Stated-Income

How Much Down Payment Do You Need to Purchase a Condo?

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Families and individuals who chose to live in the city may find it hard to look for a house and lot. Those who plan to move from renting to purchasing a home may consider a condominium unit.

Condominiums are popping up all over urban cities in the country. There are even quite a number in suburban locations. They can be a practical and classy alternative when houses and lots in the city are steeply priced.

If you’re planning to get a condo unit, you can still make use of home loans. However, purchasing a condominium can be slightly different from buying a single-unit home.

When you buy a single-unit house, all of it, including its amenities, is yours. In a condominium, you are only buying a unit. All the other common areas are beyond your control. Some lenders may consider a condominium purchase riskier than buying a house. However, when it comes to down payment, it usually is the same.

Dealing with the Down Payment

When it comes to the down payment for a condo unit, the higher the better. If you put at least 20 percent down payment, it will reduce the risk to the lenders.

This is true not just for condo units, but for all properties. The higher the down payment, the more secure the lender becomes. In fact, a higher down payment benefits the borrower as well.

First, if you put a big down payment, the loans principal balance is significantly reduced.  The amount of money to which the interest rate is applied is lower. Another reason is that a bigger down payment results in a lower interest rate.

For a single-unit house, the 20 percent down payment is enough to reduce your rates. For a condo unit, you will have to shell out an amount that’s 0.125 to 0.25 higher for you to get a lower rate.

If you choose to put a down payment that is larger than the minimum required, there is a bigger chance that a lender will approve your mortgage loan. A larger down payment lowers the risk and shows the borrower that you’re serious about purchasing a unit.

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Is a Large Down Payment Enough?

If you truly want a good loan with the best rate and favorable terms, you have to do better than putting a big down payment.

A stable employment and good credit will put you on a better ground when applying for a loan. A steady employment means you have a stable income. A good credit means you are in control of your earnings and debts. The combination shows your healthy cash flow, thus, lowering the risk further.

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Make Sure Your Condo Association is Approved

What’s the point of having a good loan when your condo association isn’t approved by your lender in the first place?

Condos are different from homes because, in a condo, every unit owner in the area, like you, owns a piece of the condo as well. You own a unit and your control is just confined within the walls of that unit. Everything else that happens outside of it is beyond your control. For example, if many unit owners default on the loan, it can cause the value of your unit to plummet even if you have been paying in full on time.

Almost every lender requires a condo association to complete a questionnaire. This will be the basis to approve the association or not. If your condo’s association doesn’t get approved, you can’t use secure a mortgage loan from the said lender.

Purchasing a condo unit is not impossible. The down payment and the association are two of the important factors to consider when buying one. It is also equally important that you shop for lenders until you find one who is willing to provide the funding.

Remember that a lender will gauge your risk level. Make sure to provide them with all the positive factors that can have a good impact on your loan; anything that can reduce the risk. Some lenders may not be as warm on the thought of condo loans, but there are still many who are willing to provide the necessary financing. Make sure you shop around.

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What’s With Nonprime Mortgages? Should You Be Afraid of Them?

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They say nonprime mortgages are coming back. In the second quarter of 2017, securitized nonprime loans reached $1.08 billion per CNBC, citing Inside Mortgage Finance. Still, were they ever really gone in the first place? If so, what were they back then?

Instead of being afraid, try to understand the workings and benefits of nonprime mortgages better. One might just be your ticket to financing your first home.

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Getting to Know Nonprime Mortgages

Let’s get this out. There’s a difference between nonprime mortgages and subprime mortgages during the housing boom. Although back then, mortgages with little to no documentation were considered nonprime.

You can rest assured that exotic mortgages that caused the housing crash won’t come back anytime soon. The creation of the Dodd-Frank Act called for many layers of vetting for mortgages. Today’s loans have never been more pristine as a result. However, lenders ended up tightening the credit box even for those who are qualified.

If lenders have to triple-check a home loan, they’d do so because of regulations. The process takes time in itself, putting conventional loans further out of reach for some borrowers.

This tightening of traditional mortgage credit plus the rigorous vetting of today’s loans gave rise to nonprime loans.

Fear Not Nonprime Mortgages

Specialist lenders make up the non-prime sector. They have their own guidelines with respect to the nonprime mortgages they are making – a departure from the usual lending standards embodied by qualified mortgages.

See how today’s nonprime loans differ from past subprime loans:

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  • Credit: Nonprime lenders are well aware that credit scores can hinder a borrower’s loan prospects, even Fannie Mae has eased up its guidelines with respect to disputed tradelines on credit reports. Thus, nonprime lenders can be more accepting of people with bankruptcy or foreclosure records, checking on their income and cash flows.
  • Income: Verification of income is a must or strictly enforced as one known wholesale nonprime lender said. This is how they gauge the borrower’s ability to repay.
  • Down payment: Nonprime loans have higher down payments than traditional mortgages, say FHA loans with their 3.5% of the purchase price.
  • Loan size: You can find jumbo loans for investment properties that usually exceed the conforming loan limits.

Are Nonprime Mortgages Safe?

During the housing boom, anyone can easily take out a loan without the proper underwriting process. Since the borrower’s ability to repay the loan was not examined, it was also easy for loans to fall into delinquency. Foreclosures were initiated that they hit a record-high 81% in 2008 – a whopping 225% increase from 2006.

Angel Oak, a wholesale nonprime lender that expects its nonqualified and nonprime mortgage originations, e.g. stated income, to reach $1 billion this year, notes that down payments represent life savings for most borrowers. The higher the down payment, the bigger the investment.

Thus, borrowers who put bigger down payments as in nonprime loans are more compelled to meet their monthly dues so they won’t lose their investment. This can be an effective deterrent to delinquencies.

Why don’t you give nonprime mortgages a look? Speak with lenders today.

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The Role of Bank Statements in Successfully Getting a Mortgage

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Whether you are applying for a stated income or a traditional mortgage, your loan officer could ask for your bank statements. These documents are used to verify and document your income. Lenders are required to do their due diligence on your ability to repay your debt and your bank statements and other asset documentation will prove that.

Because most loans are underwritten via an automated platform, e.g. Desktop Underwriter®, the need for bank statements may crop up during underwriting. Nontraditional loans such as bank statement loans are based off on the flow of money into bank accounts so that they go hand in hand with the loan application.

Find out the role of bank statements in applying for mortgages. Find a lender today.

Bank Statements and the Mortgage Process

When making loans, lenders must ensure that the borrower has the capacity to pay the debt to be incurred. They would look into the income of the borrower to make this determination.

Moreover, lenders need to check if the borrower has enough assets (readily convertible to cash) that can cover the down payment, closing costs, and reserve requirements.

Bank statements can cover both for the lenders in their quest to track the assets and income of the borrower. They are also helpful in verifying the identity of the borrower and the information as it pertains to asset accounts set forth on his/her mortgage application.

Usually, lenders look at deposits that fall outside of the declared income source of the borrower, e.g. an unexplained large deposit used for down payment. Or it could be recurring withdrawals that pertain to an undeclared debt obligation.

Mortgage borrowers like you can present your personal bank statements. If you are self-employed or are a majority owner of a business, both personal and business bank statements may be required.

Bank Statement Loans

These loans perfectly sum up the role of bank statements when applying for mortgages.

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Niche lenders who make these mortgages usually require personal/business bank statements for 12 consecutive months, thus dubbed as 12-month bank statement loans.

These lenders recognize the struggle of self-employed borrowers to have their real income verified because of write-offs on their federal tax returns. Interestingly, some bank statement loans don’t require tax returns and their related tax transcripts.

What’s important for the lenders is a reliable, steady cash flow that they will use to calculate income. To arrive at income, lenders take the average deposits during the given period, net of debits and withdrawals.

They will then take into account recurring monthly expenses to get average monthly income. From the average monthly income and recurring monthly expenses, they can come up with the debt-to-income ratio of the borrower.

Indeed, good credit, liquid reserves, and provable income via bank statements are the main ingredients to a successful bank statement loan.

As with any other loan, expect to meet loan-to-value ratios, down payment requirements and asset reserves as well.

Don’t estimate the power of bank statements especially if you have difficulty getting financing under standard mortgage programs. You can always look at alternative or nontraditional loan products like bank statement loans.

Happy shopping!

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3 Practical Ideas to Save for Your Down Payment

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3 Practical Ideas to Save for Your Down Payment

Homebuyers sure are lucky these days; they can buy a home with as little to no down payment. Indeed, you can get an FHA loan with 3.5% down payment or a conventional mortgage under their special programs for first-timers.

Don’t let a down payment pose a hurdle to your homeownership, especially if you can save up for it. We have rounded up some practical ideas to help you save for your down payment.

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Before you start any savings plan, know your timeframe for buying a home and always start with a budget to work around.

Set a price range for a home you can comfortably afford to pay for the down payment and the monthly mortgage amortization and maintenance costs. Say, a home with a price tag of $200,000 can have a down payment of $7,000 if at 3.5%.

Tip 1: Power Save

Take a look at traditional and modern ways to store your hard-earned money.

  1. Open a savings account. Find a bank that offers a higher savings account rate to grow your money. But be wary of too-good-to-be-true rates because they might just turn out to be that. Same with credit unions. You can seek out those that offer competitive rates. Ask your friends, co-workers or family members of credit unions that they can recommend.
  2. Automate your savings. Often the best way to save is to do it fast enough. There are finance apps that do the saving for you; they analyze your spending habits, how much you can afford to set aside for savings, and automatically transfer those amounts into a checking account. There are minimal costs in maintaining these apps.
  3. Take on a money challenge. A good example is the 52-week challenge, which in its simplest form can rack up $1,378 or in another increment up to almost $7,000 in a year. You can tweak your savings timetable, starting with the bigger amounts during the start of the year and working towards the lower amounts as the year ends.

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Tip 2: Automate (Your Bills)

If you can automate your savings, you surely can automate your bills payment. Enroll your biller, e.g. utility, insurance, credit card, and more in your debit card for auto-payment every month.

This not only spares you from withdrawing cash and spending it elsewhere, it makes you current on your accounts. Ultimately, you won’t incur late fees or accumulated charges especially on credit cards. It would be a plus on your credit report, too.

Tip 3: Invest

It certainly pays to have funds for investment, aside from the money you safely put in your deposit accounts. If you’re new to investing, research first about mutual funds, bonds, instruments or any type of investment that can be for short-term or long-term as you deem.

Remember, you won’t get rich overnight by investing and there is a risk to lose money as there is a chance to gain some. That’s why it’s important to understand the risks and gains in investing.

Final thought: Cut down on any unnecessary expense and where else you can save for now. Nothing beats the joy of owning a home that you have worked hard for.

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No Income Verification Loans: Another Name for Stated Income Loans

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No Income Verification Loans- Another Name for Stated Income Loans

With mortgage rates fluctuating, alternative mortgage products are bound to emerge as they once flourished before the housing crisis. No income verification loans or stated income loans have been one of those mortgage products. While not as prevalent as they were then, today’s stated income loans remain an option for those who can’t document their income the traditional way.

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No Income Verification Loans

With stated income loans, borrowers don’t have to go through the process of income verification using standard documentation, primarily pay stubs, tax returns, and Form W-2s.

  1. Not all borrowers are salaried employees receiving paychecks twice a month; some of them work on a commission basis while others run their own businesses or earn from their investment portfolios.
  2. Tax returns do not accurately reflect one’s income. Business owners often deduct some expenses to reduce their taxable income.

What stated income loans entail is less reliance on those documents to verify a borrower’s income. Your employment will have to be verified but lenders will use other forms to prove that your income meets their standards.

For example, they may require a proof of self-employment from a certified public accountant. Lenders may also require two years’ worth of federal tax returns and transcripts to show you’ve been paying taxes.

No Income Verification Loan Requirements

With fewer documents to work on, lenders have to make sure the loan is sound and the borrower able to repay. It wasn’t long ago when stated income loans were called liar loans because some borrowers or their loan officers inflated their income and asset holdings to get larger loans for pricier homes. These risky transactions contributed to the subprime mortgage crisis of 2007.

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Against this backdrop, no income verification loan lenders require that the borrower put up at least 30% equity. Some lenders may require 40% down payment as borrowers of stated income loans are understood to have a high income, albeit hard to document.

Another primary requirement is a stable work history because lenders have to verify your employment, after all. Lenders differ by their definition of a “stable” employment record but it could be no glaring employment gaps and job switching all too often.

Moreover, you must possess a high credit score, impeccable even. People with good credit scores have a dependable payment history.

Lenders may require other documents such as rental history and bank statements.

No income verification loans are clearly not for everyone, they target a specific group of homebuyers who can afford to take out mortgages with bigger down payments and higher standards in terms of credit and assets.

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How does the Down Payment Vary for Stated Income Mortgages

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How does the Down Payment Vary for Stated Income Mortgages-STATED-INCOME.COMStated income loans have a variety of requirements that differ from standard conventional loans. Because these loans remain on the portfolio of the individual bank, every lender has their own requirements. In general, you need to have excellent credit, at least 12 months of reserves, and a high down payment. Just how high does the down payment need to be? It depends on the factors of your loan.

Good Credit Helps

In order to be considered for a stated income loan, you need good credit, plain and simple. But the higher your credit score is, the more lenient a lender may get with the down payment. Most lenders look not only at your score, but at the payment history over the last 24 months as well. If you have no late housing or installment payments, your down payment requirements would likely be lower than someone that had a late payment or two reporting in the last two years. The down payment is your investment or your “skin in the game”. If you show that you are a low risk for the lender because you make your payments on time, the required investment may be lower.

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Typical Down Payment Requirements

Good credit aside, most lenders require no less than 30 percent down for stated income loans. On a $200,000 loan, this means you have to put down at least $60,000 rather than the $40,000 that would be required on a conventional loan with no private mortgage insurance. It is important to know these down payment requirements up front as it could take you quite a bit of time to save up that kind of money and can help guide you in terms of the price range you shop in when looking for a home. In general, however, the better your credit score and history, the lower the down payment will be required. The more risk you provide the lender with, the more money they will require you to invest.

Keep in mind that the lender is still going to verify your employment with or without verifying your income, which helps to give him reassurance that you are legitimately making the money you state you make and that you prove with your bank statements. If you are self-employed, they can verify that your business exists as well as verify the cash flow on your bank statements. The higher the down payment you pledge to make, however, the more relaxed the lender will get with the risk you pose without verifying your income the standard way.

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