When Are Marin County Property Tax Bills Due?

As I write this in October of 2019, my very own Marin County property tax bills just arrived. Well, allow me to reframe that. It is widely understood that our real estate tax bills are issued “sometime in October,” but when you actually receive them in the mail on October 1, it says all you need to know about our Assessor’s intent to get the point across. So with the same procrastination exhibited by most fellow Marin County property owners who will join me in actually paying the bill a few days before a penalty is assessed, I thought it was a ripe opportunity to share some basics on how, when and where to pay our real estate taxes and at the same time avoid the consequences of late payments.

Property Tax Bill Information and Due Dates

Secured property tax bills are mailed in October and payable in two installments:

  • First installment due date: November 1
  • Second installment due date: February 1

“Now hold on a minute!” you say. “I was told I could pay in December and April!” Well, technically, you can.  The late dates for the installments are December 10 and April 10, respectively. And what I’ve noticed after a long career in home finance is that most county residents pay just before these late dates. In fact, if you really want to people watch at the post office and you can’t make it on any given April 15, your next best viewing opportunity is very likely December 10. Late penalties are 10% of the installment amount, so it’s not just a slap on the wrist. State law extends the deadlines above to the following Monday if December 10 or April 10 fall on a weekend, but postmark determines the payment date. If you’re late and don’t include the penalty, the county will send back your original payment.

What About an Impound Account?

If you have an escrow or impound account through which your mortgage lender pays your taxes, your property tax bill will state, “a copy of this bill was sent to a paying agent at their request.” If you are unsure of whether or not your lender has paid your tax installment, you should clarify this with your servicer. They are the folks who send you your monthly mortgage statement. I always advise my clients to let me know if they need help with this — I just feel it’s a service any good mortgage professional should provide, and we handle the “straightening out” of countless, anxiety-inducing property tax questions throughout the course of any year. Note that if you pay your mortgage in full or refinance during the course of any year, you may become responsible for your tax payments even if you’ve impounded all along. Again, call us if we can assist.

How to Pay

Payments may be made via any of the methods below and partial payments are NOT accepted by the Marin County’s Assessor’s office.

  • Online:  www.marincounty.org/Taxbillonline. You will need the parcel number (APN) from your bill.
  • Phone: 1-800-985-7277 using your bill number.
  • Mail: Marin County Tax Collector, PO Box 4220, San Rafael, CA 94913-4220
  • Office: 3501 Civic Center Drive, Room 202, San Rafael, CA 94903 (Mon/Fri, 9am to 4:30pm)

Remember that if you’re in the loan process and you need to document payment of any installment (which can occasionally be a requirement), you’ll probably need to obtain a receipt by paying at the window.

What About Supplemental Tax Bills?

Great question! The County issues a supplemental assessment when a change in ownership occurs. This bill reflects the difference between the seller’s basis and your new and ongoing basis and you’ll only receive it in that first year of the purchase. Afterwards, the correct tax amount is entirely reflected on your regular bill. The Assessor’s office provides owners with new, previous and supplemental values and you can always call them directly at 415-473-7215.

Every day I work to help people buy and refinance real estate in Marin. Often it’s a challenge for them, mostly due to lack of inventory and high home prices. As the rest of us grouse and grumble about writing our checks to the county, let’s remember that it’s also a privilege to do so.

Read my lips, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

What Happens When My Appraisal Comes in Low (or High!)?

You’re in the process of buying a home, and so far things have been going pretty smoothly.  Your lender has pre-approved you, your Realtor has found you the perfect home, and with a bit of luck, the seller accepted your offer and now you’re in contract.  It’s very likely that early on in your loan process — usually within the first few days of having your offer accepted — your lender ordered an appraisal.  From there, a licensed appraiser went out to the property and then turned in a completed appraisal report (which, at its core, is a professional opinion of value).  Of course, you know the dollar amount you’re paying for the home because that figure is on your contract.  But what happens if the appraisal doesn’t support that price?  What happens if the appraisal comes in low, or for that matter, high?  Let’s take a look.

My Appraisal Came in Low

I’m in California and I like to use round numbers, so let’s say you’re buying a home for a cool $1,000,000.  You are putting 20% down ($200,000), and you are getting a loan for $800,000.  We would say your loan-to-value (LTV) is 80%.  When your lender pre-approved your loan, he probably structured most of the important aspects of your financing, such as program selection, approval guidelines, interest rate, etc., on the assumption you would have an LTV of 80% or less.  Let’s say the appraiser goes out to the home, does the best job she can and after all comparable properties (“comps”) are analyzed, can only support a value for the home of $975K. How does the lender react to this information?  For conventional mortgages, the lender will use the lesser of the purchase price or appraised value to determine the LTV.  This is the key concept and we’ll come back to it in a minute and in a different scenario, but for now, let’s go to the chalkboard and do the math:

Before appraisal:

  • $1,000,000             Contract price
  • ($1,000,000)          Assumption of value
  • $800,000                Loan amount
  • 80%                        Loan-to-Value

After appraisal:

  • $1,000,000             Contract price
  • $975,000                Appraised value
  • $800,000                Loan amount
  • 82%                        Loan-to-Value

Houston, we have a problem.  If your loan approval has rested on the assumption that you have an LTV of 80% of less, we can see that this is no longer the case.  This buyer might pursue these options to remedy the matter:

  1. Use a different loan program that might accommodate the higher loan-to-value.  This might mean taking PMI (private mortgage insurance), or using a piggyback loan, for example.
  2. “Making up the difference in cash.”  To produce an 80% LTV against a value of $975K, the loan amount would be $780K.  Assuming the purchase price stays at $1MM, this buyer, who would have previously made a down payment of $200K, will now need to make a down payment of $220K.
  3. Renegotiate the contract.  Often, we’ll see the buyer go back to the seller and ask for some concession on the price.  Maybe the seller will be willing to reduce the price slightly to keep the transaction moving forward, instead of falling out of contract and starting over with a new buyer.
  4. Rebut the appraisal.  Perhaps factual error or oversight of a strong comp caused the appraised value to be lower than it might be otherwise.  Buyers can opt to have their lender pursue a reconsideration of value.  Word to the wise, many rebuttals come back with no change.  In other words, they uphold the original appraisal.  But most also chew up a lot of contractual time.  Pursuing a reconsideration can be a gamble with a low probability of success.
  5. Try a new appraisal?  Hold on a second — this is not a valid option, but I bring it up because we do get the question.  So long as you stay with the lender who performed the original appraisal, ordering a new appraisal to “value fish” is not permitted.

The last important point about a low appraisal value is that it may only matter to the buyer whose loan is near an important loan threshold or guideline.  In our example above, the reason the low appraisal triggered significant changes is because the 80% LTV threshold is important in conventional lending.  And there are others like it you may not recognize, but that your lender can explain.  However, let’s say our buyer above was putting $500K down on a purchase of $1MM (50% LTV) and the appraisal comes back at $975K.  Now the LTV is 51%.  Big deal.  No key lending thresholds are crossed and this borrower very likely sees zero change to his terms.

What Happens If My Appraisal Comes in High?

Well, this paragraph is going to be a lot shorter.  In conventional lending, and for a purchase transaction, you cannot “monetize” an appraisal value that comes in above the purchase price.  Again, we use the lesser of the purchase price or appraised value to determine LTV.  Still, it’s great news.  You are getting a deal on the home, but in terms of making a smaller down payment or otherwise leveraging the higher value, there are “no dice” here.  Yes, down the road that higher value might allow you to refinance with greater ease and/or better interest rates, but practically speaking an appraisal that comes in higher than contract price is really just a vote of confidence.

If you’re reading this post and find yourself in a bind because your appraisal just came in low, don’t hesitate to get in touch.  We have a large selection of mortgage programs that grant more flexibility with LTV, and we have a lot of experience navigating the loan process together with the intricacies of fulfilling requirements of your contract.  We’re here to help with your mortgage needs whether your appraised value comes in high, low or right on the money.

Thing of value, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Your Debt-to-Income Ratio Is High and It Will Be Alright

You might have been lured into reading this blog post under the false assumption that I’d be discussing the controversial subject of financing cannabis-related businesses and property.  Well, you can let that notion go up in smoke.  Instead, we’re going to talk about the ways you can get a great jumbo mortgage in California if your debt-to-income ratio (also known as “DTI”) is higher than Jeff Spicoli at 4:20pm.  OK, dude, not really, but we are going to address the ways you can get a decent home loan with a very competitive rate if your DTI exceeds 43% — the maximum amount specified for a qualified mortgage, or “QM.”  Let’s get together and review a little background first.

Your debt-to-income ratio is determined by dividing your gross monthly income into your housing debt(we use the total monthly housing payment or “PITI”) to determine the “front end” or “housing” ratio, and then we use gross income divided into your total obligations for your “back end” or “total” DTI.  Remember to let us do the calculations to precision, but certainly feel free to use these examples as a guide.  Let’s say our borrower earns $10,000 gross per month and will have a housing payment of $3000.  This would produce a 30% housing ratio.  Now let’s also say that this borrower has $1000 per month in other expenses (auto payments, student loans, credit card minimum payments, etc.).  Our $4000 in total monthly debts, once combined with the housing payment, produces a total DTI of 40% ($4000 / $10,000 = .40).

Conforming, FHA and VA loans have a temporary exemption in the eyes of our regulators.  These types of mortgages can have a debt to income ratio that exceeds 43% and STILL be considered a qualified mortgage.  But once the loan amount exceeds conforming loan limits (and sometimes even where it doesn’t), we now have a “jumbo” loan and we are held to the letter of the law.  This means that the DTI ratio cannot exceed 43%.  If it does, we have a “non-QM” loan.  With the non-QM status, the lender incurs additional risk.  Where the lender incurs additional risk, the borrower typically pays in interest rate.  In short, more risk, more rate.  But not all lenders address the risk piece identically and quite frankly, many of the largest jumbo lenders won’t go above 43% at all.  We’re different in two ways:

  1. We have competitively-priced mortgage options — on the jumbo side — that allow a DTI of 49.99%.  Another of our options will permit a 47% debt-to-income.  How about interest-only loans?  We have them too, and they allow a 45% DTI (using their formula for qualifying payment, which is not the interest-only payment).  Sometimes our strategy will involve using a home equity line of credit (HELOC) to bring the debt ratio in line.  There too, 45%.  Indeed, sometimes our wide credit box allows us to solve the issue just by way of a niche loan program.
  2. We often view the income and debt calculation more favorably than Lender B, or we bring in income from other sources, such as asset utilization.  In these cases, we keep the debt ratio under 43%, but we do so in a manner that again thinks outside of the QM box, though it often prices equivalent to a QM mortgage.

So if you’re looking for a jumbo mortgage in California and the usual banking suspects are telling you that you don’t qualify because your DTI is high, then I’m telling you to get up, stand up and connect with me today.  Let’s review your scenario free of cost and obligation and get you back into approval status for the home you love and the loan you need.

I shot the sheriff, 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

How Long Do I Have to Wait After a Foreclosure to Get a Mortgage?

When economic war ravaged the real estate market a decade ago, statistics show that peak foreclosure activity in the US occurred somewhere in 2010.  We continued to experience an elevated level through at least 2013, which means that as I write this post in late 2019, almost the entire rat is through the seven-year snake.   That waiting period — 7 years —  is the gold standard after a foreclosure.  So what do those looking to reenter the housing market need to know?  What about if they need something other than an FHA mortgage?  Let’s look.

What is a Foreclosure?

When it comes to “letting a house go” we could say that a foreclosure is the equivalent of the homeowner’s “nuclear option.”  Basically, an atom bomb is dropped on the owner’s credit and when the dust settles, which could take months if not years, there’s not a trace of the home he once owned.  Though the legal foreclosure proceedings vary from state to state, a foreclosure is ultimately what happens when the owner of a mortgaged property stops paying and takes no other legal or financial steps.  Ultimately, a notice of default will be filed on the property and absent drastic measures to restore payment on any lien attached to the title, the lender will end up selling the property via a foreclosure sale.

What Happens After a Foreclosure?

With a history of foreclosure (or “deed in lieu”) on one’s credit report, conforming loan guidelines state that a buyer re-entering the market must wait seven years before obtaining a new mortgage. If using an FHA loan program, that waiting period is cut to three years. In the case of jumbo mortgages, however, the waiting period will be established by the actual investor — the entity that provides the loan. Because of this, the institution/investor can set its own rules about the seasoning required. They can also set rules about how a foreclosure is qualified. Was it due to financial mismanagement? Strategically done to avoid consequences of the market falling further? Or, was it done due to a legitimate hardship on the part of the borrower? Each of these might be viewed differently by any investor and the waiting period might change accordingly.  The best advice I can give is that if you experienced extenuating circumstances (death, loss of job, etc.), ask how this could impact your options because several of our best-priced investors will reduce the typical 7-year wait in these cases.

Sorting Out Second Chances

At Guaranteed Rate, one of our strongest suits is that we have multiple jumbo investors available for most scenarios. We will see our strongest-priced jumbo investors re-enter the market for the buyer with a foreclosure also at the 7-year mark — identical to conforming. But below you’ll find some of the other tiers of available as the loan-to-value (LTV) increases or decreases, the loan amount goes up in size, and the FICO score factors into the picture:

5% Down Payment

We require a three-year seasoning period and will go to a loan amount of $1.5MM (purchase price of $1.58MM). For this program, we’ll need a 720 FICO and 9 months of reserves.

10% Down Payment

We require a three-year seasoning period and will go to a loan amount of $2MM (purchase price of $2.23MM).  Like with the 5% down program above, we’ll need a 720 FICO and 9 months of reserves.  If both your FICO score is lower (to 680) and your loan size is smaller (to $1MM), we’ll then permit a 4-year seasoning on the foreclosure but require 6 months of reserves.

20% Down Payment

All of the investors above are in, plus several others with varying FICO and reserve requirements, even down to a 661 credit score with a maximum loan amount of $1.5MM (purchase price of $1.875MM).

The jumbo mortgage market is inherently more complex than conforming or FHA and because of this, your jumbo lender needs to have the options and expertise that will accommodate the demands of getting a new home loan post-foreclosure.  But purchasing a home with a history of a foreclosure is indeed possible. We understand the requirements, restrictions and tips of the trade that facilitate many of the best second chance options in existence. Maybe more importantly, my experience as a loan advisor covers a time period before, during and after the real estate recession.  I reserve no judgment for what happened in that very different market. Instead of looking back and telling buyers what they can’t do, I see it as my responsibility to look forward and help them do what they can to realize the benefits of ownership again.

Bombs away,

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Can I Get a Mortgage If I Am Retired?

I live in an aging county. So if you ever find yourself vacationing in the lovely city of San Francisco, give this little exercise a try: Simply get in your Uber. Or rent one of those death trap three-wheelers at Fisherman’s Wharf. Or bundle up take it on the heel and toe and come across the iconic Golden Gate Bridge to magical Marin County. Now, did you feel yourself getting older in the process?

Even if not, Marin County’s residents, with their 46.1-year old median age, clean air, great schools and liberal politics, will welcome you to one of the most special places in the USA. I’m willing to bet it won’t be too long before one of our residents will tell you that our median home price, at least at the end of 2019, is hovering right around $1,200,000. So what happens when a retired person wants to buy a home in a high-cost area with a jumbo loan but without the income one would typically have from employment?

Lately, I’ve seen an increasing number of mortgage scenarios exploit a qualifying feature known as asset utilization (AU). Depending on the investor, this might also be known as asset depletion, asset amortization or an asset-based mortgage. This alternative qualification method can be a real benefit to a retired borrower or to a buyer/owner who is not of retirement age but who has amassed a sizable asset portfolio (stocks, bonds, mutual funds, cash equivalents, etc.). Regardless of what it’s called I’m going to demonstrate how thinking outside of the employment-based income box can open up a world of home loan possibilities.

How Does it Work?

First and foremost, an asset utilization loan is NOT a stated income loan. We’re not going to party like it’s 1999. This is also not a reverse mortgage. With AU, we’re going to look at a borrower’s total liquid assets and we’re going to apply a formula that will create a hypothetical income stream. Assets do not need to be liquidated, distributions do not need to be taken and money does not need to be pledged or moved. But we’ll take our allowable asset total, which discounts for reserves and risk of the asset class itself, and we’ll come up with an equivalent monthly income figure. This number can, in turn, be used to replace or supplement traditional employment-based income.

Who Can Use It?

Most of our AU programs are available to all borrowers, regardless of date of birth. However, depending upon age, certain assets may or may not be allowed in the calculation. It would be a safe assumption and example that for a 45-year old borrower, we would not be able to asset deplete a retirement account. However, for that same borrower, non-retirement investments would all be eligible for the AU formula. Let’s take the case of a tech entrepreneur who is between start-up gigs. She is in her late 30’s and has $2MM in stock and investments. We can’t qualify any salary or self-employed income but we certainly can look at the assets and derive a monthly income. And if it fits her scenario, she could be eligible to buy today, even without verifiable employment. More traditionally, let’s take our 69-year old retiree. He has $3MM “in the bank,” wants to buy a home worth $1.1MM and doesn’t want to pay cash, which would erode the value of his portfolio (the same one that will produce the income on which he’ll largely depend in years to come). Without liquidating anything other than the down payment and closing costs, the borrower can use an AU program and seek to qualify for a mortgage that meets his needs.

What About the Math?

We have a handful of investors that offer AU qualifications and they all work slightly differently. Their programs will range from ARM to fixed and their formula for the generation of asset-based income will yield, for example, a monthly stream of between $3000 and $6000 per $1MM in assets. And remember, this income can be used in addition to other qualifiable income such as social security, pensions and regular employment’s wages or self-employed documented income. The key concept is that AU income can be used both ‘in place of’ and ‘in addition to.’ It’s a great feature in the hands of an expert loan advisor but not all lenders have these programs available and even of those who do, few loan originators take the time to master them.

So before I need a nap, remember that if you are retired from employment, but not necessarily from participating in the housing market, we have a mortgage program you may wish to consider. Call me today if I can be of service.

On golden pond, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959 Fax: 415-366-1590
rob.spinosa@rate.com
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Do You Need a New Appraisal When You Refinance?

It’s September of 2019 and interest rates are again approaching historic lows. This means that many homeowners are considering a refinance — and for good reasons. If there is a hurdle for some, it’s the cost and risk of getting an appraisal on their property. What happens if the appraised value doesn’t support the loan amount, loan-to-value or the transaction itself? Are these clients then out the money for the appraisal report, typically anywhere from $500 to $1200?

Earlier in the year, we introduced an appraisal tool that allows us to determine, in advance and with a very high degree of accuracy, if a refinance transaction will be eligible for an appraisal waiver. This all happens before a client even makes a loan application, so we don’t require any personal information. How does it work? We need three pieces of information:

  1. The address of the property.
  2. The estimated value of the home.
  3. A good idea of the loan balance being refinanced.

With the above, we can assess the probability of getting an appraisal waiver and if we do, we can be off to the races and closed on a refinance with less time and less expense. It’s really that easy and it’s a huge edge for the homeowner looking to save money on their housing expense.

Oh, and one of the best things about our appraisal waiver platform? It works for purchases too! If you’re considering making an offer on a property, run it by us. We can put in the address of the property and the intended offer price and we’ll know in advance if you’ll need an appraisal. In cases where you don’t, you can offer without an appraisal contingency, possibly further strengthening your offer.

Appraise be to God, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Can You Still Get a Stated Income Mortgage?

Believe it or not, the calls come in. “Do you guys still do stated income loans?” Still? Seriously, a lot has changed in ten years, but in the home lending building perhaps there has not been a more pronounced departure than the Elvis of all mortgages, the stated income loan.

Basically, these creatures roamed the earth and skies during the pre-real-estate-downturn era and allowed a borrower to state what he made in income per month. To state the amount of money he had available for a down payment. And even to state what he did for a living. All of this changed with the Dodd-Frank Wall Street Financial Reform Act (Dodd-Frank), and without getting technical, the core provision in this law is “ability to repay,” or ATR. Today, if lenders don’t prove that a borrower can repay the loan they are making, then a lot of bad things can happen to the lender. And if bad things can happen to a lender, then you know that’s gonna flow downhill to the person looking to purchase or refinance — namely, you, the borrower.

So, no. Stated income loans don’t still exist.  At least not in the traditional sense. But in the new world, lenders do have some very viable and attractive ways to determine ATR by alternative measures and I’ve outlined the three most common below. These programs address the reality of the borrowing public, especially the self-employed, who often file their tax returns in a manner that reduces income and maximizes expenses — for good reason and within the letter of the IRS law. To prevent these otherwise creditworthy borrowers from being shut out, today’s substitutes for stated income loans might involve some or all of the following characteristics:

Asset Depletion

An asset depletion loan allows a buyer or borrower to leverage his/her cash equivalents, investments and sometimes even retirement accounts to derive a hypothetical income stream that can be used for qualifying. These assets do not need to be moved or liquidated, just documented. For those who have sufficient net worth but insufficient traditional qualifying income, an asset depletion loan (also known as asset-backed, asset utilization, asset amortization, etc.) can prove an ideal solution.

Bank Statement Qualification

Business owners who show strong income into their business may want to consider a bank statement loan as an alternative to a stated income loan. For a bank statement qualification, we will typically examine 12 months of business bank statements. We’ll total all of the legitimate business deposits and we’ll apply an expense ratio to that sum. The resulting figure is the qualifying income. For those who “write off” a lot of business income on tax returns, a bank statement loan may circumvent that age-old challenge, because for these programs, no tax returns are required.

Debt Service Coverage Ratio (DSCR)

For the real estate investor who will struggle with a conventional mortgage qualification, we now have the debt service coverage ratio, or DSCR, home loan option. This program looks at the property’s income and nets out the housing payment on it. As long as the ratio is positive (and all other qualifying criteria are met), we have a deal.

While the sun may have set on the Wild West days of stated income, the home lending industry has come a long way back to offering attractive alternatives to the alternative borrower. Not all loan professionals have access to these options and fewer of those are fluent in the approval parameters. If you need help with a bank statement loan, an asset qualifying mortgage or a DSCR program, get in touch at any time. We are experts in these and look forward to being of service.

In a new loan state of mind, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Do Any Mortgage Lenders Work on the Weekend?

The fact of the matter is that a lot of real estate business gets done on Saturdays and Sundays. Prospective buyers go to open houses and buyers’ real estate agents often need to structure offers for their clients. Unfortunately, not all banks are open on the weekend even those that may take deposits and cash checks often do not have a home loan professional available to pre-approve a buyer or answer a complicated home loan question in an instant.

I’m different. Even though I’m generally not in the office on the weekend, I can always be reached and I have the full capacity to work through your scenario and give you an edge over your competition — those other bankers, brokers or lenders that may wait until Monday morning to get underway.

Let us know if we can help you today, whether that day is during the work week or the two days that follow, and that everybody’s been waiting for.

C’mon let it go! 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

How a Refinance Can Drive Down Your Monthly Expenses

While all real estate may be local, so too is it true that one homeowner, confronted with the opportunity to save $250 per month through refinancing, for example, may view that as a significant financial relief while another may feel it’s not even worth it to get off the couch to consider going through the hassle of the loan process. As we work into the second half of 2019, there is no mistake that the low rate environment we are enjoying again is providing opportunities for homeowners to refinance. Often in these cases, having an open mind about any level of savings can help us determine whether or not a refi is “worth it.”  Here in the San Francisco Bay Area, if we take an average loan size and make some assumptions on monthly savings through a refinance at today’s rates, we see that it’s not unreasonable to think that our clients can save between $150 and $350 per month. When you look at this in relation to the most significant household budget expenses; auto loans, student loans and credit car payments, it’s easy to see why a careful review is a great idea. Need more proof?

  • As of 2018, it is estimated that 44% of American adults have a car payment. On average these individuals owe over $30K on their auto loan and they pay over $500 per month on their payment. Interest rates vary but with an average FICO score of 695, you can bet your bottom dollar that some of these merry motorists are not enjoying 1% interest rates on their auto debt. It’s possible today’s refinance could cut your auto payment in half — or at least that’s the way it would feel until the car is paid off.
  • The average student graduates (or not…) college with about $25,000 in student loan debt. It’s estimated that the payment on this would hover around $280 per month. Owning a home is a big financial responsibility. Owning it alongside student loan debt can turn it into a financial burden that refinancing might ease.
  • Depending on what stats you review, it’s estimated that the average American carries between $4000 and $7000 per month in credit card balances that roll from month to month. And you can be sure that as this revolving debt ages, the interest rate on it does not suddenly get better. To break this cycle, a refinance can provide needed monthly budget space to slash the credit card balances and get off the minimum payment treadmill.

Bear in mind that in each case above, I am not advocating that our clients take on more debt! We are not suggesting that they do a cash-out refinance and pay off these other obligations. That may prove to be a good strategy and might warrant further examination. But even in cases where a borrower simply does a “rate and term” refinance and lowers the rate and payment on an existing mortgage, the savings that result can go a long way to comprehensively addressing the other components of any household budget.

We’re here to help when you’re ready to look under the hood, roll up your sleeves and do the work.

My uncle has a country place, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Should I Refinance into a 15-Year Fixed Rate Mortgage?

With the Federal Reserve tongue-tied and twisted and an easy trade war time-tripping into the future, we find ourselves the beneficiaries of another very appealing low interest rate environment here in the second half of 2019. This stands to benefit many who have mortgages at higher rates and even some who may not fit that exact bill, but who are focused primarily on reducing the term of their loan and perhaps paying their entire balance off at a faster rate. We are seeing a number of homeowners who are seeking to determine if they should abandon their 30-year amortized loans and refinance into a 15-year fixed. What are the key concepts these individuals need to know before they make this leap?

  1. For the vast majority, the mortgage payment will go up.  A while back I did the research on this and came up with my “10 and 2” rule. Namely, if you are in a 30-year loan now and have been paying it down for 10 years, then you refinance into a 15-year fixed rate loan with at least a 2% rate reduction over your present loan, only then would you have a new payment that is the same or lower than your current payment. And that’s a reach. So for most, refinancing into a 15-year fixed means a higher monthly payment, safe in the knowledge that the additional amount is going to reduce your principal balance and not to additional interest.
  2. You save big long-term. The total finance charge (aka, interest) on a 15-year loan versus a 30-year loan is dramatic. For example, on a $400K loan at 4%, you will pay a total of $287,478 in interest over 30 years. On a 15-year fixed at 4%, you will pay $132,575. But there’s a silver lining for the 15. Often the rate on a 15-year fixed will be lower than for a 30, so not only do you save on interest because of the term, but you save on interest additionally because of the lower rate. The rich get richer.
  3. Be mindful of your credit capacity. If you refinance into a 15, you’ll have a higher payment reporting on your credit report. Other creditors who may examine your debt-to-income (DTI) as a function of your creditworthiness could limit your access to credit due to the higher payment. This may or may not be a factor for your financial future, but do take it into consideration before you take the 15-year plunge.
  4. It’s possible to be debt free but wealth poor. I realize this sounds funny, and paying off a home is a commendable financial goal, but realize that while you are doing it, most of us also need to meet concurrent objectives when it comes to our money. Having a “rainy day” fund, paying off any tax-disadvantaged higher-rate consumer debt, saving for college and retirement and investing outside of real estate are important and worthy objectives and if all of your discretionary income goes into a higher mortgage payment, you could find yourself debt-free but savings poor down the road. That would almost certainly force you to look into refinancing the home again and accessing the equity, likely with a 30-year loan or a HELOC. Don’t laugh, we’ve seen this movie before…

With rates lower, it might indeed be worth looking into a 15-year fixed rate mortgage. But keep the above points in mind as you do. Like in physics, all actions have opposite reactions and finance is no different. Getting a lower rate, paying less interest over term and paying off your home quicker are all enticing objectives. There is a price to entry, however, and any true loan professional can help you assess that cost. Let me know if you need my help at any point in your journey.

Free and clear, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283