Dually Licensed Lisa Jones
Dually LicensedForum Replies Created
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Debt Layering: Its Idea and Effects on the Mortgage Underwriting
Debt layering is a structural debt where a borrower applies for more than one loan, and the borrowing encompasses a range of cross mortgages.
Mortgages
Multiple lenders are used to place more than one loan, which gives rise to complex borrowing structures, including various kinds of loans, credit cards, and even other types of loans that the borrower has incurred over time.
Relevant Issues about Debt Layering
Getting Deeper in Debt:
Other than the mortgage, a borrower has additional loans such as, but not limited to, personal, auto, or student loan debts. Generation earlier additional liability adds the Knot.
Changing your DTI Ratio:
With Layering, debt increases on account of Cross mortgages, which in turn increases bills per month on a calendar year basis. Such expenses against the income of the borrower are a crucial aspect of being vetted, DTI ratio, which can potentially lead to disqualification of the mortgage if this rate increases more than one can afford.
Risk in Credit:
Underwriting checks a borrower’s position in the embedded chain of debt, defining the risks involved in giving a loan to the borrower. Creating more than one layer of debt can trigger increased risks around a borrower’s ability to repay the loan and their financial buoyancy as a whole.
Loan Approval Decisions:
A borrower’s DTI ratio is also affected by debt layering. When the DTI Ratio Band Seeking Target or Lender’s Band is used, it can either imply denial or imposition of a higher risk fee through more down payment or higher interest rates.
Impacts on Mortgage Underwriting
Stricter Underwriting Standards:
Due to debt layering, lenders may opt for some preferred minimum debt-to-income ratios, which means they will ask for more proving documents and an analysis of the borrower’s finances.
Increased Scrutiny:
The underwriters may look for where the debts were obtained, paid off, or made, even if it means delving much deeper into the debtor’s affairs.
Potential for Higher Interest Rates:
If the debt layering is great, the lenders will hike the interest hiring for the borrowers since they take them as high-network clients.
Possibility of Loan Modification:
However, there are times when lenders list a number of refinancing and loan modifications that are supposed to reduce the debt layer.
Because it increases borrowers’ total indebtedness and affects the DTI ratio to the extent that loan approval is likely to be denied, debt layering is likely to impede mortgage underwriting. This is why lenders must examine factors such as the DTI ratio and the borrower’s overall indebtedness to reduce possible risk chances. Understanding debt layering is important for borrowers and lenders to understand the mortgage application process.
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You’re interested in using a VA loan to do a cash-out refinance of your manufactured or modular home in Texas. Here’s some general information that might help answer your question:
VA Loans and Manufactured/Modular Homes:
- The VA loan program does allow for cash-out refinancing on manufactured and modular homes.
- However, the home must meet specific VA guidelines, including being classified as real property and permanently affixed to a foundation.
- It must also have been built according to the Department of Housing and Urban Development (HUD) guidelines.
Eligibility for Cash-Out Refinance:
Since you own your home outright and have 100% equity, you should be eligible for a cash-out refinance if your home meets VA loan criteria. A VA cash-out refinance allows homeowners to borrow against the equity in their home and receive the cash difference after refinancing.
Texas-Specific Considerations:
- Texas has specific rules around cash-out refinancing, often called Texas 50(a)(6) loans.
- These rules include limits on the loan amount and certain restrictions regarding how the funds can be used.
- Make sure to consult with a VA-approved lender who is familiar with Texas laws.
Next Steps:
- Contact a VA-approved lender to verify your eligibility and obtain details on the appraisal process, interest rates, and the amount of cash you can borrow for your upgrades.
- Please ensure they are well-versed in handling loans for manufactured or modular homes in Texas.
I can assist further if you need more specific advice or help connecting with a lender!
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A land lease, also known as a ground lease, is a situation whereby you own a property (in this example, a condo) but lease the piece of land on which it is constructed from another party for a defined period. In the nonrenewal of leasing the ground, the boundary structure has to be a confirmation of the legal framework established in the axis control where the land lease was secured. Land rights usually revert to the lessor with the lease’s expiration. The prospects of owning the condominium become hazy.
Can I assume a lease for such a purchase as a condominium for a land lease period of 10 – 15 years to get a mortgage? In most situations like what you are talking about, the land lease is normally 99 years, not ten to fifteen years. These condos with an ending land lease are particularly hard to finance. Most lenders view this as a riskier undertaking. People still determine what will happen once the lease runs out. Some lending institutions will abandon credit for these properties. Others will be more stringent by, for example, wanting more equity than usual or shorter high-interest loans. I helped a family purchase a Chattel in Wyoming, and my husband Tom helped with the financing. It was a 30% down payment portfolio loan. Here are basic questions and answers that may help you.
What type of specialty loan is available for condominiums with a land lease that is or is about to expire?
Conventional loans are generally not keen on financing a dwelling with a land lease term of 10-15 years or less since it falls outside their risk factors. Some lenders may consider shorter loan terms other than conventional mortgages, in line with the remaining lease period (for instance, mortgages of 10 years on 10-year leases).
Portfolio loans are loans issued by banks and credit unions that do not sell the loans on the secondary market but take them inside the bank or credit union’s mainstream. There are no primary guidelines that govern the extension of these types of loans. As such, they may be more interested in financing condos with even shorter land leases than 30 years.
There are buyers out there who want to use cash instead of seeking financial help. This is because they need more financing options due to the short land lease term.
What issues make obtaining financing on a condo with a land lease difficult?
Limited Lender Options: Most conventional mortgage lenders wish for a land lease to be prolonged or continuous for 30 years and even more after the loan. Most lenders see this type of property as high risk. So they wouldn’t want to extend financing since only 10-15 years remain on the lease. If a lender agrees to fund the purchase, there may be an additional deposit—from 10% up to 25% or more due to increased risk.
Experts believe that lenders will offer loan terms that are at least equal to or shorter than the remaining years of the land lease. For example, if one borrower wanted a loan of 20 years and there were only 12 years remaining on the lease, one lender might give a 10-year loan.
Worry About Lease Renewable: Lenders know they will be at risk when the lease ends. The property—or perhaps the property plus many costs associated with securing the facility—can be lost to the buyer if the landowner does not enter a new lease, which further imposes risk on the lender.
What happens when the land lease expires? A number of things could or may not happen when the land lease expires, including certain rights and obligations set forth by the lease agreement.
Lease Renewal: The landowner can agree to extend the lease, but the conditions regarding costly lease payments or a lump sum to buy the lease out are likely not assessable.
Property Reversion: The title of the land (and the structures that may or may not be on that land) may be transferred back to the landowner, and in this way, the condominium owners will end up with no property rights over their properties.
Negotiation: Condo owners can negotiate with the landowner to extend the lease or outright purchase the land. However, this depends on the landowner’s willingness and the original lease terms.
What are the risks of buying a condo with an expiring land lease?
Loss of Ownership: A buyer should expect the risk of incurring this loss if the land lease is not renewed or the old resident chooses not to extend the existing land lease.
Decreased Property Value: Property value depreciation may occur where the lease end date is near, particularly rental units under a land leasing arrangement. Where The Condo and the land have an end date, a differential in possessions, monetary gains, and sales can be experienced. This can make it easier to dispose of the property later than anticipated.
For example, the Quote ‘Challenges Include Limited Financing Options’ might prove a stumbling block in obtaining a mortgage, as the chances of getting it might be likened to finding a needle in a haystack, making one’s plans to buy or re-mortgage in the future impossible.
For Example, Quote ‘Challenges Include Potentially Higher Costs’: There might be high costs associated with extending the lease or outright purchasing the land on which the condo is built, and these may outweigh the benefits associated with condo ownership.
Is it advisable to seek legal advice concerning acquiring a condo with a land lease? Yes, it is advisable to seek the services of a land lease real estate lawyer. They can assist with understanding the lease and its provisions, options for renewal, and associated risks. The attorney can also review the lease to check whether provision clauses would obstruct the future financing or selling of the property.
What should the seller know about the land lease before buying the condo?
For how many years is the land lease valid?
Is the lease renewable, and in the affirmative, what is the base lease term?
Has the condo association approached the landowner to extend or renegotiate the lease terms?
What happens when the lease runs out? Will the landowner take back the property, or can the land be bought?
Has the content of the limited lease changed within the period?
It is crucial to ask what procedures to follow to ensure no unwise investments are being made. Investigate the land lease terms and consult a real estate attorney.
Contact several lenders as soon as possible to determine whether financing is available for the business and on what terms.
Consider Resale Value: Understand that as the lease expiration date approaches, the value of the condo may drop further, making it more challenging to resell.
Budget for Potential Costs: Levy these expenses if there is a chance of the lease stretching out or acquiring the land within one financial plan if they hope to.
Is it advisable to buy a condo with a land lease expiration and not bother with getting a land lease extension? There is nothing wrong in offering cash at a time when one cannot secure any loan or land-lease properties, which normally forces people to have big down payments and short duration of repayments.
Grimmarket assessments also need to be done, such as the lease’s time expiration and the land’s depreciating value. Before following that course of cash purchase, consult a real estate lawyer and research the directions, which have quite some risks.
Buying a condo with a leasehold interest and a 10-15-year provision remaining also comes with a couple of challenges. They are mostly seeking funding. It is important to know the provisions of the land lease, have the lender understand it, and consult with a real estate attorney to assess the risks and possible expenses. Investment financing options may be limited, but a portfolio or short-term loan may be available if the lender is willing to work with you.
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Silver price per ounce is hovering around $30.00 per ounce. Gold price set a new high and broke $2,500 per ounce
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You can qualify for government-backed and conventional loans with outstanding collections and charge-off accounts.
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TBD Mortgage Approval is worth its weight in gold. You can close in one week with a TBD Mortgage Approval. Everything has been an underwriter
The only thing is the home appraisal.
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Buyer’s vs. Seller’s real estate agent commissions. How will the NAR lawsuit ruling change the home-buying and home-selling process? The home seller no longer needs to pay for the homebuyer’s real estate agent. Does this mean that homebuyers need to pay for a buyer’s real estate agent? Will this new NAR lawsuit rule, effective August 17th, 2024, hurt buyer’s real estate agents? Will the seller’s agent pay the homebuyer’s real estate agent? Watch the informative video attached.
https://www.youtube.com/live/SXWJfJeAP7o?si=oOCyxVwz3Sn0HUKz
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FHA loans are a popular option for borrowers with student loans because they have flexible credit requirements and income limits. However, you must know how student loans affect your eligibility and debt-to-income ratio (DTI) when applying for an FHA loan.
Key Considerations for FHA Loans with Student Loans:
Impact on DTI: Considerations about Student Loans under HUD Guidelines:
Calculating DTI with Student Loans:
The Federal Housing Administration uses the percentage of a person’s monthly income to pay debts as a DTI ratio. This includes even those in deferment or forbearance.
If the Loan Is in Repayment
If your student loan is in repayment, the actual amount paid per month will be used to calculate the debt-to-income ratio, provided it is fully amortized. On Income-driven Repayment (IDR), lenders use what is on your credit report as your monthly payment.
If the Loan Is in Deferment or Forbearance:
For this category of people, lenders should take 0.50% percent of the outstanding balance to calculate monthly payments towards DTI. Unless more than 0.50% can be proved using relevant documents showing actual payments, which is less than 0.50%.
Income-Driven Repayment Plans
Lenders may consider 0.50% of the loan balance when calculating DTIs unless a fully amortized payment plan shows otherwise. This is even if your IDR has low payments or $0 monthly.
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Yes, you can! You can get a home loan with a FICO credit score of less than 580. Nevertheless, some factors should be considered. The terms may be better than those for someone with higher credit. So here is what you need to know.
FHA Loans:
500-579 Credit Score: Still eligible for an FHA loan but must come up with at least 10% as a down payment.
Non-QM Loans:
Non-qualified mortgage (Non-QM) loans are for borrowers who don’t fit traditional lending criteria. Therefore, they have more flexible underwriting requirements that could accommodate persons with scores below 580. However, these mortgages often carry higher interest rates and require larger down payments.
VA Loans:
The VA does not set a minimum credit score requirement. However, many lenders want to see at least 580 to fund any money on this type of mortgage. Some may go lower depending on their risk appetite. If you’re an active duty military member or veteran, shopping multiple lenders within this space may save time!
USDA Loans:
Typically, USDA loans require a minimum 580 score to secure financing. Certain underwriters may consider an exception for strong compensating factors within the borrower’s profile. These mortgages are only available in qualifying rural areas.
Hard Money Loans:
Hard money loans are short-term, high-interest rate loans backed by real estate. They can work even if your credit is bad, but expect greater costs and fees, which are limited mainly to investment properties or temporary funding scenarios.
Compensating Factors:
All hope is still possible when getting a mortgage with subprime credit! You can still qualify if you have compensating factors such as;
- Higher down payment than required.
- Low debt-to-income ratio (DTI).
- A good amount of cash reserves or savings.
- Stable employment history.
Lender Overlays:
Remember that the HUD, the parent of FHA, allows for credit scores as low as 500. However, most lenders have lender overlays. Lender overlays are additional mortgage lending requirements on top of the minimum HUD guidelines set by individual lenders. Most lenders have lender overlays and guidelines that require a minimum of 580 or higher. Borrowers must shop around and find a lender who will work with what you’ve got.
In conclusion, getting approved for a home loan often means putting more money down when your score falls below 580. Borrowers must pick the right lender and consider other loan types. A mortgage company specializing in working with people with less-than-perfect credit can guide them through their options based on their circumstances.