Do Car Lease Payments Count as a Liability? - 11/28/08 10:25 AM
We're often asked if car lease payments count as a liability when qualifying a borrower for a loan.The answer is yes, even if there are only one or two payments left on the lease. There is a reasonable expectation that the borrower will have to either buy a car or lease another one after the current lease is up, so the payment needs to be counted as a liability.
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My Spouse Had a Bankruptcy - Can I Get a Loan? - 11/26/08 10:29 AM
Q: If someone's spouse has had a bankruptcy, does that affect the length of time before they can buy a house?  
A: Not necessarily.  If both people are going to be on the note (the loan), then it does.  If the couple can qualify for a loan with just the income of the person who did not have the bankruptcy, then they can get a loan in just that one person's name.
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What Does "Re-Establishing Credit" After a Bankruptcy Mean? - 11/25/08 12:08 PM
Q: What does "re-establishing credit" after a bankruptcy mean?A: After a bankruptcy, a lender will be looking at a borrower's credit report to make sure they have either kept some accounts open or opened new ones. If the borrower has three open lines of credit (credit cards, car loans, mortgages, etc.), and they do not have any late payments for the 12 months preceding the loan application, then they have "re-established" their credit.
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FHA Loan Limits Are Changing Again! - 11/24/08 11:00 AM
FHA loan limits are changing again!  Here are the new rules:   
Effective January 1, 2009, the limits will be lowered to comply with the Housing and Economic Recovery Act of 2008 (the big bail out act passed back in July).  The loan limits had been raised when the Economic Stimulus Act of 2008 was passed in February (that was the previous bail out act), but those were just temporary increases due to expire at the end of 2008.  To make it a bit more complicated, the lenders who underwrite the FHA loans are concerned that they will get stuck with loans that are … (0 comments)

Can Closing Costs Be Rolled into a Loan? - 11/24/08 10:53 AM
Q:  Can loan closing costs be rolled into the loan amount?  
A:  On a refinance transaction, yes, provided there is sufficient equity in the property. 
On a purchase transaction, the closing costs cannot be rolled into the loan.  Two exceptions to this rule include the up-front mortgage insurance premium for FHA loans and the funding fee for VA loans.  It may sometimes seem as if the closing costs are being rolled into the loan on a purchase, but in those cases, the fees are actually being paid by a second mortgage from a down payment assistance organization.  If there is no down payment … (0 comments)

How Much Money Can a Buyer Get Back at Closing? - 11/21/08 10:56 AM
Here's a question we get asked at just about every real estate training seminar we teach:
Q: How much money can a buyer get back at closing?  
A: The most a buyer can get back is the amount of their earnest money, less any amount (if any) that they are required to contribute towards the purchase by the loan program guidelines.  For example, if the borrower has paid $3,000 in earnest money and the loan program they are using requires a minimum contribution of $1,000, then the most they can receive back at closing is $2,000.  If they get any more than that, it would … (1 comments)

What Is an Underwriting Exception? - 11/20/08 02:22 PM
Q: When a mortgage broker says they are trying to "get an exception" from an underwriter, what does that mean?  
A: Underwriters follow underwriting guidelines to determine whether a loan application falls within the risk parameters for a particular loan program.  If a loan is not approved because it does not meet all of the guidelines (debt-to-income ratio is too high, reserves - or money in the bank - are too low, the borrower has not been self-employed for long enough, etc.), then the underwriter can still approve the loan if there are "compensating factors".  Compensating factors are things that reduce the risk level … (3 comments)

Should Someone Ever Pay a Pre-Payment Penalty? - 11/19/08 02:15 PM
Here's another question we were asked at a class we taught recently:Q: Should a buyer ever pay a pre-payment penalty?A: No, a buyer should never have to pay a pre-payment penalty (PPP). PPP's are added onto loans so the lender and the mortgage broker can make more money. The lender makes more because the borrower is locked into a loan that they are much less likely to refinance. The mortgage broker makes more because the lender pays the broker a rebate for adding the PPP onto the loan.
Some mortgage brokers will argue that they will use the rebate they get … (10 comments)

Why Does a Lender Want My Mortgage Statement? - 11/18/08 09:27 AM
Here's another question we were asked at a class we taught recently:
Q: If someone owns a house and is buying another one, why does a lender sometimes want to see the mortgage statement for the buyer's current property? I thought the mortgage payments would be listed on the credit report.
A: The underwriter is looking to see if the homeowner's insurance and property taxes are included in the monthly payment.  There is no way to tell from a credit report if the taxes and insurance are included in the amount reported to the credit agencies. If they are not, then they have … (4 comments)

Important New Appraisal Changes - 11/17/08 02:43 PM
Fannie Mae just announced that there are some new appraisal requirements going into effect, in order to make sure that properties are valued correctly.  The main change is the addition of the Market Conditions Addendum, which requires the appraiser to go into great detail to support the claim that a market has declining, stable, or increasing property values.  This is something that everyone should be familiar with - sales will depend on it.  The announcement from Fannie is 9 pages long, so we're supplying the link to the document, rather than pasting the entire thing in this email.  Here is the … (0 comments)

How Do I Know the Property Taxes Are Paid? - 11/17/08 02:31 PM
Here's another question we were asked at a class we recently taught:
Q: How do I know that the property taxes are up to date and paid when I buy a house?  
A: The lender requires a tax certificate from the county showing the status of the property taxes.  If the taxes are not current, the lender will insist that they be brought up to date at the closing. 
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Does All Income Have To Be Listed on a Loan Application? - 11/14/08 09:35 AM
We are often asked if borrowers have to include all of their income on a loan application. Except in the case of a loan where there are maximum income limits (an affordable housing program, for example), the answer is no. It is always best to submit a loan to underwriting with the least amount of income necessary for the approval because everything that is included on the application must be documented. A good example of how this would work is if a borrower has $50,000 base income and $30,000 commission income. If the borrower can qualify for the loan with just … (5 comments)

FHA Repair Escrows - 11/13/08 02:10 PM
If someone is buying a HUD home that has a repair escrow amount listed, and is using FHA financing, they can include the amount of the repair escrow in the FHA loan without having to get a rehab loan.  Let's say the house is listed at $100,000 and the escrow amount is $2,000.  They would be able to pay $100,000 for the house, but get the extra $2,000 included in the loan.  
The amount listed for the repairs is not a set number.  Before getting the loan, the buyer would need to get an estimate, and that number would be the amount … (4 comments)

Do Payroll Deductions Count as Liabilities? - 11/13/08 02:06 PM
Here's another question we were asked at a recent class we taught:
Q:  Do payroll deductions count as liabilities when calculating the debt-to-income (DTI) ratio?   
A:  If the deduction is used to pay a debt, such as child support, mandatory loan repayments, etc., then it must be counted as a liability.  If the deduction is for payroll taxes, a contribution to a 401(K), union dues, etc., then it does not count as a liability.
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Borrower is Separated from Their Spouse - Does All Debt Count Against Them? - 11/12/08 11:24 AM
If a borrower is separated from their spouse, an underwriter will require a separation agreement in order to determine which liabilities each spouse is obligated to pay, and also to determine if any child support or spousal maintenance is involved.
If a formal (legal) separation agreement does not exist, some lenders will approve the loan if both spouse's liabilities, including the housing expenses of both people, are counted in the debt ratio.
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Bank Statements - Why Do They Want the Blank Pages? - 11/11/08 11:27 AM
Q:  Why does a lender want to see all the pages on bank statements, even if some of them are blank?  
A:  The main things lenders look for are insufficient funds charges, car loans that are not reported to the credit bureaus (fairly common with credit unions), overdraft loans that are not on the credit report, and unusually large deposits.  They also don't have any way of knowing a page is blank until they see it.
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Buying a New Primary Residence and Keeping Your Current Residence as a Rental - 11/10/08 07:59 PM
Just a reminder that the new rules for buying a primary residence, while retaining a current primary residence as a rental, have gone into affect. Here's how it works.If someone is planning to retain their current primary residence as a rental, they must have 30% equity in their current primary residence if they need to include any rental income to qualify for the loan. They also need a lease agreement and proof that the security deposit for the rental has been deposited into their account.If they don't have 30% equity in their current primary residence, they can still buy a new … (13 comments)

 
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Chris Thomas

Denver, CO

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