Posts Tagged: ‘loan programs’

Home Loans For The Self-Employed

April 9, 2016 Posted by Andre Hemmersbach


Home Loans for the Self-Employed

Getting home loans for the self-employed borrower may be easier than you think. Tax season normally represents a time of financial pain, but for some self-employed individuals it could represent an opportunity!

Everyone knows that one of the factors a lender will review before approving a borrower for a home loan in their income. What most people do not know, is that there is flexibility in the documentation requirements for self-employed borrowers.

A little known policy loophole in some lender’s underwriting guidelines is the ability to only use a 12 month average of net income from self-employed borrowers. Not all lenders follow the policy and some loan officers just default to asking for the industry standard 2 years returns because they do not know any better. The problem with that is once the underwriter reviews 2 years tax returns, they cannot just “lose” the documentation per their agreements with their investors; they have to use the 2 year average. On the other hand if your loan officer is aware enough to review and catch it upfront, a self-employed borrower who had a terrible 2014 but a record breaking income year in 2015 could be off and running with an approval to purchase the home they deserve!

I know the above to be true as our office usually turns around one to two deals every month that have been declined elsewhere for this very reason.

Please call me to set up a free consultation to create a plan so that you can qualify for a home loan to purchase your house.


Move Up Buyers Get A Break

July 9, 2015 Posted by Andre Hemmersbach

Your next home

Home Sweet Home

Move up buyers got a big break from Fannie Mae (FNMA) this week as a change in their underwriting guidelines will make it easier for move-up buyers to qualify. During the mortgage meltdown FNMA had added additional requirements and hurdles for the move-up buyers as a way to mitigate the extra risk. In the case of a borrower looking to convert his current residence to a rental, a lender had to prove a minimum equity position of 30% in the borrower’s current residence to use any rent to offset a mortgage payment. Needless to say most borrowers do not qualify for two mortgages without the benefit of rental income and a 30% equity position in the market of 2008-2014 was just as unlikely.

As of July 8th the equity test for move up borrowers who wish to keep and rent their old residence will no longer apply. This will allow the borrowers to qualify using fair market rent on their current residence to help offset their current mortgage and make it easier and quicker to process and close the new purchase transaction.


Down payment sources

March 20, 2014 Posted by Andre Hemmersbach

The biggest issue facing most borrowers in this market is still saving the down payment and closing costs! I thought I would list a number of resources that are helpful to would be purchasers that are a little short on cash.

  • If you work for a company that has a 401K plan, check with your administrator to find out if you can borrow against your vested balance. Many plans allow for a loan up to 50% of your vested balance or $50,000 for a purchase of a home. Best part about this loan is that most of the time the payments will not count against your qualification ratios.
  • Call your HR department or boss to see if your employer has a company program that will do an employer loan for the purchase of your home. This debt does count against you but I have helped borrowers whose employer had incredible rates of interest for such loans.

    Your Backyard

    Your Next BBQ

  • Cash in a Roth IRA for $10,000. Currently the tax rules allow you to pull up to $10,000 without penalties for the purchase of your first home. (you still need to pay regular income tax on the amount you pull and check with your CPA).
  • Sell stocks or better yet, borrow against stocks or securities you own.
  • Check with Non-profits or your church to see if they have any special down payment assistance programs.
  • Sell or refinance a boat, car or RV.
  • Get a gift from any family member or members (some programs allow for 100% gift funds).
  • Find a co-signer or partner with someone with cash and purchase the property together (you can do an equity share agreement that splits the property price appreciation at the time of sale).
  • If you are a veteran, you do not need a down payment as financing is available at 100% of the purchase price.
  • Look for a seller that will carry a second (usually will not work in a seller’s market)
  • If you have already saved around 3.5% of the sales price for a down payment there are programs available that allow the lender to pay all your closing costs.

Call me I would be happy to discuss your particular situation.


Real Estate Time Bomb

January 30, 2014 Posted by Andre Hemmersbach

If you regularly read financial periodicals, you will come across articles from financial experts on doomsday scenarios. Many times they are motivational pieces focused on selling you something to “protect” you against the awaiting catastrophe; other times it is a true warning by an expert that sees something very disturbing. The Dotcom Bust, the Asian Currency Crisis and even our 2008 Real Estate Bubble all had warning signs and experts who correctly predicted the financial disaster.  Today’s popular pending Armageddons are the Student Loan Bubble, the T-Bill Bubble and in the real estate sector a warning about Equity Lines of Credit (ELOC).

If you were a homeowner in 2004 – 2008 you were receiving multiple free offers for ELOC with low payments and teaser rates. Many homeowners took advantage of those freebies and started using their home equity like credit cards to buy everything from automobiles to vacations. In hindsight these mortgage instruments have been pretty good deals. Historic low-interest rates over the last 5 years and the tax benefits associated with the ELOCs have made this a very cheap method to finance any purchase.

Unfortunately, most homeowners do not understand the mechanics of their ELOC. Many times the promissory note they signed ten years ago was never read, explained or maybe just forgotten.  A quick explanation of how an ELOC works will help you understand the time bomb lurking in the shadows.

98% of all ELOC have a 10 year draw period. During this time you can use your line like a credit card to buy goods and services. After the 10th year starts the 20 year repayment period begins (a few ELOCs have 15 year repayment periods).  All ELOC have an index and most are based on the prime rate (currently 3.25%). Lenders use an index to make sure that they receive an interest rate that is commensurate with current market conditions. To the index rate the lender adds a margin (the Bank’s profit) usually 0.0% to as high as 3.0% or more. Check your Promissory Note or with your servicer to find your margin. Every month the lender adds the index rate to the margin and divides by 12. This is the monthly rate you are charged on your outstanding balance. These loans do not contain any sort of periodic cap to protect you from quick interest rate increases month over month. A lifetime interest rate cap of 18% is standard.

So where is the potential powder keg? As the 10 year draw and interest only periods are coming to close, borrowers will get notices of their mortgage payments increasing as their ELOC change to  fully amortizing loans. The amount could be startling for some homeowners! For example, an $85,000 balance, which is pretty typical of what I see on my customer’s loan applications, at a current rate of 4.25% (3.25% Prime Rate plus a 1.0% margin) has an interest only payment of $301.04 this would go to $526.35 on a 20 year repayment. But that’s not the whole story! Understand that we are at historically low rates. In the past the Prime Rate has been above 8% seven times since 1970 and at 8.25% as recently as September of 2007. So let me run those numbers on a balance of $85,000: Current payment interest only $301.04, new payment with rates at 9.25% (Prime Rate 8.25% plus a 1.0% margin) would be $778.49 for a 20 year repayment. If your ELOC has a 15 repayment your new payment would be $874.82. That is a payment increase of $573.77 or 191%

Please do not misconstrue that I am predicting an 8.25% prime rate anytime soon, but recognize that homeowners who have ELOC s with larger balances need to be aware of potential payment increases and how it could affect them.

If I can help you figure out how your ELOC will adjust and the steps you can take to minimize the impact please call me at my office. 310 540 1330.


Little Known Mortgage Underwriting Guideline Exception

August 1, 2013 Posted by Andre Hemmersbach

Over the last several years the news about lending and lending guidelines has for the most part been pretty negative so when there is something positive to highlight it makes my job a bit easier.

One of Fannie Mae’s (FNMA, the government institution that buys almost all the fixed rate mortgages made today) little known rules that could help certain individuals is how they look at borrowers who are purchasing, refinancing or doing a cash-out refinance for and elderly parent or disabled child.

If the elderly parent, or in the case of a disabled adult child, is unable to work or does not have sufficient income to qualify for a mortgage on his or her own FNMA will allow the borrower of the elderly parent or disabled child to purchase or refinance the home as the owner occupant at the owner occupant rates, loan to values and guidlelines even if they are not going to occupy the property.

There would be several additional documentation requirements but as a whole it pretty simple. More astonishing than the fact that FNMA allows this as an exception is that not all lenders follow the rule or even know about it.

If i can be a resource to you on any real estate matters please call me.