Mortgage Q & A HERE!!

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Hello FW!

I've been a member going on 10 years here at FW and I thought I'd try something new and start a Q & A for the ins & outs of qualifying for mortgages and what pitfalls to look out for.
I am a loan consultant for a direct lender in CA and would be happy to answer any questions you may have... So ask away!


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If I may add my .02

Re #1:  as mentioned, Second Homes are underwritten very similar to Primary Residences, however, maxi... (more)

tiedyed1 (Oct. 02, 2013 @ 5:15p) |

Note: I have posted this information in the HARP Refinance thread but also felt it was pertinent to those who may not kn... (more)

tiedyed1 (Oct. 28, 2013 @ 5:25p) |

In an effort to keep this Q&A Forum going, I just want to post a short message and wish all FW members a very Happy New ... (more)

tiedyed1 (Dec. 28, 2013 @ 9:16a) |


You can start helping by answering questions posted in this sticky thread: http://www.fatwallet.com/forums/finance/788032/

ok:
jtatro said:   I have an investment property that has a high interest rate. I want to move into it, but can only afford to do this if I refinance it as a primary resident to lower the interest rate and my payments. Right now I live with my parents for almost free. I was recently told that I cannot refinance an investment property as a primary residence and get the primary residence rate until I have moved into it. Is this true? Is there a bank that would refinance me before I've actually moved into the property? I would hate to kick my tenants out, and then find out I can't get refinanced for some other crap reason.

What I would recommend is to submit the file as a primary residence refi as a "credit only" to underwriting, most lenders will allow this. The underwriter will review your file and tell you what exactly what is holding you back from qualifying for the refinance without having to conduct appraisal. She will also produce a conditions list which outlines the items needed to clear the file for approval (utility bills, etc.) In your case it would obviously be proof of occupancy, but you would want to know if anything else would be holding you back. Once you are cleared pending proof of occupancy, you should be clear to move in and continue the file to funding.
Good luck!

I meant to answer them in that thread, since it is already a Mortgage Q&A thread (in addition to people posting about rates)

Asking for a friend, is it still possible to get cash out up to 80% LTV for a refi? Also, does all lender require a physical appraisal for a refi?

Hahaha, Got it. Well I was hoping to focus on helping people figure out what they need to do to get qualified (not so much MBS trading trends).
That thread is a bit all over the place. It is what it is. If the mods find this thread redundant so be it. But at least I tried!


LTV Matrix (164.10kB)
Disclaimer
ZenNUTS said:   Asking for a friend, is it still possible to get cash out up to 80% LTV for a refi? Also, does all lender require a physical appraisal for a refi?
As long as it's owner occupied you can go up to 85%ltv with a fico of 620 or better. Investment properties are capped at 75%ltv. Yes the appraisal will be mandatory unless it is a FHA or VA streamline (with the exception of HARP DU REFI 2 which would only be applicable if "your friend" was underwater on a fannie/freddie owned mortgage)

Great topic, I had couple of question but was hesitant to create a new topic.
Q1: I am going to purchase a investment property from family member (non arms length). The property in question was purchased by the family member in cash as short sale couple of months ago and this transaction was arms length. The property is currently rented out. Would I have any issue getting mortgage within Fannie guidelines? There is no intention to defraud anyone. Though I feel transaction appears suspicious due to quick resale of a short sale with non-arm length. Also there is no relationship between me and the original short seller.

Q2: Lets say I've purchased 3 investment property within the last year on top of my current primary home bringing the total mortgaged property to 4. I would like to move up to a larger home while converting my current residence to a rental. Would Fannie allow more than 4 properties? Also can I use my rental income for qualification purposes, assuming it is declared in my tax returns.

sabhinav said:   Great topic, I had couple of question but was hesitant to create a new topic.
Q1: I am going to purchase a investment property from family member (non arms length). The property in question was purchased by the family member in cash as short sale couple of months ago and this transaction was arms length. The property is currently rented out. Would I have any issue getting mortgage within Fannie guidelines? There is no intention to defraud anyone. Though I feel transaction appears suspicious due to quick resale of a short sale with non-arm length. Also there is no relationship between me and the original short seller.

-The issue with non-arms length transactions usually happen if you were to turn around and attempt a cash-out refinance after the purchase. As long as the value of the property =~ the sale price you should be fine. What they are worried about is buying your uncles home from him for a ton of money, turn around and do a cash-out refi, pocket the cash, split it with your uncle, and split town.

Q2: Lets say I've purchased 3 investment property within the last year on top of my current primary home bringing the total mortgaged property to 4. I would like to move up to a larger home while converting my current residence to a rental. Would Fannie allow more than 4 properties? Also can I use my rental income for qualification purposes, assuming it is declared in my tax returns.

-Yes,you should be fine with that setup. Fannie allows up to 8 financed properties. Note that rental income declared on your returns will only be able to be used at a 75% occupancy rate (meaning total rental income minus mortgage minus taxes, etc x .75) That would be used as qualifying income for you (they do that to assume that you would be looking for tenants, doing repairs, improvements etc 25% of the time to be safe). You would also have to display a history of being a landlord for over 12 months for each property. - Otherwise, you could "rent" to your buddy for more than it's worth on paper, pay the taxes (dumb, i know) and increase your eligibility to borrower towards another property without really receiving the income. They assume that if you've been at it for at least a year, you are legit.



Perfect, thanks s lot.

Do you deal with commercial mortgages as well?

I need some help with resolving a situation, just some thoughts, maybe some of you had experience like this before.
In January of 2012 I purchased a house, paid cash since it was a foreclosed property. Applied for mortgage in December of 2011, at that time I was shopping for a house so was pre qualified, but since I sent my offer to the bank as a cash offer, had to come up with the cash at closing. So I purchased it for cash, now I need some money for something else, wanted to refinance or get a home equity line of credit and was unsuccessful.
Right now I am pursuing PhD overseas, so I dont file my income taxes for last few years, I tried to go with PenFed since I have a relationship with them for many years, never had a late payment on the credit card, but first they seemed to approve it, then everything went south.
I am not looking to get everything I put in the house, but wanted to get like 30-50% still no luck.
I paid 150 000$ and invested 50 000 to completely remodel the house, we tore everything apart, so brand new insulation, new dry wall, new floors, brand new kitchen etc.
As I said I was under impression that I will get approved and used some of my credit cards for improvements and hate to pay interest, wanted to get one loan or line of credit so I can consolidate it.
Any advice would be greatly appreciated.

P.S I am listing it as my primary residence and not planing to rent it.

Are there general debt to income guidelines/rules that we should be aware of? Are they flexible or hard limits?

I have always read the rule of thumb of 1/3rd of income, but wondered how strict that is. Thanks in advance.

Jahlapenoez said:   Are there general debt to income guidelines/rules that we should be aware of? Are they flexible or hard limits?

I have always read the rule of thumb of 1/3rd of income, but wondered how strict that is. Thanks in advance.


Most lenders will go with whatever the DU findings kick back. If DU (Fannie Mae's Software Underwriting algorithm) issues an approval the lender will adhere to the findings. DU takes a lot of factors into consideration. Everything from ficoto reserves etc. I've seen files get approved fha at 50% dti and va loans well above 50%dti. I know that when it comes to conventional loans a lot of lenders have hard stops on dti if the qualifying fico is less than 640... basically if DU will approve you, you are in good shape. If your fico is under 640 ask your lender if they have any overlays (guidelines above and beyond Fannie Mae) that would affect your approval. Investment property purchase and refis will likely have stricter limits.
Sorry i couldn't be more specific but each program is different.

pumparumpa said:   I need some help with resolving a situation, just some thoughts, maybe some of you had experience like this before.
In January of 2012 I purchased a house, paid cash since it was a foreclosed property. Applied for mortgage in December of 2011, at that time I was shopping for a house so was pre qualified, but since I sent my offer to the bank as a cash offer, had to come up with the cash at closing. So I purchased it for cash, now I need some money for something else, wanted to refinance or get a home equity line of credit and was unsuccessful.
Right now I am pursuing PhD overseas, so I dont file my income taxes for last few years, I tried to go with PenFed since I have a relationship with them for many years, never had a late payment on the credit card, but first they seemed to approve it, then everything went south.
I am not looking to get everything I put in the house, but wanted to get like 30-50% still no luck.
I paid 150 000$ and invested 50 000 to completely remodel the house, we tore everything apart, so brand new insulation, new dry wall, new floors, brand new kitchen etc.
As I said I was under impression that I will get approved and used some of my credit cards for improvements and hate to pay interest, wanted to get one loan or line of credit so I can consolidate it.
Any advice would be greatly appreciated.

P.S I am listing it as my primary residence and not planing to rent it.


They probably denied the loan since you do not show any income. as far as the under writer is concerned, if you don't have it on your income taxes, it doesn't exist. They will not be able to loan $50k to someone with no verifiable income. Who would? If you could have a family member or someone else you trust with your life hop on the loan as a non-occupant co-borrower you can make it happen depending on the type of loan. Do you know anyone who would be willing to step in?

DaONEk3 said:   Do you deal with commercial mortgages as well?
No, just residential.

I have a question regarding my loan. I am purchasing a condo through a short sale in Riverside, CA. My lender is New America Funding and my title insurance appears high:
Purchase = 193,000
Loan = 154,400
30 yr @ 4%
Lender's title insurance = 2,163.25
Owner's title insurance = 1,750.00

Am I getting ripped off on the title insurance? Property closes at end of September so is it too late to do anything about it?

PS: like the Alex logo.

Looooong time lurker, first time poster!

My loan is stuck in underwriting, and Chase is moving very slow, and blaming it on underwriting. We have already been approved for the loan. How do I get Chase to speed up? Already contacted supervisors, put pressure on loan officer and had attorney call them.

I have a conventional 30 year loan that is serviced by BOA but owned by the Bank of New York Mellon. I'm underwater, and so far I've not seen any program that helps. Is the only possibility paying down the loan until I'm under 100%?

iseetrails said:   I have a question regarding my loan. I am purchasing a condo through a short sale in Riverside, CA. My lender is New America Funding and my title insurance appears high:
Purchase = 193,000
Loan = 154,400
30 yr @ 4%
Lender's title insurance = 2,163.25
Owner's title insurance = 1,750.00

Am I getting ripped off on the title insurance? Property closes at end of September so is it too late to do anything about it?

PS: like the Alex logo.


Thanks on the avatar. The title ins looks a bit high but it's probably just an estimate the lender put in there to cover their ass. The new regulations make any substantial increase in fees from the GFE the responsibility of the lender at closing. This is to protect borrowers from any surprises at the closing table. So what lenders tend to do is overestimate all the fees from the onset, thus eliminating the potential for them having to cover the difference since it will be lower than initially quoted. Also keep in mind that title and escrow companies have to all be within reason to each other
regarding fees. They need to be appropriate or customary or else they can get in trouble via RESPA. (Real estate settlement procedures act)
Ask your title officer directly what the fee is, then call another title co and ask them for a quote. They should be within a couple hundred bucks of each. But remember, the seller is the one who is choosing the title company 90% of the time, but this should help calm your nerves.

bank45 said:   Looooong time lurker, first time poster!

My loan is stuck in underwriting, and Chase is moving very slow, and blaming it on underwriting. We have already been approved for the loan. How do I get Chase to speed up? Already contacted supervisors, put pressure on loan officer and had attorney call them.


Has the loan been locked yet? If so, when does the lock expire? Also, how far into escrow are you? Is there time to move the file to another lender?;
Be sure to put in writing a statement that you will not be held responsible for any lock extension fees due to lender delays. I've heard horror stories of of the big banks (BofA, Chase, Wells) taking of 60 to close due to their high volume. What people don't realize, smaller lending institutions and brokers will be able to close most transactions in 21-30 days and save the borrower money.

I assume this is a purchase. Be sure your agent is aware if the delay and is poised to request an extension, as well as extend the loan contingency period on the sales contract just in case the underwriter finds something she doesn't like to protect your earnest money deposit. I wish I had better news for you

bombcar said:   I have a conventional 30 year loan that is serviced by BOA but owned by the Bank of New York Mellon. I'm underwater, and so far I've not seen any program that helps. Is the only possibility paying down the loan until I'm under 100%?
It looks like you are SOL for a HARP refi at 100%+LTV unless Fannie or Freddie decide to buy your note... not very likely this late in the game.

IF you have substantial heaps of cash
&
IF you plan on dropping the anchor and retaining the property for the long haul
&
IF your current interest rate is seriously high...

It may be in your best interest to pencil the numbers on an FHA refi. Take the up front mortgage premium hit and monthly MI for FHA so you would only have to pay down the principle to 96.5% in order to corner a great rate. You would have to pencil the interest you are currently paying annually (in $), and counter with the closing costs, new mortgage amt w monthly mortgage insurance, + the cost to pay down the principle (vs the interest that money would be earning in a CD or other yielding acct). find your break even point. It may surprise you if your current interest rate is in the 6's or 7's. Keep in mind that the FHA mortgage insurance drops, but only after you reach 80% LTV AND 5 years has passed (currently at 1.25% of the loan amount annually & 1.75% up front <ouch>.

hope things work out for ya!

Have a USDA guaranteed loan in Pennsylvania. Original loan was 202900 @ 5.5%, current balance is ~194000. Do lenders still do the USDA streamlined refinance? As far as I can tell, the new pilot program does not cover PA.

The loan is currently held by chase. I contacted them a few months ago to ask if they had any refinance programs I would be eligible for, and they said no.

I just received a notice a few days ago regarding USDA suspending their programs due to lack of funds. Let me dig up that email and get back to you. If I am mistaken and USDA programs are still alive and well, it could be that Chase does not underwrite them (just currently services old usda loans). Your best bet in that case would be to go to go to another lender who does USDA (a lot more brokers than banks do them out here in CA).
Hold tight for that email.

SanDiegoDude said:   bombcar said:   I have a conventional 30 year loan that is serviced by BOA but owned by the Bank of New York Mellon. I'm underwater, and so far I've not seen any program that helps. Is the only possibility paying down the loan until I'm under 100%?
It looks like you are SOL for a HARP refi at 100%+LTV unless Fannie or Freddie decide to buy your note... not very likely this late in the game.

IF you have substantial heaps of cash
&
IF you plan on dropping the anchor and retaining the property for the long haul
&
IF your current interest rate is seriously high...



Yeah, I'm at 5.875% so it's decently high, but I'm not quite sure on how big 'substantial heaps of cash' would be. What's a good way to get an appraisal estimate in San Diego?

bombcar said:   

Yeah, I'm at 5.875% so it's decently high, but I'm not quite sure on how big 'substantial heaps of cash' would be. What's a good way to get an appraisal estimate in San Diego?


If you were going to go FHA you would have to order a FHA appraisal. On average it costs about $450 here in SD depending on size/scope. The lender orders it after they reserve the fha case number for the refi. In other words, you don't order the fha appraisal, the lender does but it will still be out of pocket from the borrower regardless of whether or not it appraises for what is needed to continue the refi. Makes sense? If not let me know via pm and I can clarify.

Understood. Zillow has me something like $100k underwater so it's probably not worth bothering with at this time.

SpeedingLunatic said:   Have a USDA guaranteed loan in Pennsylvania. Original loan was 202900 @ 5.5%, current balance is ~194000. Do lenders still do the USDA streamlined refinance? As far as I can tell, the new pilot program does not cover PA.

The loan is currently held by chase. I contacted them a few months ago to ask if they had any refinance programs I would be eligible for, and they said no.

Hey Speedy, I just got this today:

"USDA’s new fiscal year begins on October 1, 2012. Purchase funds will not be available for approximately two weeks or longer after the new fiscal year begins. During this timeframe, RD will issue Conditional Commitments “subject to the availability of commitment authority”.
At this time, we will allow USDA purchase loans to close and fund “subject to the availability of commitment authority”. We will monitor the situation closely and if it appears that the funds will be delayed longer than a couple of weeks, a decision may be made to postpone further fundings.
Please note, any loans that do not receive a conditional commitment prior to October 1, 2012 will be subject to the new annual guarantee fee of .40% and will need to be redisclosed with the new fee by October 3, 2012 to be compliant.
Refinances funds are still unavailable and Congress, as of yet, has not appropriated additional funds."


So it looks like USDA refis will be on hold for a while. If/when things change I will post here for you.

bombcar said:   Understood. Zillow has me something like $100k underwater so it's probably not worth bothering with at this time.

Hi fellow San Diego FWer!

I live in Oceanside (92057) and bought my house in 2008 for just over $200k. I'd really like to buy a slightly bigger house/yard in the area ($250k?) and rent out my existing house though I know this is most probably a stretch. Comps in my existing area suggest the house is worth roughly the same price as I paid.

My income is $70k, (very steady, six year job with Fortune 500) and Credit Karma reports around 740 though I have very little equity (100% mortgage thanks to some slightly shady Wachovia loan officer). I can pull $20k from my 401k as downpayment and I'm in the middle of paying off a $3k balance on the credit cards (just graduated with business degree). No other debts or significant assets.

Do I have any chance of qualifying for a loan for a new house, and selling the existing home or keeping as a rental?

Thanks!

Pagannagap said:   Hi fellow San Diego FWer!

I live in Oceanside (92057) and bought my house in 2008 for just over $200k. I'd really like to buy a slightly bigger house/yard in the area ($250k?) and rent out my existing house though I know this is most probably a stretch. Comps in my existing area suggest the house is worth roughly the same price as I paid.

My income is $70k, (very steady, six year job with Fortune 500) and Credit Karma reports around 740 though I have very little equity (100% mortgage thanks to some slightly shady Wachovia loan officer). I can pull $20k from my 401k as downpayment and I'm in the middle of paying off a $3k balance on the credit cards (just graduated with business degree). No other debts or significant assets.

Do I have any chance of qualifying for a loan for a new house, and selling the existing home or keeping as a rental?

Thanks!

Whether or not you qualify will come down to one thing in your case as far as I can see. Your DTI - debt to income ratio. If you have too much money going out in monthly liabilities then you would be stretched too thin as far as underwriting is concerned to afford two mortgages + your car payment(s), credit cards, student loans, etc. If you have a pretty clean slate, you may be able to squeeze by. If you added up all of your montly payments for: revolving debt, installment debt, liens, judgements, PITI on your current property etc, then add the monthly cost of the NEW proposed mortgage. what would that number be? divide that by your monthly gross (adjusted if you are self-employed and write off a ton every year)and you have your DTI. I've seen underwriters clear DTIs in the 50+% range as long as credit history, and reserves were off the charts awesome for government products. but most conventional lenders will hard cap the dti limit.
Don't forget that you will need 6 months of reserves for both properties if you are going to hold onto both unless you have 30% equity (Yes, I think this guideline is excessive and will probably let up a bit in the years to come but this is to stop people from buying and bailing on their current underwater home by pretending they will use it as a rental)

Hopefully I helped. Sorry for the delay!

Thank you for the comprehensive reply and the PM!

I understand the need for reserves though that's unfortunately out of my reach at the current moment. I definitely appreciate you including the applicable guidelines. This gives me a clear target to work towards!

Best of luck dude! Hopefully the guidelines will change sometime this year now that the market is picking up. I will pm you if they do.

How hard is it to obtain construction loan these days? Looking to purchase a foreclosed triplex that need a lot of work. I have downpayment (25%)and excellent credit score (770+).

I have a family member who wants to refi a primary residence, but her DTI is pretty high due to a rental property loss. Counting 75% of that income against all expenses brings her Debt to Income ratio to 49.77%.
I know the standard is 45% or below. Is 49.77% doable, and which lenders can we approach?

SanDiegoDude said:   Hello FW!

I've been a member going on 10 years here at FW and I thought I'd try something new and start a Q & A for the ins & outs of qualifying for mortgages and what pitfalls to look out for.
I am a loan consultant for a direct lender in CA and would be happy to answer any questions you may have... So ask away!


What effect does a recently added credit card (say 3-6 months before a mortgage app) really have on the process. Conventional wisdom is to avoid new credit at least 6 months before. All things being equal, assume a 780+ FICO score across the board, and no new debt associated with the new account, sufficient income, DTI, etc.. Many people here like to take advantage of signup bonuses, and I'm curious what the impact of the new account would be, if any.

qwerty, as long as your credit score still qualifies for the best rates, I don't think there's any real impact. I had to write up very brief descriptions of a couple of new accounts for one lender recently. I think they're just looking for assurance that you have not taken on new debt that may not be showing yet on credit reports.

But I generally do go into a very "quiet period" when working on a refi - no signup bonus is worth the risk of spooking a lender when I've got a refi worth pursuing. No new applications or anything else that might cause a hard pull (like CLI or adding a user) if I can help it.

Uso said:   How hard is it to obtain construction loan these days? Looking to purchase a foreclosed triplex that need a lot of work. I have downpayment (25%)and excellent credit score (770+).

You might consider applying for a FHA 203k loan for the acquisition and rehab costs. That way when you are done with the work you will be left with a single low interest rate mortgage. 203k loans are for 1-4 unit properties and cover the purchase and construction... the best part is they would finance basic rehab as well as upgrades!

borisr said:   I have a family member who wants to refi a primary residence, but her DTI is pretty high due to a rental property loss. Counting 75% of that income against all expenses brings her Debt to Income ratio to 49.77%.
I know the standard is 45% or below. Is 49.77% doable, and which lenders can we approach?


Does she currently have fha loan? if so she could do a fha streamline. I would definitely approach a broker who has access to a multitude of lenders since each lender has their overlays to increase the chances for approval based on the high dti. Off the cuff though, I have a feeling she should be fine. A good loan officer is kin to a creative accountant when it comes to qualifying.

Skipping 109 Messages...
In an effort to keep this Q&A Forum going, I just want to post a short message and wish all FW members a very Happy New Year and looking forward to a prosperous 2014.

-Adam
Old Hippy & Mortgage Pro



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