Wow. Any loan officer that has been in the business for more than 20 minutes has heard this question. Without selling you ANYTHING, let me give you a couple quick pointers to help determine if the rate, points and fees you are getting quoted are actually competitive.
First, you need to understand how the person originating [...]
Mortgage and Home Loan Information
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Ok, so yes Mr. Kiyosaki is smarter than me (just a touch richer, too). Watching CNBC this weekend, he discussed wealth through real estate, among other things, along with a panel of 4 other people. During the show, he mentioned that he is looking for tenants to pay at least 150% of his mortgage (or full mortgage payment plus 1/2 payment as profit) in monthly rent. As a continuation of my Mortgage Math blog series, I want to actually take a look at this and, of course, run some numbers. (more…)
Are stated income loans BAD?
It seems like open season right now on lenders who have issued Stated Income loans over the last several years. Here is a brief introduction to stated income loans.
Historically, when applying for a mortgage, potential borrowers would take their paycheck stubs and the (hefty) down-payment to their local bank, sit down with a loan officer and a stack of forms and begin the process of loan qualification. The bank would consider the credit profile of the borrower, the capacity to repay the mortgage (income) and the collateral securing the bank’s interest in the loan. These have been referred to as the Three C’s, although I have heard of the Four, Five and even Six C’s of mortgages, depending on which training program you look at. Based on a set of guidelines, a loan application will be approved or denied based on easy to define characteristics. This is a pretty straight-forward process, but is based on a complete understanding of a borrower’s earnings as documented by W-2s and paycheck stubs.
Now let’s consider a self employed borrower. Income calculations are suddenly much more complex, sometimes even impossible. The IRS will determine income based on your tax returns, but a self employed borrower has deductions which reduce his/her taxable income which a wage-earner will not have. Although the money deposited to each bank account could be identical in both cases, the taxable income can be drastically different. When you consider the number of people who have multiple jobs, or receive income that is difficult to verify (paid in cash) then it is easy to understand how the traditional mortgage qualification process does not fairly evaluate the ability of a potential borrower to repay the loan. (more…)
If you are deep in the loan process, I hope your loan officer is keeping you informed. Or at least, as informed as possible. Lenders seem to be dropping off like crazy right now. Loans submitted to lenders, some even “clear to close”, are eclipsed by the dreaded ” thank you for your past business, but we are ceasing operation” email. You think the Nigerian-millions-waiting-for-your-bank-account email is rampant, just take a look at the number of lenders shutting down.
OUCH!
What does this mean for a borrower? TALK TO YOUR LOAN OFFICER (assuming he/she is still employed). With lenders shutting down daily, it is harder to find program guidelines than it is to find a rate.
BANKRUPTCY is bad. FORECLOSURE is worse.
Although it is preferable to avoid bankruptcy, it is even better to avoid foreclosure. Foreclosure is the legal process whereby property is repossessed and sold at auction to cover the costs of an unpaid debt. This is usually the result of a homeowner defaulting on mortgage or loan repayments. The most common causes of foreclosure are divorce, loss of employment or a death in the family.
The foreclosure process can be long and costly and is regulated by state law. The most important thing to remember if you are forced to make a mortgage payment late is to contact your lender immediately.
Other Websites:
Broker Outpost | How do I stop foreclosure | FICO score
