Tuesday, July 28, 2015

Why is it harder to get a mortgage if you are self-employed?

By: Paul Defgnin, Mortgage Banker

Being self-employed can come with many perks: flexible hours, long lunch breaks, and always agreeing with your boss. However, when it’s time to buy a home and you’re looking to get a mortgage loan, self-employment can present many challenges in comparison to someone who is salaried. Obtaining a mortgage while being self-employed requires more time, effort, additional documentation and various other challenges including:

Not being able to rely solely on deposits or cash-flows going into business or personal accounts as qualified income
  • Needing two years of tax returns
  • If you are a partner, a member of a limited company or incorporated in business, you are required to provide various financial documents including, an unaudited year to date profit & loss statement, a balance sheet, and a third-party CPA letter.
  • In most cases, you are required to have 2 years of self-employment history in the same business for the income to be considered qualifying income
  • If your income fluctuates, it can pose a problem when a lender is considering your ability to repay the loan
Although self-employment presents many obstacles, obtaining a mortgage is still achievable. By educating yourself on the solutions when faced with these challenges, the process can run smoothly and mortgage approval is possible. These solutions include:
  • Getting organized and having all your documents in order. 
  • Keeping business and personal accounts separate 
  • Being prepared to provide additional documents before starting the process including but not limited to 2 years tax returns and other business tax forms
  • Ensuring that you have 2 years self-employment history before you apply
  • Providing a record that your income is consistent or increasing. If your documents show that your income is declining, be sure to write an explanation and provide documentation if it is an isolated event
  • Minimizing how many expenses will affect your net income
  • Providing independent verification of your self-employment
Regrettably, sometimes even having all of the necessary documents in order is not enough for lender approval. Frequently lenders and mortgage bankers do not understand how to read self-employment borrowers’ tax returns and will not take the time to learn. The main issue is not proving your income, but it is instead finding an experienced mortgage broker who is able to read your tax returns to assess how much you qualify to borrow.

If you are self-employed and are in need of a reputable Mortgage Banker that understands and has experience working with self-employed borrowers, contact me to get the process started.

Tuesday, July 21, 2015

Understanding Your HELOC and Repayment: What You Need To Know

By: Eric Gates, President

During the housing boom of the mid 2000’s, Home Equity Lines of Credit (HELOC) were originated at a record pace. A home equity line of credit is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house.  In particular, between 2004 and 2008, a significant number of HELOCs with terms of 10 years were created. The draw period for these lines of credit are coming to an end,  evoking conversation on what happens now.

Here is a brief summary of important facts anyone with an existing HELOC should get familiar with:


·      All terms of your HELOC are outlined in the documents you signed when opening your account and should be reviewed to gain familiarity. In particular, read through your HELOC Agreement.  
·      Your interest rate is adjustable and is tied to the prime rate. The prime rate is a commonly used, short-term interest rate used by most banks in the United States. The rate on your HELOC is typically adjusts as the prime rate rises and falls.
·      The prime rate is currently 3.25%. This rate is not static and is subject to change.
·      Rates are expected to rise sometime in the next year or two.
·      All HELOC’s start with a draw period during which the borrower can access the funds on the line of credit.  Typically, the minimum payment during this time frame is interest only, although in some cases it may be a percentage of the outstanding balance.

Which changes can you expect to come to your repayment terms now that your line of credit is amortizing?


·      The initial draw period for HELOCs opened in the 2004-2008 time frame was ten years, in most cases. Some have already moved beyond the draw period and millions more will be doing so within the next few years. Make sure you know when this will happen in your case so you can prepare for it in advance.  DON’T JUST WAIT FOR YOUR HELOC LENDER TO INFORM YOU.
·      At the end of the draw period, the minimum payment requirements change, sometimes drastically, as the HELOC enters the repayment term and funds can no longer be accessed from the Line.  
·      The payments required after the draw period are recalculated so that the balance can be paid off in a specified period of time.  Check your HELOC Agreement to know how long this time period will be.  It is likely to be 5, 10, or 20 years.
·       The shorter that time frame for repayment is, THE MORE YOUR PAYMENT WILL BE GOING UP.  For example, you’d have to pay a lot more each month to pay down the balance in 5 or 10 years than you would to pay if off in 20.

So what should you do?


·         Read your HELOC Agreement and get familiar with the terms.
·         Use an online calculator or ask a Mortgage Banker to determine what your payment will change to based on your balance, interest rate, and the length of the repayment term.
·         Consult with your trusted mortgage advisor to see if there are options to refinance that make sense for you to consider.  Make sure you consult with someone who will give you an honest answer and will be looking out for your best interest, not theirs.
·         If refinancing isn’t an option and the new payment structure is going to be difficult for you to meet, proactively contact your HELOC lender before the adjustment period to see what options they can offer.  While some lenders may work with you to make the repayment terms more affordable, this is not guaranteed.

Navigating changes to your HELOC can be difficult and an experienced Mortgage Banker can help you find the answers to your specific questions. Contact me to discuss your situation and how we can find a solution to meet your needs.

Tuesday, July 14, 2015

Why Choose a Local Mortgage Banker? They Make the Lending Process Easy.

By: Kendall Tayman, Team Tayman

Finding the best lender to finance your home is one of the most important decisions you can make throughout the homebuying process. Since this will be one of the bigger purchases you make in life, deciding who should help finance your home shouldn’t be taken lightly. It’s important to choose a mortgage lender who is trustworthy, experienced and has a team of seasoned mortgage loan officers. Unlike any online lender, a mortgage banker is a live person prepared to personally manage your loan and look out for your best interest, something a computer cannot do.
 
So why might someone choose a local mortgage banker over an online lender? The answer is simple: they offer a personalized service with the goal of customer ease and care.

1.      Personalized Service

A locally owned and operated mortgage lender with a team of experienced mortgage banker, appraisers, and underwriters is the best possible scenario when trusting someone to help you finance your home. Providing personal financial documents to someone outside of the family may seem like a daunting, invasive task, but with a local mortgage banker, you can rest assured that your personal information is safe in the hands of trusted experts in the mortgage field. When working with a local mortgage banker, all your financial documentation remains in-house during the processing of your loan. The advantage of in-house processing is the streamlined, efficient system in place that retains full control over all aspects of your loan.

2.      Extensive Knowledge of the Local Market

When questions arise - as the loan process can often be tricky - a local mortgage banker and his/her team are able to quickly and efficiently answer any questions you may have. Local loan officers strive to build a trusting relationship between themselves and their client. Local mortgage bankers are your next-door neighbors; they have unrivaled experience in the area and would go the extra mile to help you land in the home of your dreams.

3.      Copious Experience in the Mortgage Field

Would you rather have processors and loan officers based in different locations or a well-oiled team who work with each other, in-house, every day? Or how about an online, impersonal mortgage banking team focused on the number of loans closed, versus a team with each member having over 10 years of experience in the mortgage industry who cares about quality, not just quantity. Experience and control are key aspects in the loan process for the transaction to occur smoothly. You can even take this experience a step further by finding a loan officer with a CMPS (Certified Mortgage Planning Specialist) certificate. A loan officer with the CMPS designation has the knowledge and experience building a mortgage that fits within their borrower’s short term and long term financial goals. This is the kind of lender you can trust with your personal financial documents and trust to resolve any problems that may arise throughout the process. CMPS certification is held by less than 1% of mortgage pros in the industry. In all aspects of life, experience is valued.

4.      Advantages of Independence

The advantage of an independent lender is that loans can be sourced with multiple investors and not be restricted to the pricing of any one institution. This allows for clients to achieve the best possible rate on the market, while still getting the care and promptness of a local mortgage banker.

When you choose a local, independent mortgage banker, you truly can have it all: the right relationship, while receiving fair market rates and fees. Over the course of their life, the average person buys, sells, and potentially refinances their mortgage several times. Therefore, choosing the right lender to finance your home is incredibly important, as the relationship between a lender and borrower is long term. True mortgage management is a commitment by the lender to monitor the loan throughout the complete term and alert you when there are any opportunities to change based on your financial goals.

If you’d like more information about the mortgage lending process please request a copy of our homebuyer’s guide or apply online to get started with one of our mortgage bankers.