Tag Archives: income

Home Lending Debt-to-Income Ratio Increase Could Mean More Buying Power For Homebuyers

Fannie Mae has raised the debt-to-income ratio to 50% DTI, reasoning a higher debt ratio doesn’t mean poor credit. The debt-to-income (DTI) ratio is determined based on a borrower’s total amount of debt, including credit cards, student loans, auto loans and mortgages, compared to their total income. Fannie Mae’s recent changes will hopefully allow more homeowners to enter the housing  market with new expanded debt-to-income requirements, making it easier for borrowers with good credit but higher debt to acquire a home loan.

Applicants with high DTI ratios have been told their debt is too high for home lending approval. The Washington Post printed an article outlining how those rejected on home lending applications due to high debt-to income ratios often make payments for their debts early, signaling that on time payment, or payment default isn’t the issue. Of those declined applicants, some have never actually defaulted on their credit, but were declined based on their higher debt due to raised student expenses, cost of living increases as well as other expense inflation.

Fannie Mae wants to allow more homeowners to enter the market as it increases the DTI requirements. This shift by Fannie Mae opens up the market to almost 100,000 new, responsible, homeowners, and one might even be you! If you’re interested in getting pre-qualified for your home, give a call!

Kathleen Beck – Mortgage Lender
2716 Broadway
Sacramento, CA 95818

#Mortgage #MortgageLoanProcess #Debt #DebtToLoanRatio #Buying #HomeBuyer #HomeBuyingProcess #Refinance #ConventionalLoan #FHALoan #VALoan #JumboLoan #PreQualifications #PreApproval #Borrower #HomeOwnership #Sacramento #BayArea #HomeFinancing #TrustedLender

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What is “Boarder Income” and How Is It Utilized When Applying for a Loan?

Did you know you can use boarder income to help you qualify for certain loan programs? Understanding which programs allow you to utilize boarder income and the requirements for each can help you get ahead when applying for a loan.

Boarder income is income that a person receives for lodging, meals, or related services from people living on their property. There are three types of loans that you can apply boarder income to:

  1. Federal Housing Association (FHA)
  2. Fannie Mae (FNMA)
  3. Freddie Mac (FHLMC)

Federal Housing Association (FHA)

Boarder income applies to Boarders of the subject property renting space inside the borrower’s dwelling unit.

  • Mortgagee must obtain a copy of the executed written agreement documenting intent to continue boarding with the Borrower for purchase transactions.
  • Borrower has a two-year tax return history of receiving income from boarders and the borrower is currently receiving boarder income.
  • Obtain two years of the Borrower’s tax returns evidencing income from boarders and the current lease.

Fannie Mae (FNMA)
Boarder income from boarders in the borrower’s principal residence or second home is only acceptable when:

  • Documentation of the boarder’s history of shared residency that shows the boarder’s address as being the same as the borrower’s address.
  • Documentation of the boarder’s rental payments for the most recent 12 months.
  • When a borrower with disabilities receives rental income from a live-in personal assistant, the rental payments can be considered as acceptable stable income in an amount up to 30% of the total gross income that is used to qualify the borrower for the mortgage loan.
Freddie Mac (FHLMC)

Rental income from the subject 1-unit primary residence rental income generated from a borrower’s primary residence may be used to qualify with a disability if the rental income is from a live-in aide. This Income source may be considered stable monthly income if:

  • The rental income may be considered in an amount up to 30% of the total gross income that is used to qualify the borrower.
  • The live-in aide plans to continue to reside with the borrower for the foreseeable future.
  • Borrower received rental payments from a live-in aide for the past 12 months on a regular basis.
Boarder income can be tricky but is important to take into consideration when applying for a loan. If you have boarder income and want to learn more about how you can utilize it, please let me know as we can discuss your specific scenario.
Kathleen Beck – Mortgage Lender
2716 Broadway
Sacramento, CA 95818
#Mortgage #MortgageLoanProcess #Buying #HomeBuyer #Refinance #ConventionalLoan #FHALoan #VALoan #JumboLoan #PreQualifications #PreApproval #Borrower #HomeOwnership #Sacramento #BayArea #HomeFinancing #TrustedLender #BoarderIncome #Income
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One Last Shot at Super-Low Rates?

ImageIf you missed your chance at refinancing your mortgage at a super-low rate, the standoff over the raising the federal debt limit is giving you what may be one final opportunity.

Normally, signs of a softening economy are a bad thing for consumers. But if you’re still hoping to refinance your mortgage or are looking to buy a home, the standoff offers what will likely be a short-lived opportunity to lock in the kind of low rate that many thought was gone for good.

Approaching 4 percent again

Rates dropped sharply in mid-September after the Federal Reserve announced that it would not be cutting back on its bond-buying program as many had speculated, and they’ve continued to sink with the partial government shutdown that began Oct. 1 and as the prospect of a full government shutdown appears more likely.

According to some surveys, fixed-mortgage rates have declined by about half a percentage point since the Federal Reserve meeting in mid-September. Many services are reporting average 30-year fixed-rates of around 4.25 percent are available for borrowers with good credit and 20 percent down/equity, with Zillow reporting 30-year rates approaching the 4 percent level once again.

Surveys are reporting 15-year fixed-rate mortgages, popular for refinancing, are currently running about a full percent lower than the 30-year variety.

Delays in approvals are likely

If you’re looking to buy or refinance, the shutdown does present a few problems. Although lenders are continuing to process most mortgage applications, including those for loans backed by the FHA, VA, Fannie Mae and Freddie Mac, they can’t finalize until at least some government operations are restored.

That’s because they need to verify incomes and social security numbers with the IRS and Social Security Administration before those loans can be approved, and those agencies are officially on shutdown at the moment.

So if you are applying for a purchase or a refinance, you may want to lock in your rate for a bit longer than you normally would – for example, 60 days instead of the usual 30.

Mortgage rates generally sink on economic uncertainty, as investors become more pessimistic and are willing to accept lower returns on safe investments. This reduces the rate of return on Treasury bonds, considered the safest of investments, and mortgage rates and other interest rates typically follow.

What about a full shutdown?

The partial government shutdown that began Oct. 1 is generally seen as having a slightly dampening effect on the economy, due to federal workers not getting their paychecks and the closure of federal offices preventing certain government-dependant business transactions – such as approvals for small business loans – from being carried out.

The greater concern though, is the uncertainty over the possible effect of a full government shutdown and failure of the U.S to make its debt payments. That’s the main thing that has investors scurrying for safe cover and allowing interest rates to sink even further.

The deadline for resolving the standoff – in which House Republicans are refusing to raise the debt limit without significant changes or delays to the Affordable Care Act, or ObamaCare – is Oct. 17. If it appears a deal is in the offing, rates may begin to edge back up before that date; if the deadline passes, they could fall even further.

By Kirk Haverkamp, Published: October 07, 2013

First published on MortgageLoan.com at: http://www.mortgageloan.com/one-last-shot-super-low-rates-9582

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Big win for consumers and Home Buyers

Changes to FHA Underwriting: “Back to Work – Extenuating Circumstances” (ML 2013-26).  Image

As a result of the recent recession, many borrowers who experienced unemployment or other severe reductions in income were unable to make their monthly mortgage payments and ultimately lost their homes to a short sale, deed-in-lieu, or foreclosure.  Some borrowers were forced to file for bankruptcy to discharge or restructure their debts.  Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected.  FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.

To that end, FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:

•     certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control;

•     the borrower has demonstrated full recovery from the event; and,

•     the borrower has completed housing counseling

 Effective Date

 The guidance in this ML is effective for case numbers assigned on or after August 15, 2013 through September 30, 2016.  Note: This ML will serve as Section G until the 4155.1 Handbook can be updated.


•             Purchase loan in all FHA programs with the exception of Home Equity Conversion Mortgages.

•               Utilize the provisions of this ML for eligible borrowers when AUS results in a “Refer” or is manually downgraded.

•               Borrowers must meet all other applicable FHA eligibility and policy criteria. 

Borrower Eligibility

Borrowers that may be otherwise ineligible for an FHA-insured mortgage due to FHA’s waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indications of derogatory credit, including collections and judgments, may be eligible for an FHA-insured mortgage if the borrower:

•        can document that the delinquencies and/or derogatory credit are the result of an Economic Event as defined in this ML, and

•        have completed satisfactory Housing Counseling, as described in this ML, and

•        can meet all other HUD requirements


Economic Event – any occurrence beyond the borrower’s control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower’s Household Income of twenty (20) percent or more for a period of at least six (6) months.

Onset of an Economic Event – the month of Loss of Employment/Income.

Recovery from an Economic Event – the re-establishment of Satisfactory Credit for a minimum of twelve (12) months.

Housing Counseling – for purposes of this ML, means counseling from a HUD-approved housing counseling agency related to homeownership and residential mortgage.

Satisfactory Credit

A borrower is deemed to have Satisfactory Credit if:

•               the borrower’s credit history is clear of late housing or installment debt payments, and major derogatory credit issues on revolving accounts;

•               any open mortgage is current and shows twelve (12) months satisfactory payment history.

Non-traditional credit history is acceptable per the guidelines of the Mortgagee Letter.

Verification of 20% Reduction in Household Income

Verification of a reduction in Household Income of twenty (20) percent or more for a period of at least six (6) months that resulted from the Loss of Employment, Loss of Income, or a combination of both is required.

 Loss of Employment can be verified by obtaining:

          _              a written VOE evidencing the termination date or in cases where the prior employer is no longer in business:

–              a written termination notice, or

–              other publicly available documentation of the business closure, and documentation of receipt of unemployment income.

 Previous income prior to the “Loss of Income” must be verified by obtaining:

·                     a written VOE evidencing prior income; or

·                     signed tax returns or W-2s evidencing prior income.

 Post Economic Event Income

Verification of the Borrower’s Household Income after the onset of the Economic Event in also required.


Economic Event-Related Payments or Credit Deficiencies

To establish that the borrower’s derogatory credit was the result of an Economic Event, it is required to determine that:

•           the borrower exhibited Satisfactory Credit prior to the Economic Event Onset;

•           the borrower’s derogatory credit occurred after the Economic Event Onset, and

•           the borrower has re-established Satisfactory Credit for a minimum of twelve (12) months

Note: Foreclosures, deeds-in-lieu, Short Sales and Bankruptcies require that 12 months have elapsed since the date of the derogatory item (i.e., date of sale for a short sale, discharge date for a bankruptcy, etc).


Housing Counseling

To qualify under the guidelines of the Mortgage Letter, borrowers must:

•          receive home-ownership counseling or a combination of home-ownership education and counseling provided that each participant receives, at a minimum, one hour of one-on-one counseling from HUD-approved housing counseling agencies

•         The counseling must address the cause of the economic event and the actions taken to overcome the economic event and reduce the likelihood of re-occurrence. The housing education may be provided by HUD-approved housing counseling agencies, state housing finance agencies, approved intermediaries or their sub-grantees, or through an on-line course.


Note:  Counseling must be completed a minimum of thirty (30) days but no more than six (6) months prior to application.  Housing counseling may be conducted in person, via telephone, via internet, or other methods approved by HUD. 


A list of agencies can be obtained online at http://www.hud.gov/.



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