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The Ever Changing World of Mortgage Lending

October 03,2012

The Ever Changing World of Mortgage Lending

October 2012

Questions and Answers for Today Only!

What do you mean, I canat buy another home the day after foreclosing on the one I currently defaulted on?

Itas true, you must wait a minimum of three years after the actual foreclosure date of your current home with an FHA loan and if you are wanting Conventional financing you must wait four full years. The most important thing to do is maintain a perfect credit and rental history after the situation has occurred. Mortgage lenders make an exception if there is a death of the primary wage earner. Most of the time no other exceptions are made.

My Chapter 13 payment plan is letting me repay 50% of what I owed, will that be a problem trying to get a home immediately? What if I have a Chapter 7 bankruptcy or convert my Chapter 13?

While FHA DOES allow borrowers to obtain a mortgage loan while still in a Chapter 13 bankruptcy (with twelve months of a perfect payment history), the trustee will not usually approve the acquisition of a mortgage unless the repayment plan is increased to 100% pay back to your current creditors. They will also look at the your current housing payment amount versus the one you will have on your new home with the increased payment of the bankruptcy at 100%. Conventional pncing requires borrowers to wait four years after the date of discharge, just the same as a Chapter 7. FHA allows you to purchase a home exactly two years after the date of discharge with a Chapter 7, if you have maintained and re-established credit in the two year time frame.

My new business income is fantastic, why do I have to wait till I have two years of filed tax returns to buy a home?

Even though your business has positive cash flow, a mortgage loan must be repaid over an extended period. Mortgage Lendersnmust be able to not only analyze the income but also the debt load of the company and itas expenses and whether or not it is sufficient to maintain a consistent payment history to the lender. Less than two yearas of filed, verified tax returns are not acceptable for most lenders.

My new job is an increase in pay, so why do I have to have 30 days of pay stubs in order to close my mortgage loan?

Mortgage lenders have learned from experience that borrowers and employers can have unforeseen things come up. To be sure the borrower will have sufficient income to repay the debt, they want to see the first 30 days of stubs to verify the payroll promised matches the amount received and that no additional deductions are going to be taken out of the borroweras pay such as liens, garnishments or child support.

My current home is going to leased out, but my lender says I canat count the income I will be receiving to offset my current mortgage. Is that true?

There were some changes made to that rule about three years ago, but as long as you have at least 25% equity in your current home both FHA and Conventional will allow it to be counted. An appraisal of your current home will be required to verify your equity position.

Why do I have to document where every deposit comes from that is not my regular payroll? My garage sale did really well and I didnat need the extra car anymore.

All lenders are required to verify any extra deposits into a borroweras account besides payroll. There are new laws enacted in 2012 to avoid what the government considers to be money laundering. If you receive a gift from a family member then the funds must be tracked as it is removed from their account and then deposited into yours. Most loans allow gifts as long as they are from a relative. They must also complete a gift letter form that the lender will provide stating that the gift does not need to be repaid. If you do happen to sell a vehicle, we can verify that you owned the auto, prove its current value and then provide a copy of the cancelled check and bill of sale. Lenders are now looking at all deposits that are not payroll above $300. Lastly, itas best NOT to deposit garage sale money, since it can not be sourced.

My old furniture will look really bad in my new home. I have picked out all new stuff with one of those payment free loans for a year and a half. I am SO excited! And my wife wanted a new car to match the exterior or our new home, the payment is only $250 more than the one we had.

This can be a HUGE problem especially in cases of new construction where we are constantly doing credit updates. At closing borrowers must sign a form stating that they have not increased their debts over those listed, so please do NOT change anything about your current debt load without talking in detail with your lender first. It could be the difference between buying a new home or not. A lender must count 5% of the balance as a payment on any loan whether one is required or not. Student loans on conventional loans always count and on FHA must be deferred for at least one year to not be counted.

Do I have to be a US Citizen to purchase a home in the USA?

Actually the rules are very specific. If you are a green card holder or have an acceptable visa that allows you to stay and work in the United States then you will be able to purchase a home, as long as you have two years of filed, verifiable tax returns. If you are in the country illegally or do not have a valid social security card,then you will not be allowed to purchase a home.

My lender has asked for every possible item except my blood type and the color of my underwear, is this normal?

Actually, most lenders donat care about either of those items and never request anything that is not absolutely essential to approving each loan application. Even the questions that seem intrusive would not be required if they were not necessary to close the loan.

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