Forum Replies Created
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Gustan
AdministratorAugust 20, 2024 at 4:41 am in reply to: Does all installment Loans with 10 or less exempt from debt to income ratioAll programs do not exclude installment loans with ten or fewer payments from being calculated into debt-to-income (DTI) ratios. Depending on the program’s guidelines, a loan program may or may not remove this type of loan from the calculation. Here is how different types of loans typically deal with this:
FHA, VA, USDA, and Conventional Loans
When it comes to exclusion, if a loan does not significantly affect a borrower’s ability to repay their mortgage, the remaining ten or fewer installments can be excluded from DTI calculations.
Other things to consider: Lenders must also judge how much these payments will impact someone’s financial stability. Even if they are not included in their monthly debts, should this amount still be included in their overall DTI ratio?
Remember that some lenders may have slightly different interpretations of acceptable practice, so you should ask your lender directly.
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Gustan
AdministratorAugust 20, 2024 at 4:34 am in reply to: DO LENDERS WANT TO SEE CASH TO CLOSE BEFORE ISSUING PRE-APPROVALCertainly, a sufficient amount of available cash to cover closing costs and a down payment for the house being bought is usually required by loan providers. During preapproval, your financial statements will be reviewed by lenders to confirm that you possess enough money for this purpose. The lender will also verify whether these funds are seasoned (i.e., they have been in your account for some time – typically not less than 60 days) so as not to consider them as borrowed or from a sudden source.
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Getting a mortgage while there is a tax lien is difficult, but it can be done if certain conditions are met. Some lenders may consider approving a mortgage for someone with a tax lien, like those who offer non-qualified mortgages (non-QM). Suppose they have an IRS payment plan or can secure an IRS subordination agreement. A subordination agreement allows the mortgage to take priority over the tax lien in case of default.
If you need help getting an IRS subordination agreement, your lender or mortgage broker can assist you. They’ll likely need experience working with these situations. Some companies specialize in helping buyers with tax liens that could step in if necessary. Make sure your lender allows it. Federal tax liens and qualifying for an FHA, VA, USDA, or conventional loan follow some specific guidelines:
FHA Loans
Before applying, the borrower must have an IRS payment plan and proof of three consecutive payments. The three months of payments cannot be made at once as lump sums.
VA Loans
Like FHA loans, the borrower must establish a repayment plan with the IRS. Supporting documentation and consistent payments will be required.
USDA Loans
The borrower will need a repayment agreement and evidence of timely payments on the debt that are not delinquent.
Conventional Loans
Fannie Mae and Freddie Mac’s guidelines on outstanding tax debts on conventional loans are as follows: You can have a written payment agreement with the IRS and be on a payment plan. However, you cannot have a tax lien. You can owe the IRS money and be on a payment plan.
An IRS subordination allowing the mortgage to take the first lien position must be agreed upon, and a payment plan with proof of payment consistency is also needed.
All loan types require meeting general credit, income, and debt-to-income ratio guidelines. Working with experienced lenders who understand what’s expected here is important.
If this sounds like something worth exploring further, reach out directly via phone or email so we can discuss your situation together!
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Gustan
AdministratorAugust 20, 2024 at 12:58 am in reply to: New Buyer Representation Agreement: What Homebuyers Should KnowChad, you as a real estate agent, what are you hearing from your colleagues and fellow real estate agents. I know eventually everyone adapts to changes but this is different. You are looking at a lot of money for a homebuyer to pay for the buyer’s real estate agent. I think you are ahead of the competition because you are a licensed realtor and mortgage loan officer. Knowledge is king.
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Gustan
AdministratorAugust 19, 2024 at 11:56 pm in reply to: 100% Financing for Commercial Real EstateGreat program, Lee.
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Gustan
AdministratorAugust 19, 2024 at 7:19 pm in reply to: What are the pros and cons of choosing a USDA loan?Advantages and disadvantages of USDA loans
benefits:
No down payment required: With this loan, you can buy a house without spending any money upfront. This makes it easier for people who have little savings.
Lower interest rates: These loans can save borrowers money in the long run by offering competitive interest rates.
Less expensive mortgage insurance: The monthly payments are lower on average because they have reduced mortgage insurance premiums than FHA loans.
Flexible credit guidelines: Lenient credit requirements make this type of financing available to those with imperfect credit histories or scores.
Financing is available only in rural areas. These funds help residents purchase homes outside densely populated regions, like towns or suburbs around cities where more individuals reside. Doing so promotes ownership among citizens living elsewhere and increases their number, thus reducing congestion within municipalities themselves. This may lead to other environmental problems, such as pollution.
There are some downsides, too, though:
Location restrictions apply: Only certain rural and suburban communities qualify as eligible locations for USDA lending programs; therefore, buyers will be limited geographically when considering properties.
Income limits imposed: Income levels vary across the country, which is important during the evaluation stages. If earnings are higher than stipulated, they might not fit into these schemes.
For primary residences only: It’s worth noting that these mortgages cannot be used towards investment real estate ventures or second homes since they’re intended solely for owner-occupied houses where one intends to live permanently all year round until death comes knocking at their doorsteps!
Additional fees charged upfront and annually on top of MIPs (Upfront/annual fees): While usually cheaper overall compared against FHA-related costs such as MIPs, etc., there still exists an annual fee plus up-front guarantee charges that add to total borrowing expenditure, thereby increasing overall costliness other types of competing products found within the same marketplace.
Longer processing times: This kind of loan usually takes longer to process than other types since it has to be approved by both the lender and USDA officials.
Which is the best way to apply for a USDA loan?
Find out if you are eligible: Determine whether your desired property falls within a USDA-eligible area and that its price and yearly earnings do not surpass specific thresholds they set at the location.
Look for an approved lender: There are lenders authorized by USDA, so you need to find one such financial institution that offers these loans before proceeding, i.e., selecting a mortgage provider.
Get pre-approved: Obtain a letter from your chosen lender stating how much they are willing to lend based on their assessment of your financial situation. It’s also good practice because it makes you appear more attractive as a buyer in sellers’ eyes when making offers.
Collect necessary paperwork: Gather all relevant documents like tax returns, pay stubs, bank statements, etc. These will come in handy during the underwriting stage. This involves verifying income sources, calculating debt ratios (di), and analyzing credit reports,
Choose property location: Once pre-approved, look at homes in designated rural areas. Then, hire a real estate agent competent enough to search available listings for suitable properties that meet the earlier criteria.
File application: After deciding on house agreement terms and purchase agreement controlled forms provided, local association realtors fill all blank spaces accurately. This ensures you follow applicable state laws regulating such transactions. After this, submit a completed copy and any supporting attachments required directly to the office nearest to the listing broker involved in the transaction. Offer evidence of earnest money deposit being paid per instructions stated therein. The buyer’s escrow account or the listing broker’s trust fund, whichever is applicable.
Close the deal. If everything goes according to plan, lenders should communicate the closing date. The proposed settlement company will furnish the necessary legal documentation to facilitate the transfer of ownership interests between the parties concerned. It needs to ensure compliance with governing bodies overseeing this process and protecting the rights of both buyers and sellers.
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The FHA scorecard is the TOTAL Mortgage Scorecard of Technology Open to Approved Lenders utilized by lenders in underwriting FHA loans. It assesses a borrower’s credit risk through factors such as the debt-to-income ratio, payment history, or even credit score. On one hand, it has been designed to determine whether an application should be approved automatically or if it requires manual underwriting.
FHA Score Card is loosely related to HUD rules, but this automated underwriting system is specific. Here’s what I mean:
FHA Score Card:
This is an automated mortgage loan scoring system for Federal Housing Administration (FHA) loans.
We are officially called TOTAL (Technology Open To Approved Lenders) Mortgage Scorecard.
Purpose:
Assess creditworthiness on applications for FHA loans.
Provide an initial assessment of the risk associated with the request for mortgage financing.
How does it work? Look at the applicant’s credit report, income, assets, and other considerations. Produces either an “Accept” or “Refer” recommendation.
Relationship to HUD:
Created by HUD for use with FHA loans.
Conforms to HUD’s criteria for approval of FHA mortgages.
“Accept” recommendation:
- This indicates that HUD, the parent of FHA, set minimum standards.
- HUD guidelines regarding the likelihood of defaulting on repayment obligations based on current financial conditions have been met.
- It requires some data points to be verified manually by the lender even though they are received electronically from sources such as IRS transcripts showing income tax returns filed.
“Refer” recommendation:
- Refer/eligible finding per AUS means manual underwriting is required.
- It does not necessarily result in denial.
- It only means a closer look is needed.
Factors considered:
- Payment history in the past 24 months.
- Credit score.
- Debt-to-income ratio.
- Cash reserves.
- Loan-to-value ratio.
Advantages:
- Speeds up processing time during the loan approval process.
- If humans do it entirely, it can take months without automated systems like this.
- It may only sometimes agree quickly enough due to the nationwide volume processed daily.
- It ensures equal treatment for all applicants across different lenders.
- Applying the same rules uniformly regardless of where the borrower lives or which institution provides financing.
Not the final decision:
It’s not an arbiter in deciding whether loans should be approved but rather a tool lenders use to help them make such decisions.
Lenders have discretion when approving mortgage applications, regardless of what the FHA Score Card says.
Updates:
Scorecards change over time as new FHA policies are implemented and HUD revises old ones.
Accessibility:
Different loan origination systems enable FHA-approved lenders to access this system.
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Rules for Mortgage Approval During and After Chapter 11 Bankruptcy:
During Chapter 11 Bankruptcy:
- Approval is challenging but possible with trustee and court approval.
- You must show a strong repayment history under the bankruptcy plan.
After Chapter 11 Bankruptcy:
FHA Loans: Typically require a 2-year waiting period from discharge.
Conventional Loans: Usually require a 4-year waiting period from discharge or dismissal.
VA Loans: Often require a 2-year waiting period.
Key Considerations:
- Strong, re-established credit and stable income are crucial for approval.
- Thanks for sharing these guidelines about mortgage approval during and after filing for bankruptcy under Chapter 11.
- This information is very useful as it gives an insight into what options are available to people who have experienced this process.
- Let us go through the major highlights below:
During Chapter 11 Bankruptcy:
- Approval is possible but challenging.
- Requires trustee and court approval.
- This ensures that new debt doesn’t interfere with the bankruptcy plan.
- A strong repayment history is crucial.
- Demonstrates ability to manage finances under the bankruptcy plan.
- Shows commitment to financial recovery.
After Chapter 11 Bankruptcy:
Federal Housing Administration (FHA) loans: Two years must elapse from discharge before applying again.
Conventional loan programs: Before qualifying again, four years must pass following the discharge or dismissal date, whichever comes later.
Veterans Affairs (VA) home loan applications: Two years must pass after the discharge date for an applicant to be eligible again.
Key Considerations:
Re-established credit: Rebuilding your credit score after filing bankruptcy can involve utilizing secured cards and becoming an authorized user.
Stable income shows one’s ability to repay the new mortgage, indicating financial recovery post-bankruptcy.
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Gustan
AdministratorAugust 18, 2024 at 6:24 pm in reply to: Changes in Credit Scores During Mortgage ProcessThe credit score that was pulled when you applied for a mortgage loan is the credit scores that will be used throughout the mortgage process. If your credit scores dropped during the mortgage process, it does not matter because the credit score that was pulled is good for 120 days. If your credit scores drop during the mortgage process, it can potentially affect your loan approval, interest rates, and terms if the credit score drop was due to late payments, or other derogatory credit tradelines. Here’s what may happen:
- Re-Evaluation: The lender may re-evaluate your application and pricing if your credit scores went up. Higher credit scores mean lower rates.
- Rate Change: A lower credit score could lead to a higher interest rate if the credit report is 120 days or older and a new credit report needs to be pulled and your credit scores dropped.
- Approval Risks: If the score drops significantly after 120 days when a lender needs to pull a new tri-merger credit report, you may no longer meet the lender’s criteria.
What to Do:
- Communicate with Your Lender: Explain any factors causing the drop.
- Avoid Major Financial Changes: Don’t open new credit or make large purchases.
- Monitor Your Credit: Ensure there are no errors causing the score drop.
Staying proactive and working closely with your lender can help mitigate potential issues. Do not worry about your credit scores dropping because the original credit score that was pulled will be used throughout the mortgage process. The original credit scores from the initial credit report pulled to issue your pre-approval letter is good for 120 days. Any credit report that is older than 120 days needs to get repulled and the new credit scores will apply.
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