Things You Need To Know About Mortgages
If you’re considering purchasing a home, especially a first home, a loan may be essential for you to get the property. In this case, considering your loan options and which ones are the best for you is something that you have to sit down and do. “The Dollar Diva” Debbie Bloyd takes you through several loan options as they relate to mortgages and your employment status. Loans are serious business and one mistake could keep you from acquiring the home of your dreams. Make sure you go into the process of loans absolutely prepared.
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Things You Need To Know About Mortgages
We get a lot of questions in the mortgage business about appraisal values, PMI and how to get out of PMI. We’re going to start off with a lot of mortgage questions, things that may be on your mind. If I answer them, great. If not, please text me, email me, or give me a call and let me know and I’ll talk to you personally. When clients come to me to purchase a home, they have 4 or 5 different choices. We have a VA loan, a conventional loan, an FHA loan and a USDA loan. There are subsets of all of those. Those were the basic way that we buy our homes. VA loan has a great plan for veterans with 0% down, but there is a 3% funding fee. It’s 3% of the loan amount, which is usually 100%.
If you’re buying a $300,000 house on a VA loan, you’re going to be looking at a $9,000 funding fee. That is waived if you have eligibility for disability or if you’re receiving disability. That fee can go away. The benefits to a VA loan are the rates are good and underwriting is bare. It takes longer to do the appraisals because VA is extra picky with their appraisers. The appraisal guys themselves, the appraisers are extra picky on the home because you’re not putting anything down on the home. You’re doing 100%.
They’re super picky to make sure that everything is perfect in that home. Older homes are much harder to go to VA. That also means because it’s a government loan that they take a little while longer. There’s a special portal that we order things through. We’ve got a special number. Instead of a 30-day close, we’re normally looking at 45-day-close. When you do an FHA loan, you might be looking at a little longer too, especially when that is prevalent with 3.5% down. A lot of people are taking advantage of an FHA loan. Also, interest rates are great. The appraisers are a little bit tougher on an FHA home because you have such a little down. It’s a government-backed loan.
The problem with FHA loans that I see is only if you’re keeping the house for a long time. We want to look at how long you’re looking at to keep the home. If you’re going to live in it for a while and turn into a rental property, you don’t want an FHA loan because that mortgage insurance never comes off. Unless mortgage insurance comes off after you reached 20% equity in a property off the appraised value. Not with FHA, they’re keeping that mortgage insurance the entire life of the loan. The only way to get out of it is to refinance. That’s a question that I always ask people is, “How long do you think you’re going to be in this home to make sure an FHA loan is right for you?” USDA is another type of loan. It is becoming a popular loan because it has better interest rates and you don’t need to have as much down if any, but there is an income requirement. You can’t make $300,000 a year and get a USDA loan. It is for a little bit of a lower income.
There are also a couple of other loans that I’ve talked about, Home Possible, that are alternatives to FHA loans with little down payments. There is an income limit on those. We still take money from down payment assistance programs all across Texas. Those have income limits on it too and at different levels. We do all these types of loans, but there are requirements that sometimes get people booted out of one program and into another. The loan that I do the most of is a conventional loan. You’re putting 5% down, 10% down, 12% down. Most people don’t put 50% down unless they’re trying to qualify with low payments. A conventional loan is probably the quickest, fastest, easiest thing to qualify for. It’s still taken about 30 days to close unless you have all your paperwork.People who are looking to purchase homes have different choices: VA, Conventional, FHA, and USDA loans. Click To Tweet
Let’s talk about what does it take to need paperwork for a loan. It depends on who you are and what your past is like. When I take a loan application, you can do it online. I have a little link on the signature of my email. It’s a secure portal to My Calix website where you can make a loan application. You don’t always spell them out because you don’t understand the questions that they ask sometimes. You don’t understand the importance of the exact date. Let me try to explain that. When you talk to anyone about getting a loan, they’re going to want the last two years of your living history. You’re saying, “How complicated can that be?” You’d be surprised. We have people living with their parents. They’re paying for their parents’ house or the parents are paying. The kids live there and you’re rent-free.
Part of establishing credit to get a home is to prove that you’re a good credit risk. That’s why they analyze your rent history, your mortgage history, your credit history, and your job history of making sure that you have been consistent with earnings. We’ve gotten a little sticky with that because a lot of people do not understand the importance of a job history or a living history. We get in trouble in underwriting because you’re not exact on the date. When the government says they want to know where you’ve lived the last two years, they mean exactly, not a year and seven months.
If your living history is incomplete, we have to adjust that in underwriting and that takes longer. If you’ve lived in three places in the last two years, we need all three addresses. We need all the phone numbers of the management companies if you’ve rented in order to verify your rent history. That’s important. The next important thing is your job/school history. When we talk about job history on a loan application, it’s not your job. If you’ve gotten out of college with a doctorate or Master’s or whatever degree, a Bachelor’s, we want to know where you went to school.
We need the transcripts. We need dates. If you left out of the semester too, we need to know that. We’re very picky when it comes to history. You can’t say, “I started my job six months ago.” “What did you do before that?” “I didn’t work.” What did you do? Did you sit at home or did you go to school? Did you work part-time? We have to be thorough with our answers and our questions because it’s all-important. We’ve lost a couple of loans because the people work for smaller businesses. A lot of smaller businesses are not set up to do income verification or job verification. Part of what the government does or the underwriters, and if you’re doing a government loan, the government does it. If you do a lender loan, conventional, a lot of the lenders do verifications of employment. They now take us out of the middle of that.
We get the initial information as loan officers and send it to the lender in your loan application along with your pay stubs, bank statements, W-2s, 1099s, however you’re paid. The lenders are now verifying your job history, trying to speed up the process, but they double-check to make sure everything is legit. We’ve had a couple of loans fall out at my company because my clients worked for a small company. It wasn’t like a traditional office line. It was someone’s cell number. The email address that the company used was not a corporate email address.
I have my corporate address as DLBMortgageServices.com because I own that URL. My office number is my cell phone. I’m mobile. I am all over the place all the time. I work nights and weekends and that number is with me all the time. I don’t have a “corporate number” HR like big companies to call. My borrower had a problem verifying her job because the HR person’s phone number was her cell phone. The HR’s email address was her own email. The company didn’t have one. We don’t run into these things often, but it does show the importance of the information you give me and the company verifies it.
The underwriters are taught to verify if you’re an owner in a company, they have to look up your corporate bylaws. They have to find out who’s or what percentage owner in that company. Sometimes people have said that they don’t own any in a company, yet when the underwriters run it through, they find out they do. We have to be careful. They call it fraud usually on the file because we have not been forthcoming and honest with our loan application. The problem is I only know what you tell me. If you don’t tell me all of it, I don’t know all of it. I cannot protect your file and help you get the information we need to make it go through underwriting.
Job histories are important. Taking time off for a family member being sick and all that, we understand. I’m not for sure with this COVID-19 what’s going to happen with job history and HR. It’s getting harder to verify employment because we’re down to skeleton crews of companies. People are working remotely from their homes. The lenders are waving a lot of conditions that they wouldn’t have before because it’s too hard to round them up. I’m not sure what’s going to happen with the unemployment rate being high.
If you’ve been unemployed for a period of time, you typically don’t get a mortgage loan. I don’t know if they’re going to change those laws at all. It would be unfortunate for people that are working hourly or part-time jobs that have gotten laid off. We can’t verify their job history and take them out of the running of qualifying for a home. We probably will need cosigners on those homes. If you are a couple, this happens a lot, questions like, “If my husband’s credit is not as good as mine, does he have to be on the loan?” No, if you can qualify for by yourself.
I do have several couples where the husband’s credit is not as good or the wife’s credit is not as good and we verified and qualified them. Find a home with one person on the loan application. If it’s your primary home, you’re still going to be entitled. Don’t think because you’re not on the loan that you’re absolved from any of the debt, you will be on title. That means the other person cannot sell the house without you signing off on it at the closing. You’re protected as far as that goes, but you’re not getting the credit bump in your credit score like you owned a home because you’re not on the note.Loan providers are very picky when it comes to history. Click To Tweet
I have a question from a gentleman, “I’m in the middle of a divorce, but I’m buying this house.” I’m like, “Stop.” For your information, don’t buy a house in the middle of the divorce. Your new ex-spouse will then be eligible to receive half of the equity that you have in that new property. In the state of Texas, if you buy a house and you’re still married, that spouse is going to be on the title, you can’t go to a closing without it. Wait until your divorce is done, the judge has declared it and it’s been filed. It’s over before you buy a property or you run the risk of losing half of your equity that you put in that house.
This has been a big problem for our clients. If you get divorced, the judge awards, let’s say I’m working for the husband. The husband has called me and wants to buy a new house with a new girl and a new family. We go to pull his credit and there’s still a house on his credit. He goes, “That’s okay. I’m divorced. She got the house in the divorce. We’re totally fine.” No, you’re not totally fine. You’re still on the debt. We have to hit you with that housing debt plus the new house that you’re buying, plus whatever is on your credit report, like credit cards and car notes.
When you get divorced, make sure the car note is refinanced, make sure the house is refinanced and you can put that in the divorce decree, but they have to refinance the house to get you off of it. You do not want to be left with a spouse. What happens is sometimes the wives or the husbands get the house, they can’t afford to refinance it or they can’t qualify for the refinance of the house. They can make the payments, but they cannot show on paper that they’re qualified to make that through me.
They were like, “What are we going to do?” You can’t refund it as a house if you can’t be on the loan alone. Your spouse is going to still be on it even though they are your ex-spouse. You want them off and you can’t get them off title if they’re still on the loan. It gets sticky. We want to make sure that when you divorce or separate, you separate all the credit as well. That doesn’t usually happen with an attorney. If you’re going through a divorce, you plan to go through a divorce, make sure you’re separating out that credit. If she’s getting a car and he’s getting his car, make sure each of you is off that loan. You don’t want to carry any extra credit because that’s going to hinder you from what you’re going to be able to do going forward.
Another problem that we’ve had, that we’ve overcome well is an income problem because you’re self-employed. We used to do no doc loans, low doc loans, stated income loans prior to 2008. Since 2008, that all went away. There is a loan that’s come out where I’m helping a lot of self-employed people and I’d love to help you too if you’re self-employed, is a bank statement loan. The way a bank statement loan works, if you’re self-employed, you usually have a company account and a personal account. You give me the last twelve months or the 24 months of your bank statements, all pages, all of them. You’re going to say, “Debbie, that’s 200 pages.” I know it is. What we do is we have you download all those from your bank. Your bank usually keeps 3 to 5 years online. You can get them and we forward those to the lender.
There are only 3 or 4 lenders in the country that do these bank statement loans. They’re becoming more prevalent so more lenders will pick it up. What happens is they analyze the income on those bank statement loans as deposits without taking the expense side. I’ve had a plumber before show $30,000 in deposits. That’s great because we don’t have any of the outflow of expenses, only the income. His average turned out to be like $23,000 a month in income. After he paid people in it and expenses, he probably only made $8,000.
By the way, the bank statement loans are written, they qualify him for much more. They don’t take the debt, they take the income. If you are self-employed, this is a great loan for you. You still have to have good credit. You’ve got to have money in the bank. Normally, they request 20% down, but you can do a bank statement loan. It’s important to call and inquire with lenders. Most banks don’t do these. Wells Fargo, Bank of America, the big banks are not going to do these. Community banks don’t do these. They do in-house loans and they don’t take into consideration this type of loan.
This is why I became a mortgage broker. As a mortgage broker, I’m able to work with Quicken, UWM, Caliber, all the companies that I want to, bank statement loan companies, construction loans, onetime closes. I don’t have to say no when people call me for a mortgage. We also have lenders that are going down to 500 credit score. We typically go down to 620. They used to be called subprime lenders, but they’re called Alt-A lenders. They sometimes can go down to the 500s for VA or FHA. They usually go down to 580, which allows a lot of people to get a mortgage that has had some medical issues and it pulls your credit down. If you have questions about loans, I can talk about loans all day long and talk seven days a week, so call me. My direct number is (979) 220-3018. My email is [email protected]. Be sure to email me. If you have questions about mortgages or finance or insurance, please give me a call or email as well.