The very first thing you should do when in the market for home is the get a full  loan pre-approval.  This is true regarding FHA, VA or conventional home loans.  This is very important because your don’t want to waste a lot of time searching for a property until you know for sure if you can get approved and what the maximum amount you can approved for is.  This can be accomplished in a matter of minutes and then you will have the peace of mind that if you make and offer on a home and it gets accepted you will have no problem closing.

Below is a list of what we will do to fully approved your for your loan:

1. We will go through a loan application (most often over the phone).  It is best for me to talk to you and go through the application vs. having you fill one out as this way we get it right the first time and save a lot of time.
2. We will do a credit check
3. I will ask you to send me your last 1 months paystub copies, last 2 years w-2’s and bank statements documenting where you will be getting the down payment.  If you are self-employed we will need your last 2 years of federal tax returns all pages.  

After those simple steps I can issue you a pre-approval letter.  In the call we will also discuss the maximum loan amount that you qualify for and what the total payment will be (mortgage + property taxes + home insurance).

If you have any questions or would like to get a fast pre-approval give us a call or email.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer

rob@affinity-financial.com

858-922-7899

Since FHA loans require full income documentation from each borrower, here is a quick review of an FHA underwriter will be looking for with many different types of income.

W-2 employee

You will have to provide your last 2 years of w-2’s + your most 30 days pay stubs.  Any gaps in employment over 1 month during the last 2 years will need to be explained.  After a large gap in employment, the FHA loan underwriter may require 6 months on your current job before approval.  However there are exceptions to this rule if a borrower is getting out-of school or training and can provide a degree or transcripts.  Of if a borrower was on sabbatical or maternity leave for example.

Bonus and overtime income

Generally you need to document that you have received this for the last 2 years.  The underwriter will average of the last 2 years of this income. 

Part time job and seasonal work

You can count income for a part-time job if it has been consistent for 2 years and you can fully document the income.  Seasonal work is OK if you have worked for the last 2 years at it and it is likely to continue.

Commission income

You will have to document the last 2 years of commission and the FHA underwriter will average the last 2 years.  Copies of your last 2 years federal tax returns will be required.  Unreimbursed business expenses appearing on your ta returns must be subtracted from you qualifying income.

Alimony and child support

This income can be counted towards qualification.  You will need to provide final divorce decree or legal separation agreement.  This will have to document that support will continue for at least 3 more years.  You will need to document that you have been receiving it for the last 12 months (canceled checks, deposit receipts).   In some cases you can still count it if received for less than 6 months.

Interest and dividend income

You will need a 2 year history of this income and an average of those 2 years will be used.

Self-employer borrowers

Your last 2 years tax returns all pages and schedules will be required.  The FHA loan underwriter will take an average of your net income over the last 2 years.  It’s key to note that your net income AFTER deductions will be used to qualify, not your gross income.  There are some deductions that can be added back to your net income such as contribution to retirement accounts, depreciation, business use of a home, etc… (call or email rob@affinity-financial.com) for more info.  You will have to have a 2 year history of being in business to qualify.  If you just left a w-2 job 1 year ago to start a business, you may have difficulty qualifying.

There are of course many other variations and exceptions to the above regarding income and other items left out.  So if you have any questions about you particular income and if you will qualify, don’t hesitate to email or call me using my contact info below.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

rob@affinity-financial.com

858-922-7899

There are a lot of potential homeowners that assume erroneously that they need to be U.S. Citizens to get a mortgage loan to purchase a house in the United States.   And there are others that believe that yes they can get a home loan as a non-permanent resident, but they would have to put a very large down payment down.  Both of these beliefs are false.   As long as you have a social security number and are eligible to work in the United States, you may likely be able to qualify for a 3.5% down payment FHA loan to purchase your primary residence.

A quick review of highlights of FHA home loans:

• only 3.5% down require and that can be a gift from a relative or lifelong relationship
• you do not need perfect credit
• flexible underwriting guidelines
• 30 year fixed rate mortgages that are still at historic lows
• low amounts all the way up to $729,000 in California

Warm Regards,

Rob Chomentowski

Sr. Loan Officer and FHA specialist

rob@affinity-financial.com

858-922-7899

There have been recent changes to home appraisals that don’t directly affect FHA Loans and changes to the general scrutiny of underwriting guidelines that directly affect FHA loans.  There has been a big recent change in how appraisals are ordered for conventional loans called HVCC.  They are now ordered directly through the bank and assigned by someone other than the bank.  For years prior all appraisals were ordered by the loan officer handling the loan.   With this new system of appraisals, the loan officer has no contact with the appraiser.   Through early feedback on this system, many are seeing appraisals come in very low for various reasons.  At this tme FHA loans can still be ordered by the loan officer, but this may change soon.

FHA appraisals are affected more from the general lender tightening of underwriting guidelines that has happened over the last 2 years.  Lenders are now being much more careful with appraisal values and they are doing internal appraisal reviews.   This affects you when you use a FHA loan to buy a house because the FHA appraiser may appraise the property for the price you are purchasing it for, but then 2 weeks later in the loan process the lender may review the appraisal and cut the value.  This means that you would either come in with cash for the difference, or renegotiate with the seller to lower the price to meet the lenders appraisal review in order to close on the house.

Comparable sales are the foundation of home appraisals.  The appraiser looks for 3-6 recent home sales that are comparable to your home in size, location and age.  They then use the sales prices of these recent homes to support the value they are giving your home with their appraisal.  Lenders are now requiring the appraisers to provide much more recent comparable sales.  Sales within 6 months used to be acceptable.  Now lenders are looking for sales within 3 months and even current listings and houses pending sale.  Also when lenders do their internal review appraisals, they generally do not go out and look at the property.  The do what is called a “AVM” or desk appraisal.  So if a house has been really upgraded or renovated, they are not giving a lot of value (if any) for that.  They may use a comparable that is a fixer but they don’t know that because they are not going out to the property physically to look at it.

So as a FHA buyer it is best to work with a excellent buyers real estate agent that can help you properly value the property before you make an offer.  That buyers agent should be looking at recent sales similar to the house you are making an offer on to make sure it is a realistic price that you will offer.

Warm Regards,

Rob Chomentowski (FHA loan specialist)

rob@affinity-financial.com

858-922-7899

I wanted to update some new information that has come out regarding using the $8,000 federal tax credit available to home buyers purchasing a home by November 2009.   Recently HUD has talked about allowing borrowers to “monetize” the tax credit and be able to access that money when they close to help them with the money needed to purchase the home.   There has been a lot of mixed information and confusion about this as HUD 1st issued a mortgagee letter about it a few weeks back and then retracted that.  But I will summarize the latest information on it.

HUD is basically saying now that they will allow borrowers using FHA loans to get a bridge loan for the tax credit the help with paying closing costs.  This bridge loan would be a “silent 2nd” loan for the amount tax credit that would eventually have to be paid back by the borrower.  It may or may not have payments.   However borrowers would still have to have the 3.5% minimum down payment needed for an FHA loan.   Government agencies and non-profit groups are supposed to be offering this bridge loan.  However to date there are no agencies offering the bridge loan. 

So in summary, in the near future you may be able to get a bridge loan in the amount of the tax credit due to you to help pay closing costs if you purchase a home with a FHA loan.   However at this time there no agencies set up to offer the bridge loan.  But stay tuned and we will update you when there are.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer and FHA Loan Specialist

858-922-7899

rob@affinity-financial.com

Home buying is on the rise and with it the perception that real estate is a good long term investment. The Gallup Poll reported that 71% of Americans think that right now is a good time to buy houses. That is the highest it’s been in four years! Coupled with the fact that homes are more affordable now than they have been between 2003-2007, it makes a lot of sense.

WASHINGTON (Reuters) - The Federal Housing Administration will allow the new $8,000 first-time homebuyer tax credit to be applied directly toward home purchase costs when using an FHA-insured mortgage, the Department of Housing and Urban Development said on Friday.

The plan to "monetize" the tax credit up-front is aimed at more quickly stabilizing the housing market, HUD Secretary Shaun Donovan said in a statement.

But in detailed rules, the FHA will still require home buyers to provide a minimum 3.5 percent downpayment from other sources.

Get Started Click HERE

The $8,000 tax credit for first-time home buyers was created as a part of the Obama administration’s $787 billion stimulus plan. Some private lenders already were allowing buyers to apply the credits directly toward purchase costs through special financing schemes.

With the FHA following in a similar vein, a significant portion of the first-time homebuyer market will have up-front access to the credits instead of waiting until tax returns are filed.

"What we’re doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing," Donovan said in a statement

FHA-insured loans, which largely have replaced the subprime mortgage market, now accounts for about 25 percent of new mortgages, senior HUD officials said, versus about 2 percent of the market two years ago. At this pace, the agency will insure some 2.2 million mortgages this year.

The National Association of Home Builders estimates that the $8,000 first-time homebuyer credit will stimulate 160,000 home sales across the United States — 101,000 purchases from first-time buyers and another 59,000 purchases by existing homeowners who sold dwellings to first-time buyers.

Most older houses have some level of termite damage that exists in the house structure.   And most purchase offers made by buyers call out as a condition to their offer that the buyer will do a pest inspection and the seller will be responsible to fix any section 1 termite damage.  Section 2 termite damage is more serious and not generally paid for by the seller, but of course can be negotiated to be cleared by the seller.

In the old days of FHA loans you had to get a termite clearance before the lender would fund your loan regardless of whether you called for a termite inspection in your purchase contract or not.  But these days if you do not ask for a termite inspection in your purchase contract, you will not have to get a termite clearance to get the FHA loan.

Now if you feel that your seller will pay for the termite work, it can be helpful to call out the termite report inspection as a contingency of your purchase.  But if you feel the seller will not pay of the termite work, you may want to leave the termite inspection out of the contract.  Because once it is in the contract, you will need a clearance before you close.  And if the seller will not pay for the work, the buyer will have to pay for it.

If you have any questions about this topic or any other questions about FHA, VA or conventional home loans, feel free to email or call me.  My contact info is below.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer

rob@affinity-financial.com

858-922-7899

Most articles on this blog are geared towards FHA loans, which are for people purchasing their primary residences .  But we also handle all other available residential financing such as conventional loans, Jumbo home loans for large loan sizes over the conforming limits, and investor home loans to purchase rental property.  In this blog post I will write a quick blurb as to what is available right now for investors.

Basically right now if you buy a rental property you will have to put 20% down.   The interest rates will be better with 25% down.  You will have to qualify with full income documentation, that means if you are a W-2 employee 2 years of w-2’s + last 30 days paystubs.  If you are self-employed that means your last 2 years tax returns.   One nice thing is if you buy rental property is you can use the estimated rent as income to help qualify even if the property is vacant.  When the appraiser appraises the property they will estimate the market rent.  That is what you can use as income to offset the new housing payment.  This means you can buy a lot of property without if affecting debt ratios because the rent will cover a lot of the rental house payment.  You can also buy up to 10 total financed properties. 

I don’t usually comment on the housing markets, but in many high quality areas of the U.S. that have come down in price significantly (California, Arizona, Nevada Florida especially), there are some tremendous buys.  You can buy a property in a premium market and it will “cash flow”.  Meaning the rental income will cover the total housing payment and all expenses.  In many places in California for example, it has probably been nearly a decade since an investor could achieve this!

So if you have any questions or would like to get pre-approved to buy rental property, give us a call or email.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer

rob@affinity-financial.com

858-922-7899

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The credit scoring system requires a person have active trade lines reporting so the 3 credit bureau’s Experian, Equifax and Trans Union can produce credit scores for that person.   These trade lines are usually loans or revolving credit accounts.  Such as auto loans, student loans and credit cards.  But there are some people out there that would like to buy a house but they do not currently have any trade lines.  They do not have a auto loan, credit card or other loan that reports to the credit bureau’s.  Well this is OK, because FHA loans allow something called “non-traditional” credit.

With a non-traditional credit borrower we can build a credit report for that borrower by other means.  What we will do is ask the borrower for the the following items:

1. Verification that rent is being paid for the last 12 months

2. Verification that utility bills are being paid on time the last 12 months (gas, electric, etc..)

3. Verification telephone service has been paid on time the last 12 months

4. Verification the cable TV bill has been paid on time the last 12 months

We will send a verification to your landlord to verify rent payments have been paid on time the last 12 months.  With items 2,3 and 4, you can call up the provider of these services and ask for a letter stating that you have paid your bill on time the last 12 months.   Then we will take these items to our credit services company and have them produce a “non-traditional” credit report.  This will allow us to get you approved for a 3.5% down FHA home loan.

If you do not have all of the 4 above credit sources.  We can also use 12 month payment verification on the following items to help produce a non-traditional credit report for you:

• Auto or medical insurance accounts
• Cell phone accounts
• Child care service
• Internet service
• Personal loans from individuals supported by cancelled checks

So if you are concerned that you won’t be able to qualify for a home loan because you lack a credit score, don’t worry, there is still a great chance you can get that loan.   However to clarify, non-traditional credit as discussed will not help if you if you already have poor credit.  This method is only for people who have “no” credit or insufficient credit.

Please feel free to call or email if you have any questions or would like to get a free pre-approval for a home loan.

Warm Regards,

Rob Chomentowski

rob@affinity-financial.com

858-922-7899

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