested in refinancing two properties at the same time. This is less of an issue of course if both loans are submitted to the same lender. The lender’s internal database will detect both loans, and then require that each loan […]Read More

No Taxes Owed at Close; Installments OK

Lenders require all income tax liabilities to be paid current at time of close. If borrowers file tax returns for 2012 that show a tax liability owed, they will have to prove that the taxes have been paid before their lender can fund their mortgage. Even if borrowers file an extension, lenders will require proof […]Read More

Only the Very Experienced and Diligent Should “Pre-Approve” Borrowers

We have been getting an influx of purchases that have blown up at other lenders. All of the transactions had major issues that were simply missed during the pre-approval process. This just drives home the extreme importance of having a very experienced team to pre-approve borrowers. JVM’s teams are responsible for spotting every potential issue […]Read More

Minimum Credit Score for Financing: 620 to 640; Re-Score?

When we refer to a borrower’s “credit score,” we are typically referring to the middle of his three scores (from the three major credit bureaus); lenders almost always correlate to the middle score. The minimum “middle score” for conventional financing is 620. The minimum middle score for FHA is 640 at almost all lenders, with […]Read More

Why We Don’t Recommend 15 Year Loans – Future

We often have borrowers request 15 year fixed rate loans (or even shorter maturities), and we typically discourage them. The reason is that we expect significant inflation to set in over the next several years. Our reasoning is: why saddle oneself with a much higher payment now while money is more valuable? Our advice is […]Read More

Jumbo Pricing Improves – Again; Markets Open Up

We had another lender come out with a very competitive Jumbo product this week. “Jumbo loans” are those loans in excess of $625,500 (maximum conforming loan limit; it could be less, depending on the county). These loans are underwritten and funded completely outside of Fannie Mae, Freddie Mac and HUD/FHA. As we have mentioned before, […]Read More

Have JVM Review Tax Returns Prior to Filing; 2 Year Average

We like to remind borrowers periodically that we are happy to review tax returns before they are filed to assess whether there is enough income to qualify for a desired mortgage. We have many self-employed borrowers who are very “aggressive” with respect to expense allowances on their tax returns. If they are on the cusp […]Read More

Screening Potential Buyers for Viability with Basic Questions

Realtors refer potential buyers to us every day, and we are more than appreciative. Many times, however, the borrowers are not even close to qualified for a variety of reasons. We do not mind screening such borrowers, but we often feel bad for Realtors when we find out they spent substantial time with buyers who […]Read More

Much Lower Price But 1% Higher Rate = Higher Total Payment

We had a borrower yesterday express reluctance to buy because there is “so little inventory” that he thinks he will “inevitably end up over-paying in a bidding a war.” We had two responses. First, we think the chances of housing prices coming down again, if and when there is an inventory surge, are slim to […]Read More

Can Non-Borrower Make Mortgage Payments for Borrower?

We are often asked if it is “OK” for someone other than the borrower to make mortgage payments on behalf of the borrower. Our answer is “yes” in most cases, based on our experience. Many lenders expressly prohibit non-borrowers from making payments because they want to discourage borrowers from buying properties on behalf of others, […]Read More

“The Great Flood” – Inspiring Story!

We referenced a rush purchase last week that involved a property that was totally flooded by the departing seller just prior to close. We never told the whole “inspiring” story though. As we mentioned, the seller moved out and left water running in the laundry room, flooding a large portion of the house. The “Great […]Read More

Annual Percentage Rate or “APR” – Includes MI

“Annual Percentage Rate”, or APRs, remains confusing to many borrowers (and to most loan officers). We want to address them again because they are especially confusing with respect to FHA Loans. The intent of the APR disclosure requirement is good; it is to prevent lenders from advertising unduly low-interest rates without conveying the effective cost […]Read More

“Rates Are Awful” – An Amusing Matter of Perspective

As most readers know, it is JVM’s philosophy to hire for education and brainpower as opposed to hiring for just “experience.” We are able to do this because we have developed an extraordinarily unique and effective training program. The bi-product of this hiring philosophy is an office full of much younger and more educated employees than […]Read More

Clarification On Chapter 13 Bankruptcy Seasoning: None Required

We have a borrower who has been waiting a year since his Chapter 13 Bankruptcy (BK) Discharge to get mortgage financing. This is unfortunate because he did not need to wait at all. Borrowers in a Chapter 13 BK (personal BK with debt reorganization and payments) can garner FHA financing after they have made 12 timely […]Read More

Avoid FLIP Issues By Watching Dates; Issues After 90 Days??

We often encourage our realtor-clients to dance around “flip issues” by ensuring contracts, deposit checks, escrows, etc. are all dated AFTER the 90 day flip period is over.  This allows buyers to access any lender they desire b/c there will be no flip prohibitions.  And, it usually avoids the extra scrutiny that goes into all files involving flips. […]Read More

Financing a Home in Need of $25,000 of Repairs? 203k; HomePath; JVM Lending

We were recently asked if we could finance a property with $25,000 of repairs. This comes up often, so we thought we would repeat some guidelines for properties with major repair issues. 1. If major repair-needs are “disclosed” anywhere, including in the purchase contract, the MLS info or the inspection reports, the work will have […]Read More

Using “Rough Draft” Tax Returns To See If Someone Qualifies?

We have several self-employed borrowers who could not qualify for the properties they wanted in 2012 because their 2011 tax returns had too little income. The borrowers all had better years in 2012 than they had in 2011, and they all intend to send us rough drafts of their 2012 tax returns in early January […]Read More

The “Private” MBS Market Returns – Lower Rates; More Loan Types; Great News for Jumbo Financing

We have been hearing encouraging talk about how the “Private” Mortgage Backed Security Market will resurge in 2013. Private mortgages are those NOT backed by Fannie, Freddie or FHA. This week, a good friend of ours emailed us the following link: http://www.housingwire.com/news/sp-private-label-rmbs-issuance-almost-doubles. This is very good news for lenders, borrowers and Realtors for a couple […]Read More

How Will “Fiscal Cliff” Affect Interest Rates?

The Fiscal Cliff is a combination of tax increases and massive government spending cuts that will hit the U.S. economy in 2013, unless congressional action is taken soon (in 2012). Most economists see the imposition of the Fiscal Cliff as “contractionary,” or as something that will hurt the U.S. economy overall (both tax increases and […]Read More

“QE 3” Announced – Lowers Rates

QE 3 is short for Quantitative Easing, Round #3. This is a policy where the Fed buys up debt instruments or assets in an effort to push down long-term interest rates. The Fed’s hope is that lower long-term rates will stimulate the economy by giving consumers and businesses an incentive to borrow and invest more […]Read More

Rescission Periods – 3 Days For Primary Residence Refi Only

A “Rescission” Period is a mandatory “cooling off” period between the date someone signs loan documents and the date a loan can fund. There is NO rescission period for purchases, or refinances involving 2nd homes and/or investment properties. Only a refinance of an owner occupied primary residence requires a rescission period. Prior to the late […]Read More

Options For Investors Buying “Fixer Uppers”

Investors looking to buy “fixer uppers” that are in poor condition have only a few options. Hard Money or Private Money/30%+ Down: These lenders do not care about condition, but they do require 30% down or more, and their rates are in excess of 10%. In addition, they charge from 3 to 5 points. Fannie […]Read More

Loan Over $417,000? 2 Options: 10% Down or 3.5% Down FHA

If loan amounts are under $417,000, buyers can get conventional financing with as little as 3% down, as well as FHA financing with 3.5% down. If loan amounts are over $417,000, however, buyers still have only two options: conventional financing with 10% down or more, or FHA financing with 3.5% down. This is an important […]Read More

Call Extra/Unpermitted Units “Storage”

We have two retired borrowers refinancing their property in Berkeley – a quaint older home with an in-law in back. The in-law unit is a cute little, detached cottage that does not detract from the property in any way, and it also generates $900 per month in rent. The cottage itself is in great condition. […]Read More

“Appraised Value” Often NOT “Market Value”; Low Appraisals

We often have buyers bidding for houses in very competitive markets because of the lack of inventory. In these situations, appraisals often come in under contract price. This frightens buyers because they think they are paying too much for the property. But, we explain to buyers that the “appraised value” often does not come close […]Read More

“Gift of Equity” for a Down Payment; No Cash Required

We often have buyers purchasing properties from close family members. These buyers often have minimal cash for a down payment, and the sellers (often parents) are willing to help the buyers out. In these situations, the best option for a down payment is a “gift of equity.” As long as the down payment is 20% […]Read More

Buy Primary Property as “Investment” if Debt Ratios Tight

We often have buyers looking to “buy up” into a larger property with the intention of keeping their current property. These buyers, however, often cannot qualify for the larger house b/c the new mortgage in conjunction with their current mortgage makes their debt ratios too high. One solution is to find a renter for the […]Read More

3% Down Conventional vs. 3.5% Down FHA

Many buyers with limited down payment funds think FHA financing is their only option. But, for loan amounts under $417,000, Conventional Buyers can put down as little as 3% (0.5% less than FHA requires). Below are some of the benefits and drawbacks of Conventional Financing. Benefits of 3% Down Conventional Financing (vs. 3.5% Down FHA […]Read More

Will Rates Stay Up? Still Say Lock Now

There are three reasons why rates have spiked: (1) improvements in Europe’s sovereign debt picture; (2) improvements in the US economy overall; and (3) decreasing likelihood that the Fed will move again to “ease” or push rates down. As we point out frequently, positive economic news sends investors into stocks and away from bonds (and […]Read More

Main Criteria To Evaluate To “Know” a Buyer Is Viable

We often have Realtors with eager buyers who want to view homes before the buyers have been previewed by us. To ensure no time is wasted on non-viable buyers, Realtors need to ask a few questions about the criteria that make buyers viable: (1) Credit; (2) Income; (3) Equity – Down Payment. Credit: Ask about […]Read More

Every Penny In Transaction Must Be “Sourced” Up To Close

Borrowers all too often believe that once their loan is approved and they sign loan documents, they have nothing to worry about. We have addressed this before, reminding everyone that “verbal employment verifications” are often performed right before close of escrow (so yes, borrowers do need to keep their jobs through close of escrow). Another […]Read More

25% Ownership Means “Self-Employed”; 2 Year History Required

Borrowers who switch from one W2/salaried job to another in the same field can still garner mortgage financing as soon as 30 days after their job switch. There is a caveat, however, that surfaces all too often in this age of “entrepreneurialism.” If a borrower takes a 25% (or higher) ownership stake in his new […]Read More

U.S Rates Worse; Mortgage Rates Better; Why?

Mortgage rates do not always move in lock-step with Treasury rates. Mortgage rates will often move independently from Treasuries, depending on the overall supply and demand for mortgage-backed securities. Secondly, there is a good by-product of the excessively stringent underwriting guidelines – investors are realizing that mortgages are very safe bets. This increases demand for […]Read More

Defining “Turn Times”; Financing Takes Time

Lenders are frantically hiring more underwriters and support people to handle the influx of loan requests for both purchases and refi’s. They simply cannot find enough trained talent to handle the volume. As a result, “turn-times” are slower than usual. It is essential that everyone understands the definition of a “turn-time” in order to understand […]Read More

Strong Borrowers Frustrated Because of Need to Comply With Fannie

We address this frequently and are doing so again because it comes up so often. We constantly get extremely strong borrowers from a financial perspective who either cannot qualify for a loan, or who gets conditioned to death. And, as always, they become irate and blame us for the problems, telling us how strong they […]Read More

Part Time and 2nd Jobs Require Two Year History

We often get borrowers who can only get part-time jobs b/c of the weak economy. We also get borrowers with 2nd jobs to help make ends meet. A “part-time” job is typically one that requires fewer than 30 hours per week. A “2nd job” is simply a source of employment other than a person’s full-time […]Read More

Foreclosure Inside a BK – Same Seasoning Periods

As mentioned yesterday, we often get borrowers with recent bankruptcies (BKs), and we quote the normal seasoning periods that lenders require after a BK is discharged. The seasoning period is usually 2 years b/c most of our borrowers have had Chapter 7 BKs. But often, after further digging, we discover that borrowers had one or […]Read More

Financing After a Bankruptcy – Seasoning

We have been getting borrowers with recent bankruptcies asking about financing after a bankruptcy. Fortunately, FHA is very forgiving when it comes to bankruptcies. A Chapter 13 BK requires NO seasoning after 12 months of timely payments into the BK. Chapter 7 & 11 BKs require 2 years of seasoning in most cases, or 1 […]Read More

Do NOT Mention PENDING Divorce

This is another reminder from previous Comments because it has come up many times. If a borrower or buyer is involved in a divorce that is not yet recorded or finalized, do not bring it to light. If lenders find about a pending divorce, it raises legitimate issues in regard to future liabilities. Hence, lenders […]Read More

2nd/Vacation Home Financing to 90% LTV

This is a reminder that 2nd Home or Vacation Home Financing is alive and well. For loan amounts below $417,000, borrowers can buy 2nd homes with only 10% down. The rates are only marginally higher than those associated with primary residence financing. No points loans can easily be locked in the mid to high “3’s.” […]Read More

Initial Deposit Into Escrow Needs to Come From Buyer or Donor

We often get purchases where well-meaning relatives or friends write the initial check for the escrow deposit. This invariably creates problems for us; we often end up backing out initial deposits from escrow (with the permission of sellers) and then getting buyers to write a new deposit check. The reason is that every penny that […]Read More

Options For Locked Borrowers if Rates Fall

There are hundreds of thousands of borrowers across the country with locked in interest rates, and most are wondering what their options are when rates fall. First, we like to remind borrowers that they were smart to lock in the first place. We remember all too many times over the past 20 years when borrowers […]Read More

Final Conditions In? Still Need Sign Off & Docs Drawn – 4 to 8 Days

We had a purchase of a condo conversion recently where all conditions were signed off with the exception of the final condo documents. When the final documents showed up, the buyers and realtors (all great clients, by the way) expected to sign loan documents and close the next day. In the above case, we still […]Read More

Rates Hold; We Often Discourage Leaving One Lender for Another

With rates at record lows, we often get calls from borrowers currently locked and working with another loan officer. They might say, “I am locked at 3.75% but I want to see if you can do better.” We invariably can offer a much better rate, but unless the borrower is getting a decidedly bad loan, […]Read More

HO6 Insurance; Open House Fliers

Almost all of the Condos we finance now require the addition of HO6 Insurance. The homeowner’s association insurance covers the overall building only. HO6 insurance covers the unit itself (interior), personal property, fixtures and upgrades. It also offers liability protection. HO6 Insurance costs from $35 to $40 per month. As many of our condo buyers […]Read More