Qualifying for a Mortgage? Don’t Step in a Large Deposit Mess

By far, one of the most confounding experiences when one goes to obtain a mortgage is the sourcing of “large deposits” on a bank statement.  This is our industry’s gift that keeps giving.  However, there are some ways to avoid inadvertently stepping into trouble and like with most things in life, an ounce of prevention is worth a pound of cure.

What Is a Large Deposit?

Most of the time a mortgage lender will define a large deposit as a non-payroll deposit that exceeds 50% of your gross monthly income.  So, let’s say you provide a bank statement to us.  We see an ATM or teller deposit for $6175 and your gross monthly income is $10K.  You can expect we will ask to know what the deposit is and where it came from.  Different lenders and different programs may have different thresholds, and there is subjectivity to this as well.  With a borrower who makes $10K a month, it’s not unreasonable to think an underwriter might ask to know about a non-payroll deposit of $4750.  It’s happened before…

What’s the Big Deal with Large Deposits?

Remember, at the end of the day, your lender is assessing your creditworthiness and your ability to repay the loan.  If the money you plan to use as a down payment is not derived from savings with a documentable history, your lender will want to know if the money coming into your accounts is from a legitimate source.  Or, is it a loan?  If the latter, does it now require a monthly payment we must factor into the debt-to-income (DTI) ratio?  The large deposit test creates a firewall for the lender where a buyer who otherwise could not afford to buy gets “propped up” by family, friends or undisclosed creditors just prior to purchasing the home.  And it’s precisely these question marks that create the additional risk for the lender.

Reality Sets In

Let’s face it, if you’re planning to buy a home, you should be planning.  If you’re going to be moving money to your accounts from other sources that you know will invite questions, it is best to allow these funds to “season” in your account for a period of time that exceeds the lender’s documentation requirements (usually two months).  After all, I’m not going to assume all large, non-payroll deposits are illicit drug deals.  There can be a lot of honest bank activity that is almost impossible to source.  If you know that you’re going to be relying on this kind of funds to close escrow, get it into your accounts long before you plan to make a mortgage application.

What About Gifts?

Gift funds are allowed in most transactions and within guidelines, but practically every mortgage lender will ONLY recognize gift funds from a family member.  Where large deposits that are “gifts” get into difficulty is not necessarily the sourcing, but the source.  Sometimes, the family relationship is not there.  How do we know who is the donor?  Simple, we require a gift letter that will outline the relationship.

In the mortgage industry, two, clean months of bank statements with no large deposits are our equivalent of Eureka.  I’m convinced that if every potential buyer or borrower knew this in advance, we’d drastically cut down on the number of bad customer experiences.  The worst outcome for our clients is, of course, that when we source a large deposit from another bank account, that origin account also has large deposits, and so on.  You can see how this would get less and less fun…quickly.  So, understand this basic concept and call with any questions.  If we can help you plan for a smoother transaction, we’re happy to be of service.

Where’s the beef, 

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

The Haunted Loan Process

As we wind our way closer to Halloween, I wanted to cover a few of the graveyard variety hobgoblins of the mortgage process.  You know, the things our clients don’t tell us at the start and that later come back to haunt their home loan transaction like so many nightmares on Friday the 13th.  The goal here is not to scare the prospective borrower, but instead to provide fair warning about the actions you can take or avoid at the start of your application that will help you close your loan on time and without undue stress.  Let’s peek-a-boo at some of the most common loan zombies that come out when the moon is full:

  1. Amending a tax return.  It can be such an innocent mistake.  You file a tax return and later amend it for some reason.  When we ask you for your tax records, you provide us with your Forms 1040, but forget there is a 1040X out there as well.  We order an IRS transcript (Form 4506T) and our numbers on the tax return don’t match the numbers on the 4506T.  Now, you’re not in trouble with us or the IRS, but we do have to underwrite to the amended return.
  2. Beginning or not disclosing ongoing work on the property.  Open walls, torn up flooring, room additions underway, no fixtures in a bathroom, an empty swimming pool, etc.  This is not a complete list, of course, but always tell your lender if your home is in any way undergoing work (or will be) when an appraiser comes out.  In general, you will not be able to fund your loan until all work is complete and a reinspection by the appraiser confirms such.
  3. Changing or leaving jobs, or giving notice.  Expect that every lender will complete a prior-to-funding (PTF) verification of employment.  If you are no longer on the job just before close, or if you’ve signaled your intent to leave the job, we may have a major issue.  In short, the employment by which you qualify for the loan is the one that needs to be in place when you close.
  4. Co-signing on a debt for someone else.  Most often, co-signed debts will show up on the credit report, but if they are new or unreported to the credit repositories, we often have to factor them into the debt ratio (DTI) at that time.  The conventional wisdom is to never co-sign for anything.  In reality, life is more complicated than that and it happens.  Where it does, tell us up front.
  5. Disputing a credit item.  It may seem like the right thing to do and it may make you feel better about sticking it to a creditor who’s done you wrong, but disputing a credit item while in the loan process can take on a ghoulish character.  The advice here is don’t do it until we’re funded, but at the bare minimum, let us know when you’re thinking about it.
  6. Failing to disclose a property you own.  Our borrowers often believe that if they own a property free and clear, there’s no way we’d know about it (and more importantly, why would it matter?).  But remember that real property ownership means there’s county records and we can find those.  And about the fact that it’s free and clear?  Good for you but it still doesn’t address property taxes and insurance?  Those go in your DTI too.
  7. Moving unsourced money into your bank accounts.  This one has stopped more purchases of brick and mortar than Amazon.  When you go to buy a home, know that we will look back at least two months (via bank statements) to confirm that all of the money for your down payment, closing costs and reserves is accounted for and meets guidelines.  If you try to move money into your account, we will often question the deposit.  So it’s essential we identify, reveal and document how you plan to close the transaction when it comes to your money.
  8. Not making a mortgage payment when refinancing.  “But I thought we would close by then…”  Famous last words.  Remember, when you are in the loan process, you are not done until you have keys in your hand or, in the case of a refinance, your new loan is funded and recorded and the old loan has been officially released.  During that time, it’s imperative you continue to make your regular mortgage payments.  “If there is any doubt, there is no doubt,” goes the old mountaineer’s saying.  Keep your existing mortgage current at all times.
  9. Recurring payments for a loan or other obligation.  If you have undisclosed debts or payments and we see a recurring withdrawal from your bank accounts, expect that we will ask.  If the item is discretionary, it’s likely no issue, but if it is an obligation we will want to consider it in your debt ratio.  The sooner we find out about it, the better.  So let us know at the outset.
  10. Taking on new debt before closing escrow on your purchase.  Early in my career I had a young, homebuying couple sign their loan documents on a Friday afternoon.  Jubilant with their new purchase, they spent the weekend shopping for furniture and outfitting their new home, including opening a store credit card where they proceeded to take advantage of the new customer discount on their large purchases.  On Monday, when confronted with the question of whether they took on any new obligations over the weekend, they said yes.  Their rationale?  “Oh, we closed when we signed on Friday.”  The lesson here is that it’s not entirely their fault.  Our industry can do a better job of explaining the closing process and when borrowers are “all clear.”  I learned a lot from that experience and have used the lessons ever since.  On a purchase transaction, you are not closed until you are signed, funded and the deed is recorded with the county.

Look, some of the above may seem funny or obvious.  But the reason I’ve listed them is because they happen.  Over and over and over.  We’ve dealt with each and if you find yourself in a bind as a result of any of them, don’t hesitate to get in touch.  We don’t stand in judgment of how things happened and instead we focus on solutions.  Let me know if I can be of service today.

Trick or treat, 

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

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

Top 10 Tips for Buying a Home in the San Francisco Bay Area

Buying a home in the highly competitive San Francisco Bay Area real estate market is a daunting task for nearly everyone. Tales of heartache abound — “everything goes for over asking price,” “we don’t stand a chance against all-cash offers,” “everything we want is out of our price range,” etc. If you only listened to the naysayers, you might not even set foot in the arena. As a lender who has observed the home purchase market, specifically over the last decade (2009 to 2019), I wanted to share my Top 10 tips for succeeding with your goal of home ownership. No doubt about it, it’s a worthy one despite all the challenges. I’m confident this advice will help you too:

  1. Get financially prepared. Before entering the housing market, establish a household budget and some fiscal boundaries. These will get tested but go through this exercise anyway. Then spend the few hours necessary to organize all of your financial documents amassed over the last two years. You’ll need some of them but reviewing all of them will provide firm financial footing for the next steps.
  2. Choose a lender but avoid the high-cost options that abound. I’m not going to name names, but as a veteran of this industry I can and will tell you which lenders will NOT be competitive for the type of loan you may need. The reason I’m aligned with Guaranteed Rate is because we have many options and we deliver these at competitive pricing. You should not have to settle for either service or rates. You can get both.
  3. Get pre-underwritten. First get your pre-approval with the lender of your choice, but then escalate this to an underwriting approval. It will help your offer when the day comes and it will help you close quickly once in contract. This is competitive leverage you may need.
  4. Choose your real estate agent wisely. If I could give advice to my younger, home-buying self, it would be to always align with a Realtor that knows your target market in a dominating manner. If you understand your finances and the geography in which you want to live, finding a real estate professional who masters that market will put your offers in the best light. A great agent will have a sixth sense about any specific market inside (properties not yet listed) and out (properties on the market, and for how many days and why). Need a referral? Ask me.
  5. Kiss a few frogs. Buying a home is a process and not an event. If you find a property that fits but you’re not 100% sure you’ll get it, I encourage you to take that shot. The process will educate you and the results, assuming you don’t get it, will prepare you for the emotional roller coaster that may come ahead.
  6. Don’t be deterred by the competition. Still, nearly every desirable home we see come on the market will elicit multiple offers. You will need to swim with other, bigger fishes, so be prepared to do so. We see some buyers decide to not even make an offer simply because the listing agent might say there are 12 disclosure packages out on a home. So what? Kiss the frog anyway.
  7. Be the strongest buyer you can be. Take enough shots and you will run up against all-cash buyers, higher offers, faster closes and generally, competition that is the proverbial “bigger, faster, stronger.” All you can do is control what you can control. Be the strongest buyer you can be. That doesn’t mean you can or will be the strongest buyer, period. But you don’t control that last part.
  8. Be flexible. As the Brits might say, you may find a spanner thrown in your works at some point. Perhaps the price point will force you to consider a different mortgage option. Perhaps you’ll have to consider buying before you sell your current home. Whatever the case, don’t let the perfect be the enemy of the good. If you can successfully buy in a tough market, you may be able to improve your loan terms later, if indeed you had to make a sacrifice in order to get in.
  9. Warm socks and shoes will help. Cold feet are a killer. Buying a home in the Bay Area is for grown-ups. Once you’ve had your offer accepted and are in process, take a one-way train to your destination. Cold feet, buyer’s remorse, or whatever you call them are all normal human emotions but keep them in rightful check. Like Napoleon said, “If you start to take Vienna, take Vienna.”
  10. Expect to win. Sellers, or at least good sellers’ agents, can read your mind. They can tell how many offers you’ve made, how many open houses you’ve visited and whether you are serious about buying their home. Even if you’re in the “fake it till you make it phase” of your search, a great way to convey conviction is to expect to win. An attitude of “this is the place we want and we will get it,” is electric and it transmits directly to the other party.

My wife and I bought our current home in 2016. The market then, as now, was fast, tough and unforgiving. We did not win on our first try, or second, or third. We could not sell our existing home in time to buy the new, so we had to be flexible on the loan program we chose, opting for 15% down instead of a 20% down payment, for example. Even though I am in the mortgage industry, I had to collect and organize all of our financial data, just as my clients do. We were not immune from underwriting scrutiny and requests for more information. We chose a Realtor who was an expert in our target neck of the woods and we learned from our heartbreaks. When an ideal match finally came along, we placed the best offer we could, informed by the experience we’d gained over previous attempts. We were prepared to lose, but we expected to win.

We love the place — one of the best decisions we’ve ever made — and we are not the only ones who’ve had this experience. Far from it. Are you next?

Sittin’ by the dock, 

 

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

Closing Costs on a Mortgage

When a homebuyer, or homeowner looking to refinance, obtains a mortgage, there are always associated costs. Even in the so-called “no cost” loan structures, trust me, you’re paying something. When a consumer does the research on what it will cost to get a loan, there are a few ways to categorize and better understand what’s being charged. Specific numbers will vary wildly depending on the nature of the transaction, the amount and where the settlement takes place. A key takeaway of this article will be to differentiate between a “cost” and a “settlement charge.” They are not the same, and how they interact plays a large part in the total amount of cash a borrower ends up bringing to the closing table. I have found that by using three broad categories, we can get a better sense of how things will play out, and as a result, feel less of a sense of shock about the total amount of any settlement. Let’s look at these “buckets” now:

Lender Costs and Fees

Most lenders will charge an “origination fee,” and that cost is usually intended to cover their overhead. What I see across the industry is that this fee will typically range from $500 to $1500, though it may be called something other than origination. Lenders might also charge separate fees for credit reports, appraisals, flood certs and tax service, for example. If you are paying any discount points to lower your rate, they will be listed in this section as well.

Title/Escrow/Closing Agent Fees

Two things you’ll likely need in your transaction will be a closing agent (this can be an escrow company, attorney or other, depending on the real estate practices in your area) and some form of title insurance. While your fees for the settlement services themselves and the title insurance policy(s) will be the largest costs in this category, you’ll also see smaller amounts such as document preparation, notary, recording and other costs associated with title and escrow.

Prepaid Items

If there’s a place where things get tricky and where a settlement can “blow up,” this is it. “Prepaids” are amounts of mortgage interest, property taxes, insurance (both homeowner’s and flood, if required) and other components of the total monthly housing payment that are collected in advance and that contribute to your settlement. Without going into the complex calculations, know that when you have an impound or escrow account and you close a purchase or refinance transaction, your lender will collect those amounts in multiples of months. If the timing of your close predicates that you must reserves six months of property taxes and your property taxes are $6000 per year ($500 per month) then at close the lender will collect $3000 in tax impound reserves. It should be noted that this is not a “cost” of getting the loan. Your property taxes are due once you are an owner, but how you pay them drives this calculation and adds to your settlement.

While in this category, let’s do a little refresher on how mortgage payments are made. You pay mortgage interest ‘in arrears,’ which means that you live in the house for one month and then you pay your mortgage payment on the first date of the next month. If you close a home transaction on July 15, for example, your first payment on your mortgage will be due on September 1, not August 1. But why? Because mortgage interest is paid in arrears. At this closing, you would pay prepaid interest from July 15 through the end of July. You would have no August 1 regular payment (sometimes called “skipping a payment”). Then, because you’d live in the home all of August, you would get a ‘regular’ mortgage statement on September 1 for that time. It is by this logic that we discourage our clients from financing the prepaid interest, which can amount to several thousand dollars. If your settlement statement shows this amount of closing costs, it may be financially wise to bite the bullet and pay it, as you will not have your regular mortgage payment coming right on the heels of the closing.

Understanding how closing costs work goes a long way to understanding the actual amount you’ll see on your settlement statement. In any transaction there will be a total settlement amount, of which only a part will be actual costs to get the loan. Still, there is always a bottom line and understanding that at the start can help avoid confusion and unwanted surprises with cash to close.  If you have questions or need my help, get in touch any time.

Coffee is for closers, 

 

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

Investment Property Jumbo Mortgage with Low Down Payment

Since I’m in California, and property values where I live and work tend to be on the, shall we say, higher side, residential real estate investors — those looking to purchase a home of 1- to 4-units to be used as an income-producing property — can sometimes be limited in their attractive jumbo mortgage options. This is especially true if they are looking to keep their down payment as low as possible. Many potential rental property buyers are told flat out that even a 20% down payment is California dreamin’, and that a jumbo loan on a duplex or triplex, for example, requires a 30 or even 35% down payment. So in addition to being known for good vibrations and sun, let’s talk about our proclivity for innovation and examine some of our low down payment jumbo mortgage programs specifically catered to investment properties.

15% Down Payment

For a property of 1 to 4 units, we’ll lend up to $1,000,000 at a loan-to-value (LTV) of 85%. This implies a max purchase price of about $1,175,000 at the highest LTV. There is no PMI on this loan.

20% Down Payment

For a property of 1 to 4 units, we’ll lend up to $1,500,000 at a loan-to-value (LTV) of 80%. This implies a max purchase price of $1,875,000 at the highest LTV.

25% Down Payment

For a property of 1 to 4 units, we’ll lend up to $2,500,000 at a loan-to-value (LTV) of 75%. This implies a max purchase price of approximately $3,300,000 at the highest LTV.

Investing in real estate can be elusive where the property values are expensive and where the buyer doesn’t have 30% or more to put down. But we strive to lead the market with loan options that can turn buyers into landlords with even half of what they may have expected to invest at the start.  Further, with the capacity to accommodate multi-unit properties, some of these lower down payment programs can and do cash flow from Day 1.  If you are on the cusp of making your first rental property purchase, get in touch any time and I’ll be happy to review your options with you.

New lease on life, 

 

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