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.

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.

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.

3 Things to Consider Before Buying a Home

By: Glen Lazovick, SVP, Business Development

Whether you are a first time homebuyer, looking to trade up or down size your current home, the homebuying process can often be intimidating. Here’s 3 things to consider to help you plan for your homebuying quest. 

 1. Be a smart shopper. 
Begin your homebuying hunt by knowing how much you can afford. How do you determine what you can afford?

 • Prepare a budget.
Create a list of your monthly expenses. Be sure to include any current recurring debt, entertainment expense, commuting cost. Pro tip: This is a great time to ask yourself if there are any items you can cut out to reduce your monthly expenses. Take this time to review your cable and phone plan, check your insurance bill, find cost effective ways to doing the things you do regularly – like brewing your own coffee.

 • Meet with a Mortgage Loan Officer.
A Mortgage Loan officer can help you determine how much home you qualify for. While the Loan Officer can get you a loan for more than you thought you could afford, that does not mean it is what you would feel comfortable paying each month. This is where you could consider the budget you created. While your Loan Officer will review your income and credit statements he or she will not be able to account for your lifestyle expenses paid in cash, or credit cards that get paid off each month. 

2. Determine the best mortgage product for your needs.
Work with your Loan Officer to determine the best mortgage product for your unique situation. Your Loan Officer should ask you questions like how long you plan on being in your home and how much money you’re looking to put towards the down payment. The answers to these questions will help determine the best mortgage product for your needs.

 • Thinking about how long do you plan on staying in the home can help determine if an Adjustable Rate Mortgage (ARM) makes more sense than a fixed rate mortgage. Often times ARM’s provide a lower rate due to the shorter mortgage terms.

 • A down payment is an important consideration when considering a home loan. Your Loan Officer will be able to talk you through different products based on what you feel comfortable having for a down payment.

 3. Location, Location, Location. Check out and target a neighborhood.

• Visit your targeted neighborhood on several occasions at different times and days of the week. A neighborhood that is quiet Tuesday at 2:00 pm maybe noisy and traffic filled on a Saturday at 11:00 am.

• Plan a practice weekday commute from your targeted neighborhood. Leave the targeted neighborhood the same time you leave your current home. Is the commute longer or shorter is it something you can live with? It might be short as far as distance but traffic patterns may double your commute time.

• How are the schools in the neighborhood? Even if you do not have school aged children, the schools that serve your neighborhood can affect the home’s resale value.

• What surrounds the immediate area of the house? There may be a nice tree lined border in the back yard during the spring and summer months but in fall you may find out that the house is behind an Industrial complex.

• What are the future plans for the surrounding area? Check with the City or County planning or zoning board. Will a major highway be planed to cut across your back yard? The more information you have on the location, the more informed decision you can make on your future home.

While the list of considerations above should help begin the conversation about your future move, I would highly recommend meeting with a Mortgage Loan Officer who can help you plan and put you in touch with the right industry professionals to make your move as smooth as possible. If any red flags come up through your consolation, you have the opportunity to plan accordingly before your move.

Want additional information about the homebuying process? Request a copy of our homebuyer’s guide or apply online. Happy house hunting!

What Do Underwriters Actually Do Anyway?

By: Scott Shenton, Mortgage Banker

For anyone who’s been through the mortgage process, particularly in the current regulation-heavy environment, they may feel that underwriter’s only purpose is to be difficult. Although it may feel that way sometimes, underwriters actually are the superheroes of the mortgage industry. 

To appreciate why underwriters are so indispensable, it’s important to first understand a few of the underlying processes in the mortgage industry. No matter which institution you choose to do your mortgage, it’s a near certainty that that loan will one day be sold to a different institution. This buying and selling of mortgages is collectively referred to as the “secondary market”. It’s this buying and selling of mortgages, that enables institutions to continue to have funds to lend and without this market, the entire system would come to a screeching halt. For a mortgage to be considered viable on the secondary market, it must be structured and delivered in a way that proves that it is indeed a good investment (adequately low risk) and is consistent with industry standards.

  

This brings us back to the heroes of this story, the underwriters. Loans are delivered to underwriters complete with a large collection of supporting documents intended to prove a borrower’s income, ability to repay the loan, credit worthiness and the circumstances in which they are purchasing the property. An underwriter’s job is to then look at the big picture and ask the difficult questions.  Is the borrower’s income consistent and stable? Are the borrowers using the property as a primary residence, 2^nd home, or investment? Are all debts being taken in to consideration when determining a borrower’s ability to repay the loan? Does the loan make sense, and will it be purchased by an investor?

Underwriters are expected to pose questions that may impact the loan’s marketability and request additional documentation to answer these questions. When an underwriter has done their job well, the loan will easily be sold and will continue on, issue free. It’s this step that keeps the secondary market, and ultimately the mortgage industry plugging along.

So take it easy when answering an underwriter’s request for additional information and thank them. They keep homebuying possible. Want additional information about the homebuying process? Request a copy of our homebuyer’s guide or apply online.

6 Tips for a Successful, Stress Free Loan Process

By: Lorraine Packett, Mortgage Banker

1) Ask your financial adviser, tax preparer, realtor, family, friends and coworkers who they recommend as a loan originator. You can have it all with the right relationship and still receive fair market rates and fees.

2) Prepare yourself to be responsive and be sure you are ready to access your financial information for the initial application including: 2 years tax returns, 2 pay stubs and 2 monthly bank statements to cover the basics.

3) Make contact with the loan originator that was referred to you and tell them of all the information that makes your situation unique. The loan process may seem invasive, however, it is very important to show all of your cards. It is better to address any difficulties up front, so that your originator can find the best mortgage solution for your needs. Know that the relationship is long term. Over the course of their life, the average person buys, sells and potentially refinances their mortgage several times.

4) Once you have spoken to the referral(s), choose and plan to work with that one person. Rates are constantly in motion and will always be competitive. Having personalized service from a responsive loan originator is key to ensuring that the loan is done correctly and closes on time.

5) From the initial application, preapproval, as well as finding the perfect property, it is critical that you provide all the information that is requested rapidly and completely.

6) Ask as many questions as necessary to make sure you are comfortable with the outcome of the dollars and cents beforehand to avoid surprises. The responsibility is with you and the originator working together for your goals!

Apex Home Loans is equipped to provide you with other referral partners for homeowner’s insurance, closing attorneys, estate planning and financial planning services as needed. The goal is simple – surround yourself with a team that will have your best interests in mind.

Follow these tips and you’re on your way to a successful, stress free loan process. Ready to begin the home buying process? Request a copy of our homebuyers guide or apply online.

5 Critical Steps You Must Take Before Listing Your Home For Sale

By: Glen Lazovick, Senior Vice President, Business Development

Summer is approaching, and you’ve decided that it’s time to put your house up for sale. Drawing from my 25 years’ experience in the industry, I’ve compiled this list of things to consider before you list your home. Taking these steps now can go a long way towards assuring that you'll successfully sell your house quickly and at a good price.

1. Walk through every room and around the outside of your home. Make a list of what needs to be repaired, updated or replaced. Remember you only get one chance to make a first impression.

• Which rooms need to be repainted?

• Wash the windows both inside and outside.

• Do the carpets need to be cleaned, stretched or replaced?

• Clean all light fixtures and make sure the blubs are clean and working. A bright well lit house will give a good impression.

• Make sure heating and ventilation vents as well as bathroom exhaust fans are vacuumed and clean.

• Have the HVAC system serviced and cleaned.

• On the outside of your home, prune trees and shrubs, replace any shrubs that did not make it through the winter, add some color with flowers. Put down fresh mulch.

• Power-wash siding, driveways, walkways and decks. Re-stain decks if needed.

• Repair and paint trim as needed.

2. De-cluttering your home will make rooms and closets appear larger and more inviting.

• Now is the time to go through your closets and get rid of the clothes you have not worn in the past few years. Don’t forget the linen closets, pantry and kitchen cabinets; they all should be orderly and uncluttered.

• Clean out the garage, basement and attic.

• If you have items that you do not use often but want to take with you to your next home consider renting a storage lockers or portable storage container. (Do not keep the portable storage container on your property have the company store it at their location, you do not want to call attention to a perceived lack of storage space).

• Hold a garage sale, or better yet donate your excess furniture, household items and clothing to a charity. You will get a tax write off and help someone in need.

3. Visit listed homes similar to yours.

• How do they compare to yours? Are they in better or worse shape? You will notice things that you might have overlooked in your own home (refer to number 1 above)

• How are they priced?

• Get some staging ideas to efficiently use space.

4. Meet with a Mortgage Loan Officer.

• Make sure you will be able to purchase your next home. There have been many changes to the mortgage process in recent months.

• Get pre-approved to increase you negotiating power.

5. Interview 2-3 Real Estate Agents.

• Get a referral from your Mortgage Loan officer. Your loan officer will know the top Realtors in your area and would be happy to make a referral.

• Ask for references from clients that they have worked with in the past.

• Ask for a detailed listing plan including a Competitive Market Analysis (CMA). All Agents should be in the same ballpark with a suggested listing price. If one is much higher or lower than the other ask them to justify the suggested price. They may give you an inflated price to gain the listing, only to have you lower your asking price in a week or two.

With these simple steps, you’ll be in a great position to sell your home. I’m always available to help you in the process in any way I can. Are you ready to begin the home buying process? Request a copy of our homebuyers guide or apply online.