Attorney Connie
AttorneyForum Replies Created
-
What are mortgage points?
Mortgage points are upfront fees paid at closing in exchange for a reduced interest rate on the loan. Typically, one point equals 1% of the loan amount and decreases the rate by an eighth or a quarter of a percent, depending on the lender.
Purpose of Discount Points
They aim mainly at reducing monthly mortgage payments throughout their life span, thus creating long-term savings.
Who Charges Discount Points?
Lenders are responsible for charging these fees, which borrowers pay during closings.
Benefits for the Buyer
Depending upon how long one intends to stay put, buying these little guys can save you some serious money over time. This is especially if we’re talking decades here when our houses become homes forever.
Is it worth it to pay a discount point?
To determine whether or not it is worthwhile to purchase points, calculate a “break-even period”. How many months before lower monthly costs surpass initial expenditure. If this number happens to be less than your expected tenure (i.e., number of years staying), go for those bad boys!
-
When applying for a mortgage, you can use past W-2s and a current year-to-date (YTD) pay stub. This is even if the latter includes overtime income, if OT income has been seasoned for the past two years and it is likely to continue for the next three years. Nevertheless, there are factors to consider:
Salient Points:
Income Stability:
Lenders prefer that an applicant has had a steady income over some time. If overtime forms part of your regular income and has been so for the last 24 months, they may consider it when calculating your qualifying income. In this case, they will average such earnings for the past two years to determine what is acceptable.
Verification of Overtime:
To verify this fact, lenders usually expect employers’ Verification of Employment (VOE) to show that overtime work is ongoing and predictable.
Documentation:
Two of the most recent years’ W-2s, recent pay stubs (including one with YTD earnings), and sometimes an employer’s letter are usually required. Additionally, the lender may request tax returns if there are large amounts of OT or other types of variable income.
Income Calculation:
Suppose an employee’s overtime pay tends not to be constant. For example, annually varying the amount earned within consecutive 24-month periods could affect how much money one can qualify for as a loan. In such cases, there might seem to be significant differences between what one has made this year through extra hours worked beyond regular shifts and what was earned during any previous calendar year doing the same thing. Using previous W-2s and current hourly or salary on the employment offer letter as qualified income is customary. Plus, the past two-year average overtime income (verified via employment verification) can be used when applying for a mortgage. Ensure that the overtime income is regular and well documented since lenders want proof of its stability. Overtime income is verified by the employer via employment verification. The chances of overtime income continuing for the next three years need to be likely. Talking with your lender can help clarify what portion will be used in calculating qualifying income based on these documents.
-
Yes, a non-occupying co-borrower can be a friend and not a family member, but this is determined by the loan program you are using.
FHA Loans (HUD Guidelines):
For FHA loans, it is usually required that a non-occupying co-borrower must be related to the primary borrower by blood, marriage, or law (such as a close family friend who has had a long-standing relationship with the borrower and may qualify under specific circumstances). However, this rule may have some exceptions depending on certain factors presented to an underwriter at the time of submission. If they can make a good case for themselves and their relationship with applicant[s], then sometimes the lender might go along with it; otherwise, being related is normally necessary.
Conventional Loans (Fannie Mae and Freddie Mac Guidelines):
According to Fannie Mae or Freddie Mac guidelines, non-occupying co-borrowers do not have to be related to the main borrower. This means any individual with a strong financial background, including friends and business partners, could act as your non-occupying co-borrower. These programs tend to have more flexible relationship requirements compared to FHA loans.
Main Differences:
FHA Loans: Non-occupant borrowers generally need some blood, marriage, and legal tie, though this is not always true in all cases.
Conventional Loans: Fannie Mae & Freddie Mac will allow unrelated parties to serve as non-occupant borrowers if they so desire. Your friend would only qualify if they were related to conventional loans such as Fannie Mae or Freddie Mac. However, for an FHA loan, I would like them to have some kinship through blood, marriage, and legal ties. The underwriter may waive this requirement based on our lender’s flexibility.
-
Certainly, you can use your wife’s revenue to apply for an FHA loan despite her negative credit ratings. However, here are some important points:
Non-Borrowing Spouse:
If your wife has a very poor credit history, you have the option of listing her as a non-borrowing spouse. This means that her income may be considered when qualifying for the loan. Her credit will not be considered during the approval process. Instead, her debts will be included in calculating the debt-to-income (DTI) ratio.
Joint Application:
If you opt to apply jointly, both your credit scores will be assessed. Usually, the lender considers the lower score between the two. This might affect whether you qualify or even the interest rate.
Community Property States:
In case you reside within a community property state, regardless of whether she has taken out any loans. They will still be factored into DTI calculation. This is because such places treat all debts incurred by one spouse as joint obligations potentially impacting qualification. But having said so, it’s worth mentioning that using her income could help improve your DTI ratio.
FHA Requirements:
These loans are known for being more lenient towards low credit ratings. Therefore, even if your partner does not have good scores, there is still a chance of eligibility, provided other compensating factors exist. For example, a larger down payment or higher earnings exist.
Strategies:
Here are a couple of strategies you can consider
Non-Borrowing Spouse: To avoid affecting the loan with their bad score, thus only benefiting from their income,
Credit Improvement: Try enhancing their ratings before applying to increase the chances of giving better terms.
To conclude, with an FHA loan. Even if my wife has terrible credits, I could use her money to apply. But I must decide whether she should become a borrower or act as a non-borrowing spouse. You should consult an authorized FHA lender for guidance based on your specific circumstances.
-
Yes, in a Chapter 13 bankruptcy repayment plan, you can qualify for a mortgage and buy a house. However, certain requirements must be met:
Main Requirements:
Approval by Trustee and Court:
To incur new debts like a mortgage during bankruptcy, you need permission from the trustee of Chapter 13 and the court. To do this, you must file an application with the court explaining why such a loan is needed and how it fits into your payment plan.
Payment history:
For lenders to consider giving you a mortgage, they typically require between 12 and 24 months of on-time repayment towards a bankruptcy plan. It’s positive that you have made 2.5 years’ worth of payments on time.
Credit score:
With a credit score 655, certain loan programs may be available to you, including FHA loans. These loans have less strict policies regarding scores and are very popular among borrowers who have filed for Chapter thirteen bankruptcy.
Type of Loan:
FHA Loan: You will have better luck getting approved for this type since they’re more lenient with their rules about credit scores and past bankruptcy. The minimum requirement for an FHA loan is usually around 580, so even though yours could be better, at least it’s within range.
VA Loan: If you’re a veteran, VA Loans might work better because they don’t care too much about what happened before filing bankruptcy.
Conventional Loan: Most conventional lenders will only touch people two years after discharge, but if presented properly during Chapter 13 proceedings, some might consider extenuating circumstances.
W2 Income Only (No Tax Returns):
This is for individuals without tax returns but having W-2 income. Mortgage lenders could still pass, particularly if the loan is an FHA or VA, where income verification methods are more flexible.
Steps to Take:
Consult Your Bankruptcy Attorney: Before taking action to secure yourself housing through a mortgage, In contrast to chapter thirteen, consult with your lawyer first so that he or she can advise on how best to approach the court approval process.
Work With An Experienced Lender: Find a lender who has dealt with borrowers under Chapter 13 bankruptcies before because they will know what to do and push for at each stage. They should be able to help you through the whole thing and ensure all necessary papers are filed on time.
Get Ready For Documentation: Have everything ready, such as W2 forms and recent pay slips, among others, which show that even though one is still paying off debts, one can still afford mortgage payments.
Having paid consistently for two and half years, coupled with having a credit score of 655 plus being employed officially (W-2 income). It puts you in good stead when seeking mortgages during the repaying period under chapter thirteen. The most important thing is getting approvals from courts or trustees required by law while dealing with lenders having experience in these matters.
-
Chad, do you think, in your opinion, the NAR lawsuit will affect homebuyers and sellers? Will it affect real estate agents in general?
-
Great topic Chad Burns @chadbush . This NAR lawsuit and new rules is the talk of town. Nobody or better, yet, everyone seems to have their own opinion and interpresentation of the NAR lawsuit ruling and what is in compliance and what is not. So confusing. From my interpretation, the following is what I perceive it as and please correct me if I am wrong:
The National Association of REALTORS® (NAR) recently reached a settlement introducing new rules for homebuyers to make the process more transparent. The changes take on concerns regarding commissions, agent responsibilities, and how buyers navigate the market. Here’s what you need to know and how it could impact you:
Commissions become more transparent.
What’s different: Under the settlement, real estate commissions must be disclosed in a way that is more transparent to homebuyers. This means buyers will better understand how much their agent makes and what portion of the commission goes to the buyer’s agent versus the seller’s.
How it affects buyers: Homebuyers can now see upfront information about different commission structures, which allows them to make smarter decisions. More transparency might also prompt additional negotiation around commission rates, ultimately saving money.
Agent’s duties are clearer.
What’s different: The new guidelines require agents to communicate with clients clearly and without ambiguity about what services they’re providing and at what cost. Agents should also provide an explicit explanation of their role.
How it affects buyers: When agents talk straight, homebuyers know exactly what they’re getting from whom. This can help avoid misunderstandings or conflicts when only some are on the same page! It also ensures buyers are fully informed about payment expectations and desired level-of-service delivery standards.
Buyer representation agreement tweaks possible
What’s different: The settlement, among other things, could change the structure of buyer representation agreements, which have traditionally taken handling commissions. This creates an opportunity for purchasers to negotiate if they want some portion paid sooner rather than later, among other options available under these revised arrangements.
How it affects buyers: Broadening flexibility within such types of contracts would enable consumers looking forward to purchasing homes to save money. This is done by reducing the costs associated with buying houses while still guaranteeing satisfaction derived from working with agents based on an individual’s financial capabilities.
More consumer education is required.
What’s different: The agreement highlights the need to educate buyers about purchasing real estate—especially financial matters. Expect NAR and its members to ramp up efforts to provide educational resources and tools.
How it affects buyers: With more information at their disposal, people planning on buying properties will be empowered with knowledge throughout the process, making them better equipped to make informed decisions regarding cost implications vis-à-vis benefits accrued from such investments, taking cognizance of risks involved, too!
The market could change.
What’s different: As brokerages and agents adjust to these fresh guidelines, there might be a shake-up in how they operate within the industry. This includes reduced commission rates offered by realtors competing against each other for clients’ attention or going above board in service delivery so as not to lose relevance among their peers, hence charging lower fees than competitors altogether.
How it affects buyers: Home seekers may pay less due to increased competitiveness between sellers. One must stay alert because some individuals might try to pass through hidden charges elsewhere. The constant vigilance can do this during transactions
The NAR’s recent agreement will make buying a house more transparent and easier by clarifying commission structures and agent duties. As the buyer, these changes can give you more power to negotiate with sellers and know what exactly you are paying for. It is necessary to stay updated about these changes while dealing with a real estate professional so that everything goes smoothly when purchasing a home.
-
I appreciate your inquiry. This is a complicated problem involving estate planning and property law. If I may summarize what you have told me, here are some things to think about:
Joint Ownership: It matters what kind of joint ownership the house has with your brother and his ex-wife.
- Joint Tenancy with Rights of Survivorship—In this case, the surviving owner (usually the wife) takes over the whole thing automatically.
- Tenancy in Common – Your brother’s portion might pass to his children or other heirs here.
Divorce Agreement: The divorce settlement might include instructions on how properties will be handled if one party dies before another does.
Will or Estate Plan: If he has one, it’ll say who gets his share of that place.
State Laws: You didn’t mention where this happened. We need more details. Different states have different rules on inheritance rights and properties in their territories. Outside those owned by residents thereof, they shall be governed exclusively according to the law unless otherwise provided from now on after subsequent acts heretofore until recently.
Unless deemed necessary under current practice, albeit against public policy notwithstanding, any such provisions remain invalid. Remains invalid until always repealed except as authorized pursuant hereunto. Therefore, otherwise made known at present while still valid during future legislation without prejudice as to any existing laws enacted prior here forthwith upon ratification notwithstanding the fact.
Mortgage Responsibility: Just because kids inherit part doesn’t mean they don’t owe a mortgage, too!
Deed Details Matter: How a deed is written can change ownership rights quite a bit sometimes, so watch out for those words people use when signing stuff like this.
Please let me know if there is anything else you would like to know about estate planning or property ownership.
-
Example Cases on the Operation of Discount Points
Case 1: Small-Savings Loan
Loan Amount: $300,000
Interest Rate Without Points: 3.5%
Interest Rate With 1 Point: 3.25% (Cost: $3,000)
Monthly Savings: $42
Break-Even Period: 71 months
Result: Worthwhile if staying for more than six years.
Case 2: Large-Investment Loan
Loan Amount: $500,000
Interest Rate Without Points: 4.0%
Interest Rate With 2 Points: 3.5% (Cost: $10,000)
Monthly Savings: $142
Break-Even Period: 70 months
Result – Good if staying for over five years.
Case 3: Short Term Stay
Loan Amount I borrowed: $250,000
Interest Rate Without Points: 3.75%
Interest Rate With one Point: 3.5% (Cost:$2,500)
Monthly Savings:$34
Break-Even Period: 74 months
Outcome – Not worth it if you plan to sell within six years.
In every scenario where somebody buys discount points, it reduces their monthly mortgage payment, but you have to calculate how long you’re going to stay with the mortgage to determine whether it’s a good financial decision or not based on when the break-even point is.