101 Mortgage Questions Flashcards
1
Q
What is the minimum down to buy a duplex as an investor? As a primary residence?
A
Any 2, 3, or 4 unit property, when bought as investor requires 25% down. If buying a duplex as primary residence (live in one of the units)- 15% down minimum for conventional, 3.5% for FHA. 3 and 4 units are always 25% down, no matter if primary or investment on conventional. FHA allows 3.5% down as long as no cosigner on multi unit properties.
2
Q
Is VA educational income eligible as income?
A
No, va educational income is not considered eligible income.
3
Q
Can I use a credit card to make my monthly mortgage payment?
A
No, credit cards are not allowed. Can typically pay with check, over the phone, online, automatic payments.
4
Q
If a seller has gone delinquent on a mortgage, can a relative get a loan and buy the home off the delinquent seller?
A
This is called a “bail-out” and does not meet underwriting guidelines. If underwriting knows family is buying from family- they will always want a mortgage rating to ensure this is not a bailout.
5
Q
Do I need to put my spouse on the loan?
A
Many times the question comes up if we should put a non-working spouse on the loan. If someone does not have income, they won’t help the file qualifying wise- but they can help potentially get a little lower mortgage insurance by having 2 people on the loan. If the non-working spouse has lower credit- it can cause the interest rate to be higher or if they have debt that is under just them- it can hurt the debt to income ratio. If you don’t put a spouse on the loan- the title company can always help add them to title later on.
6
Q
How much will my credit score affect my mortgage insurance?
A
On FHA and USDA- none- same mortgage insurance. On conventional- big time. 760 and higher- lowest rate and then goes down in 20 point increments.
7
Q
When there are two (or more) borrowers with different credit scores- who’s score do we use?
A
The lowest middle credit score.
8
Q
Can I refinance my current home (as a primary residence) with the intent to move out in a month or two, rent it out, and buy another investment property.
A
We get asked this quite a bit and it can put you in a tricky situation. The challenge is when someone refinances their home as a primary residence, they are signing documents that state they “intend” to live in that home for at least a year. When they are refinancing knowing full well they are moving out in the next month or so, technically they are committing loan fraud- and so are you if you knowingly help them. It’s not that they absolutely have to live in the home a year- it just comes down to intent. Jobs change, families change, fights with neighbors, etc happen which can cause someone to want to move before the year is up and if something like this happens before the year is up, I believe they have in best efforts fulfilled their “intent.”
9
Q
If someone has had a Conventional, VA, USDA, or FHA loan in the past- are they eligible again?
A
The loan in the past doesn’t really matter (except for VA). The question is on the new loan. Conventional doesn’t matter as long as they can qualify for the new loan, regardless of what loans they currently have or have had in the past. VA matters when they currently have another VA loan- usually need that old VA loan paid off prior (or close on the same day when talking a buy/sell). FHA doesn’t like 2 FHA loans out at the same time (one will need at least 15-25% equity). USDA does not allow you to own another home at the time of purchase.
10
Q
Which loan program does not allow someone to own another home at the time of purchase?
A
USDA
11
Q
Do we have to count an ex spouse’s debt.
A
If we can show clearly on divorce decree that ex has been awarded the debt- then we have a chance of not having to count it. Otherwise, if it’s still showing on your borrower’s credit- probably have to count.
12
Q
When can we not have to count an ex-spouse’s debt when showing on our borrower’s credit?
A
When the divorce decree clearly spells out the debt has been assigned to the ex. Sometimes I’ve had an underwriter come back wanting proof ex has made said payment for 12 months.
13
Q
What if someone else (or a business) pays someone’s monthly debt.
A
Typically if we can prove another entity has made the last 12 months payments- either through cancelled checks or bank statements- good chance to omit that debt.
14
Q
How long must we prove a business has paid the monthly debt to exclude?
A
12 months
15
Q
How do we calculate payments on Student Loans?
A
Payments on student loans are calculated differently depending on the type of loan. If FHA or USDA- always use 1% of the outstanding balance- regardless if a payment shows or not (unless you can show a lessor fully amortized payment). With conventional, if a payment is showing on credit- use that payment. If zero and Fannie- go with 1%. If zero and Freddie- go with .5%. On VA- if payment is deferred for at least 12 months and can prove- omit debt. Otherwise times the balance by 5% and divide by 12.
16
Q
For student loans, what payment do we always use for FHA and USDA loans?
A
1%. For student loans, what payment do we always use for conventional loans?
17
Q
Do we do (stand alone) 2nd mortgages?
A
We do not do stand alone 2nds. Once in a while we’ll do a simultaneous second- typically when we do the first to the maximum conventional conforming limit and then the 2nd for the rest. We have one outlet that will actually allow 5% down with this option but I prefer the 10% down option. (Refer to UCCU, America First, or Mountain America Credit Union.)
18
Q
What if a client wants to waive escrows (taxes and insurance paid monthly)?
A
If going with a government loan (FHA, USDA, VA)- not an option. If conventional, need at least 20% down to waive escrows. On conventional, if ltv is between 60.1 to 80%- typically have a quarter point hit to pricing to waive escrows.
19
Q
Which loan programs do not allow you to waive escrows?
A
USDA, FHA, VA
20
Q
On conventional, how much down minimum/equity must someone have to waive escrows? What does that hit us if less than 40% down/equity?
A
20% and .25% to the pricing.
21
Q
What if it’s a residential home on a farm?
A
If we are talking a home and a large garden- should be fine. But if actually doing farming work- not eligible for a residential loan.
22
Q
Can we lend on farms and ranches?
A
No, we only do residential type loans.
23
Q
Can a lender increase premium pricing and do a rebate back to the client?
A
No, lender can only pay for actual closing costs and prepaids and not a penny more. No cash back to client.
24
Q
What is premium pricing?
A
Where we the lender increase the interest rate and use the extra premium to cover part or all of buyer’s closing costs?
25
What does "Sourced and Seasoned" mean.
Seasoned means the money has been in the bank for at least 60 days or 2 months bank statements. Nothing needed at that point. Sourced is for money that shows up in the bank account in the last 60 days. For FHA, any deposits over 1% of the loan amount or for conventional- over half their monthly income- that deposit will need to be sourced.
26
What does "sourced" mean?
Sourced means if the money in the bank account showed up within the last 60 days- we have to prove where it came from if it's over 1% of the loan amount on FHA or 1/2 someone's monthly income on conventional.
27
What does "seasoned" mean?
Seasoned means the money has been in the bank account for at least 60 days (and we then don't care where it came from)
28
Can the seller pay closing costs for the buyer?
Yes, up to 6% on government loans, 3% for conventional, and up to 2% for investment properties. This is interested party contributions so contributions total from the seller and the agent cannot exceed these amounts.
29
How much can interested parties (seller and realtor) pay in closing costs for buyer?
VA, USDA, FHA- up to 6%. Conventional- up to 3% except for investment property which is 2%.
30
When is homebuyer education required?
On home ready and home possible mortgages. Reverse mortgages. A couple of the Utah Housing programs require.
31
What 3 loan programs require home buyer education?
HomeReady/HomePossible. Reverse mortgages. A couple of Utah Housing.
32
Can we use subordinate financing (like a 2nd mortgage)?
Yes, on occasion, though rare, we will do a 2nd mortgage to help out with the transaction.
33
When do we do 2nd mortgages?
We have a couple of options on combos- 1st and 2nds. Never do stand alone 2nds.
34
How is a borrower eligible for Home Ready or Home Possible (3% down and lower mortgage insurance)
Must take a homebuyer class (Fannie's costs $75, Homepossible is free) and have less than 80% of AMI in qualifying income. Can be used to purchase a home or do a rate/term refinance. Unsure if it can be used on a cash-out refinance.
35
What are the 2 criteria to be eligible for HomeReady and Home Possible?
Must make under 80% of AMI (around 5,000-5,500 depending on the area) and take a home buyer class.
36
What are the benefits of HomeReady and HomePossible?
3% down. Lower MI when less than 10% is put down. No hit to pricing on credit scores between 680 and 739. Does not have to be a first time home buyer.
37
Can a loan officer pick the appraiser or talk to the appraiser.
Per federal regulation, a borrower nor loan officer cannot choose the appraiser. LO cannot talk to the appraiser. Buyer and agent can talk to the appraiser.
38
What if someone is buying a property with multiple parcels.
As long as the other parcels are not buildable- this should be fine. If any of the other properties can be built on- will have trouble getting a residential loan.
39
Can someone buy a property in the name of an LLC and get a residential loan?
No, residential loans are for people only. Only excepton is a trust. However, if going the trust route- I want the clients to buy the home in their name and do the loan- and then deed the property into the trust afterwards.
40
Which type of refinance has the higher rate- rate/term or cash out?
Cashout refinances almost always have a higher interest rate than a rate/term refinance. (Except on VA which is the same rate)
41
If someone is getting divorced and will keep the home, but has to refinance for cash-out to pay off the ex- is this a cash out or rate/term refinance.
In this special case, you may be able to run it as a rate/term.
42
How much cash can someone receive back on a refinance and still be a rate/term refinance?
On conventional, typically the lesser of 2% of the loan amount or $2,000.
43
How is the value of the home calculated on a refinance?
Typically through the appraisal. Exception on FHA- must have owned the home at least a year. If not owned at least a year- then lesser of the current appraised value or value they bought the home for.
44
How is the value of the home calculated on a purchase?
Lesser of the purchase price or appraised value.
45
If someone has owned the home for less than a year, can I use the new appraised value as value?
Conventional- typically yes. FHA- client must have owned the home at least a year before being able to use new appraised value as value.
46
How long must someone own a home to do a cash-out refinance?
6 months. (unless we are doing a special program called delayed financing where we can show they paid their own cash for the home- then can start as soon as 1 day after owning the home. Price as cash-out. Another exception is if someone acquired the property through inheritance or divorce)
47
How long must someone own a home to do a rate and term refinance?
1 day. You can start the loan process the day after they take title.
48
On purchases, can extra money be added to the loan for repairs and improvements.
On most loans no. Only on the FHA 203k or conventional renovation loan.
49
If borrowers are not married, can they be on the same application.
Only married borrowers can be on the same application. Unmarried needs to be on their own separate application and separate credit reports. (Although while pre-approving- I always put them on the same application and pull one credit report. Then once we start the file i split them up, drop one off the existing credit report and pull a second credit report for the other)
50
What absolutely must the loan officer do when sending the file.
Make sure the loan officer signs the exact day the file is sent, without fail. Client doesn't have to sign within 3 days- just needs to receive- although we don't like starting the file until fully signed. Also, always, always, always make sure mortgage insurance is entered correctly if applicable.
51
What happens if I don't send the file in the 3 days
You have a dead deal and must start over.
52
How long does a loan officer have to send a disclosure package to a client once the file is triggered?
3 days
53
If a self-employed borrower did not file taxes last year, is that a problem.
If before April 15th, not a problem- get previous two years tax returns, P&L for previous year and year to date. If after April 15th but before October 15th, same as before- but also get proof of extension and any required taxes are paid. If after October 15th, previous years taxes must be complete.
54
What is the deal about FHA appraisals.
If someone does an FHA appraisal on a home- that appraisal sticks with the home for 4 months so if the sale falls through and another FHA borrower comes along- that FHA borrower must use the old appraisal if it's within 4 months.
55
How long are appraisals good for?
Typically 4 months.
56
Can we use a POA (power of attorney).
Yes, if a borrower will not be available for signing, a poa can be acceptable. Have title work it up and get it to the underwriter prior to final approval. Make sure closing and title knows about it. Make sure borrower at least esigns or handsigns initial application. Cannot do POA on both initial and final docs.
57
Can the purchase contract include a rent back agreement.
If buying investment, no problem. If buying owner occupied, buyer must occupy within 60 days from note date so rent back (or tenants occupying) must terminate within 60 days from settlement. Don't do if going Utah Housing.
58
What must I be aware on the declarations.
Make sure they are not in a lawsuit. Make sure they have not had a bankruptcy or foreclosure in the last 7 years. Make sure they are a US citizen or at least a permanent resident alien. If not US citizen- make sure they are here legally and have the ability to get a loan. (Some visas like a student visa (F1) do not qualify someone for a mortgage). H1B visas do work- just need letter from employer they will continue to sponsor. DACA does not work for FHA but can for conventional (if C33 code in middle of employment authorization document- they are DACA). If have employment authorization card and have over a year remaining- should be fine. If less than a year- typically need a history of renewal.
59
If someone is on the purchase contract, but not on the loan, what must happen?
Typically we get an addendum removing whoever is not on the loan from the purchase contract.
60
If someone pays off some credit card debt, how long does it take credit to update?
Anywhere from 1-4 weeks. I typically give it 3 weeks if we are kind of in a hurry and 4 weeks if we are not in a hurry to repull credit.
61
What is a rapid rescore?
If we need to quickly fix something on credit, we can get documentation of said item, submit it to our credit company at about $120 per tradeline and they can update. Takes about a week and then we can repull a new credit report.
62
What if I need to order a new credit score within 30 days?
Credit scores are locked for 30 days. If someone has done something to improve credit (such as paid off credit card debt)- must call Factual Data to “release” the credit scores. Phone number at top of credit report.
63
How long is a credit report good for?
Per SHM policy. Credit reports are good for 90 days. If won’t close before day 90- need new credit report. Be sure to hit “Order new credit report” in encompass since it defaults to “import/reissue old one.”
64
What are the rules on counting seasonal income?
Need to show 2 year history and likelihood to continue and should be able to count the income.
65
What are the rules on counting 2nd job income?
Typically client must show they've worked 2 jobs side by side (can be different jobs) for the past two years. May be able to make work with just one year of side by side work.
66
What is someone just went to a 1099, commission or piecerate job?
Will need to be on at least a year, underwriter's typically want to see two years. Might be able to get loan with less time if can clearly show client has worked for same pay with different employer for at least 2 years.
67
Are capital gains eligible income?
Possibly. Have to show 2 years of receipt and likely to continue for 3 years. The challenge with capital gains is it's from the sale of an asset. Once the asset is sold, typically there is no likelihood of continuance.
68
Is pension income eligible?
Yes, just need to show it will continue for 3 years typically through a letter from the pension company and show current receipt through 2-3 months of bank statements. Yes, just need to show it will continue for 3 years typically through a letter from the pension company.
69
What is an appraisal waiver? How can I ensure my client gets one? How does it work?
Just like everything else in this digital age, appraisals are all data. Most appraisal right now are a manual comparison of data. An appraiser inspects a home, and then manually searches and finds similar homes that have sold, compares and contrasts the differences and derives a value. Every appraisal submitted to Fannie Mae or Freddie Mac, is also submitted as a data file, so they have millions and millions of sales data to compare. So if a purchase price can be supported by data they already have they will issue an “appraisal waiver” this means an appraisal will not be required. Right now appraisal waivers are pretty random. But as they gather more data, we should see this more frequently. This appraisal waiver is issued when automated underwriting is ran. It’s great for the client because it saves them having to pay for an appraisal. And it’s great for the people involved in the transaction because it’s one less thing that can go wrong.
70
Can I use a reverse mortgage to purchase a home?
Yes, and it’s a great option for most people over the age of 62. It’s pretty simply; the amount you put down to not ever have to make a payment on the home gradually decreases the older you get. As a rule of thumb, if you bought a home with a reverse mortgage at the age of 62 you would need around 60% down to not ever have to worry about making a payment again. That amount you need for a down payment decreases every year you’re over 62.
71
What happens when rates move after my client is locked? (up or down)
This is tricky situation for lenders. When a borrower decided to lock in there rate they are taking a risk for better or worse. If rates suddenly rise, a lender would never come back to a borrower telling them they won’t be able to honor their locked rate any longer. For that same reason when rates drop it’s very difficult, and extremely costly to lower the rate for a borrower after they decided to lock. However most lenders will have a policy in place that if there’s significant market movement a borrower will have an option to lower their rate. This always comes at a steep cost to the lender.
72
What is a doctor’s loan, how is it different from a regular loan?
A doctors loans is for medical professionals, it allows you to obtain financing not offered to the general public. A few features of a doctors loan are:
- Finance up to 97% of a home, up to $650k loan amount with a subsidized rate
- Exclude student debt from qualification
- Easily allow for future income, if a contract with a hospital is signed. Even if they haven’t received a paycheck yet
73
What are my options for renovation lending? (FHA, and Conventional)
When it comes to renovation lending you’re going to be using a FHA 203k loan, or a conventional HomeStyle Renovation. Both are similar in that you can buy a home that needs repairs, get a bid on the repairs from a licensed contractor, and order an appraisal as if those repairs were completed. As long as the repairs increase the value to where you need it for typical financing 96.5%-97% or less. You’re then able to close on your loan, and finance those repairs into the purchase price. You can also use them for a home you already own, to do re-modeling, or even upgrades like an in-ground pool, or outdoor gourmet kitchen.
74
What if someone wants to use the equity in their home to buy solar panels?
This is actually a really cool option. Normally if you’re pulling cash out of your home you pay a higher rate, and you’re capped at 80% of your home’s value. BUT – if you’re pulling cash out of your home to buy solar for your home, you get a lower rate (no hit for cash out), and can use up to 97% of your home’s value. That’s huge, and most times the cheapest way to finance your panels. Most solar companies will also give you a 15-20% cash discount for doing it that way, rather than using typical solar financing.
75
What if the Solar panels are leased, how does that effect their mortgage financing?
If the solar panels are leased, and that lease won’t be paid off at closing by the sellers, the buyer would need to assume that lease. Because there are so many different variations of lease plans when it comes to solar the most accepted calculation to determine a monthly payment for debt-to-income purposes is adding the total amount the buyer will pay over the life of the lease, and dividing that by the months remaining on the lease. However, that is only needed on a conventional mortgage. On an FHA loan, where the buyer is assuming the sellers lease that payment is not calculated into the DTI. It is treated like a utility payment. That’s pretty cool.
76
What happens when solar panels are on a home? Is there value associated with them? Do comps need to have solar?
Contrary to what most people who sell solar will tell you, your solar panels will not add dollar for dollar value to your home. Although we are starting to see more appraisers give some value (I’ve seen anywhere from $5k-$20k) and that is simply because there are more comps now that have solar panels. When you’re selling a home with solar panels, the comps that are used don’t necessarily need to have solar panels, but generally you won’t get any value from them if comps aren’t found.
77
Must the client really download the appraisal at least 3 business days before closing?
Yes, we have to have proof client received the appraisal at least 3 business days before settlement.
78
When can I change fees or interest rates on a mortgage once I've disclosed?
You can always lower interest rate, loan amount, or fees. Safest thing to do is always send out an LE and COC change of circumstances but not always needed when reducing. Must ALWAYS SEND OUT LE AND COC when increasing. Only on valid change of circumstances can you increase something. Valid examples. Appraisal comes in lower which increases the ltv and increases the mortgage insurance. Get back the COE (certificate of eligibility on VA) and find out they are reserves and not regular military. Client wants a lower interest rate so you have to increase the origination fee to obtain. Client has a collection or something derogatory that lowers their interest rate and puts them into a higher rate. It has to be beyond the LO's control. Simply misquoting is not grounds for raising the rate or fees. LE AND COC MUST ALWAYS BE SENT OUT WHEN INCREASING AND SENT OUT AT LEAST 1 BUSINESS DAY BEFORE CD IS ISSUED.
79
What's the fastest we can legally close a mortgage.
7 business days. Business days typically include Saturday.
80
What are considered rescission days for refinance?
Every day except for Sundays and federal holidays. 3 days for rescission, fund on fourth day. Assuming no federal holidays- if close on Monday, fund on Friday. Close on Tuesday or Wednesday, fund on Monday. Close on Thursday, fund on Tuesday. Close on Friday- fund on Wednesday.
81
What are considered business days for CD?
Saturdays are included in 3 days. Sundays and holidays are not included. Assuming no federal holidays in between: If CD issued on Monday- close on Thursday. Issued on Tuesday- close on Friday. Issued on Wednesday or Thursday- close on Monday. Issued on Friday- close on following Tuesday.
82
What is the definition of a 2nd home.
A 2nd home is a home a client will occupy for part of the year. Cannot be a rental. Little known fact, guidelines state if parent is buying the home for kids, that is technically considered an investment property.
83
Can I rent out rooms or the basement if I owner occupy the home.
Yes- as long as client owner occupies the home (and doesn't have a utah housing loan)- we don't care if they rent a portion. However, if single family unit- don't plan on counting any of the rental income to help qualify (except for HomeReady that might allow with 12 months history)
84
How far away must a 2nd home be from a primary residence?
Underwriters want to see the 2nd home at least 50-100 miles away or in a make sense area like a resort.
85
Can I do AirBnb or VRBO on a 2nd home?
This is kind of a grey area. Some underwriters would advise a "don't ask, don't tell" policy as long as client bought the home as a true 2nd residence and is only renting out for side income. If client's whole purpose is to rent it out- needs to be treated as an investment property.
86
What are the 4 C's of Mortgages
The 4 C's of mortgages are the fundamental criterias used in getting someone a loan. 1) Credit. 2) Collateral (down payment). 3) Capacity (debt to income ratio/ability to repay the loan. 4) Compliance (disclosures sent within 3 business days of application, CD out at least 3 business days before closing, etc.)
87
Top 5 Things Agents Need to Know About Credit
1) Credit is just a snapshot of the information reported by individual creditors to the credit bureaus and can change as quickly as new information is reported. Because of this it’s possible to drastically affect a credit score by something as simple as paying down the balances on maxed out credit cards
2) For mortgage lending the score from three bureaus is looked at Equifax, Experian, & Transunion. While other companies (such as credit karma) may give a credit score, always recommend that your clients obtain a credit score from a mortgage company because different organizations give weight to contributing factors differently
3) Credit is determined by analyzing a combination of information.
a. 35% Payment History.
i. Recent, frequency, severity. Includes account payment information, bankruptcy or judgments, how long overdue payments are, amount past due, and the time since any adverse occurrences.
b. 30% Amounts Owed
i. The amounts owed on accounts individually and totaled together as a whole, number of accounts with balances, proportion of credit line used and proportion of installment loan amounts still owed.
c. 15% Length of Credit History
i. The time since you accounts have been open and the time since they have been active.
d. 10% Credit Mix
i. The number of various types of accounts; credit cards, retail accounts, installment loans, mortgage, etc.
e. 10% New Credit/Inquiries
i. The number of and time since recently opened accounts and proportion to total accounts, number of and time since recent credit inquires, and the re-establishment of positive credit history following past payment problems.
4) Minimum credit scores needed to obtain loans
a. Conventional- 620
b. FHA- 620, 600, and below depending on the lender. Technically a score as low as 580 is allowed. However, it’s very hard to get someone approved with a score below 600.
c. VA- typically 620
d. USDA- hard to get someone approved below 640
e. Utah Housing- First Home and Home Again- 660
f. Utah Housing- Score- 620
g. Utah Housing- NOMI- 700
5) What score works best for which type of loan?
a. Conventional
i. 740 and higher- best interest rate
ii. Tiers in 20 point increments down to 620 (720-739, 700-719, etc)
b. Government Loans
i. 720 to get best interest rate
ii. Typically go in 40 point tiers.
88
Top 10 Things Agents Need to Know About Utah Housing
1) Utah Housing offers 4 programs which can be combined with a second mortgage to cover the down payment, making it possible for a borrower to purchase a home with $0 down.
a. In order for the borrower to have no cash to close they must have seller paid closing costs
2) Utah Housing has no area limitations, so a borrower can use it to purchase a home anywhere (in Utah).
3) It has both FHA and Conventional loan options
4) Has programs for both “first-time” and borrowers who have previously owned a property
5) You cannot use Utah Housing to buy a “second” or investment property or multi unit.
6) It does have yearly income limitations from $75,500 - $144,700
7) Renting a home secured by a Utah housing loan is not allowed
a. No portion of the property may be rented.
b. Dwelling unit cannot have more than one utility meter.
c. Cannot have a portion of the living area blocked or locked from accessing another living area in Dwelling.
8) Residences with second kitchens are eligible for UHC financing as long as the second kitchen: is not an accessory dwelling separate from the residence and there is only one utility meter on the property.
9) You may purchase a manufactured home using a Utah Housing loan
10) There are minimum required credit scores for each of their programs
a. First Home & Home again – 660
b. Score – 620
c. NoMI – 700
89
Top 10 Things Agents Need to Know About USDA Loans (aka...Rural Housing)
1) Outside of the VA loan, if someone is purchasing a home in a USDA area, the USDA loan is the best way to go- it facilitates the same monthly payment as conventional or FHA but with no money down.
2) Home must be in an area listed as rural by the USDA.
a. Everything north of Plain City/Pleasant View except for Logan and the cities next to it are eligible.
b. The main part of Weber county is not eligible except for far east (Eden, Huntsville, and Liberty).
c. None of Davis County nor Salt Lake County are eligible.
d. Tooele, Summit and Wasatch counties have eligible areas.
e. For Utah County- south of Spanish Fork is eligible and west of Redwood Road in Saratoga Springs are eligible. (A few areas between Redwood Rd and the Jordan River are still eligible)
3) To purchase a home with USDA, Client cannot own another home, period. They don’t have to be a first-time homebuyer and they can even sell their current home just before purchasing the new home.
4) Has an upfront guarantee fee of 1% which is added to the loan amount.
5) Zero down loan. Client is not required to put any money down (as long as there are seller paid closing costs or premium pricing to have no money out of pocket) and in some cases can even get their earnest money back at closing.
6) Has mortgage insurance for the life of the loan (like FHA)- but their mortgage insurance is half of FHA’s.
7) If home being purchased is a condo, we must show that the condo is approved by FHA, Conventional, or VA.
8) Has household income limits. A family of four or less cannot make over (approximately) $85,900. A family of 5 or more cannot make over $113,400.
8 Anyone 18 and over that will be living in the home must submit w2’s and paystubs (and sometimes tax returns)- whether on the loan or not. (or if not working write letter stating that they “are not currently employed and have not intention of seeking employment in the foreseeable future”)
9 USDA is very strict on the review of bank statements. We must submit the last 2 months and must document every single deposit in the last 60 days (even if it’s just cents).
10 You can only purchase using a USDA loan or refinance from a USDA loan to a new USDA loan. If you have a VA, FHA, or Conventional loan- you cannot refinance into a USDA loan.
Bonus: USDA (unlike FHA or Conventional) will allow the loan amount to be raised to cover closing costs only if the appraisal comes in high enough to cover loan amount and closing costs.
90
Top 10 Things Agents Need to Know About Conventional Loans
1) Can be used to buy primary home, second home (vacation), and investment properties.
2) Maximum loan limit across the nation is currently $484,350 (higher for 2,3, and 4 units).
3) Some counties have a higher limit such as Salt Lake County and Park City which allows someone to go up to $600,000.
4) Can only be used to purchase 1-4 unit homes.
5) Must have at least a 620 credit score.
6) When buying a second home, the interest rate is similar to that of a primary residence.
7) No income limits on regular conventional.
8) Minimum down on a primary residence is 5% down, unless utilizing HomeReady or HomePossible loans which only require 3% down (must be under 80% AMI- average median income- around 63k)
9) 10% minimum down for 2nd homes.
10) 15% minimum down for investment properties (single family units only). Better deal if can put down 20% and even better at 25% down.
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Top 10 Things Agents Need to Know About VA Loans
1) Can only be used to purchase a primary residence. (2nd homes and Investment properties are not allowed- however, can rent out primary residence after having lived in for at least 1 year).
2) Must be eligible for a VA loan. The very first thing when I’m preapproving a veteran is I get a copy of their DD214 and order their certificate of eligibility. There are different rules of who is eligible depending on when they served, but following are some general guidelines for eligibility:
a. Typically need 90 days of service during wartime.
b. 181 days of service during peacetime (regular military)
c. 6 years minimum for national guard or reserves.
3) Follow conventional conforming loan limits so in Utah County, the VA loan limit is $484k. In Salt Lake county it is 600k.
4) The only person that can be on a VA loan with the veteran is the veteran’s spouse, legally and lawfully wedded. No cosigners allowed.
5) If the veteran died in active combat, the surviving spouse can pick up the veteran’s loan benefits. If the veteran died through non-active combat, the spouse typically does not receive any VA loan benefits.
6) Not required to put any money down (can get their earnest money back at closing if setup correctly)
7) No monthly mortgage insurance- probably biggest perk of VA.
8) Does have a VA guarantee fee unless the veteran has 10% or more disability. (2.15% of the loan amount for first time use (2.4% for reserve), 3.3% for subsequent use). Please note- if a veteran is disabled, it does not mean they do not have any loan costs (I’ve had a couple agents tell clients this)- disabled vets just don’t have to pay the VA guarantee fee. There’s always the standard loan costs- appraisal, title, lender fees, etc which can be paid by the seller, the veteran, or by the lender through a higher interest rate (premium pricing).
9) Veteran can get multiple VA loans through their lifetime. Typically they need to pay off the previous VA loan before getting a new one, however, there are a few exceptions when they can have two VA loans.
10) VA loans are assumable- and a non-veteran can actually assume a VA loan. If a veteran assumes a VA loan, the previous veteran has their eligibility restored. If a non-veteran assumes a VA loan, the veteran that originally took out the loan does not get their eligibility restored and will be limited on what they can do in the future regarding another VA loan.
Bonus: Super big thing- if you’re ever sitting at a closing with a veteran- always, always, always- make sure to tell them they may be eligible for a tax abatement where they can have part or all of their property taxes reduced. I always tell the veteran to go talk to the county after they have bought the home to see what, if any, break they can get on their property taxes.
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Top 10 Things Agents Need to Know About FHA Loans
1) Can only be used to purchase a primary residence.
2) Mortgage insurance does not drop off- stays on for life of loan. (Unless at least 10% is put down and then mortgage insurance will stay on for 11 years).
3) The most common appraisal issue is bare wood on the exterior of the home (and in some cases detached sheds and fences- depends on what the appraiser calls for).
4) Is the most lenient of all programs when it comes to qualifying. Many times, I’ve had clients who I can’t get an approval with on a conventional loan that go right through with FHA.
5) 3 year wait on derogatory items- short sale, foreclosure, and bankruptcy. (Only 2 year wait on chapter 7 bankruptcy if home was not included in bk).
6) Can be used to buy a home if someone is in Chapter 13 bankruptcy- they need to have reestablished sufficient credit- made at least 12 on time payments in the bk and have the trustee’s approval. (unicorn, big foot)
7) If home is a condo, it must be FHA approved. FHA approvals last for 2 years and then must be renewed. If you want to find out if a property is FHA approved, feel free to email your loan officer the condo project’s name and city and we can quickly check that for you.
8) On condos, the main things lenders are looking for are
a. No litigation
b. No more than 50% of the units can be investment
c. No more than 15% of the units can be in arrears on HOA fees
d. No single entity can own more than 10% of the units
e. At least 10% of the budget going to contingencies
9) 3.5% minimum down payment.
10) 1.75% (of the base loan amount) goes toward the up-front mortgage insurance premium which is added to the loan.
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I'm just graduating from college, I've got a guaranteed job, can I get a mortgage right away?
Yes, we can count the college toward your two year work history.
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I just switched jobs, can I get a mortgage?
Yes, as long as new job is full time w2- ideally we want 2 full paystubs on the new job. Or, if you have a guaranteed contract and can show sufficient funds, we can close you before you start your new job.
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I just became self-employed (or took a 1099 job) can I get a mortgage?
Typically a 2 year self-employment/1099 history and tax returns to document sufficient income are required.
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I haven't been on my job for 2 years, can I still get a mortgage?
Yes- we just need a complete and consistent two year work history. If going FHA and have had a 6 month gap in the last 2 years, borrower(s) must be on current job for 6 months before case number is pulled and document a full 2 year work history prior to job gap.
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My spouse who has passed away was a veteran. Am I eligible for a VA loan?
Depends. If the veteran spouse died in the line of duty- very likely the surviving non-veteran spouse can be eligible for a VA loan. We always recommend calling the VA loan center.
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I've had a VA loan in the past. Can I get another one?
Yes- as long as you satisfactorily paid off the previous va loan.
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I'm not married to the person I live with who is a veteran and we want to get a VA loan. Can we both be on the loan?
No, only someone married to the veteran can be on the loan with the veteran.
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Will you do a hard credit check to do a pre-approval or pre-qualification?
Yes, I will usually do a credit pull before completing a full Pre-approval, we can also do one with a pre-qualification as well to make sure there is nothing we may need to fix on credit.
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Why should I get pre-approved?
Pre –approval is one of the most important steps to the process, it would be like saying you can walk before you can crawl. Both sellers and buyers agents usually will not show you a home or accept a contract unless they have a pre –approval letter. Also it helps you become more comfortable and confident in your purchasing/buying power for what type of home and price range that best suits your needs.
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Can I get pre-approved over the phone or should I come in for a face-to-face visit?
Either way works great. Most people prefer to do everything over the phone/electronically.
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What is the difference between pre-qualification and pre-approval? (go over pre-approval process)
Prequalification is a quick, run the numbers, seat of your pants, approach. Pre-approval requires pulling credit, reviewing financials and make sure everything is good.
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What documentation should I gather for a mortgage?
Typically need last 2 paystubs. last 2 years w2's. last 2 years tax returns. copy of driver's license.
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I'm retired, can I get a mortgage?
Yes. There is no too old (just have to be at least 18) age limit. We just need to document sufficient income, have sufficient credit and down payment/equity.
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I receive child support or alimony, can I use that to qualify for a mortgage?
If FHA, must document have received for the last 3 months and will continue for at least 3 years. If conventional, typically need 6 months of receipt and 3 years continuance.
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I represent the seller as a real estate agent and received a pre-approval letter. What questions can I ask the loan officer to make sure the buyer can really buy this property? What other advice do you have?
Have you reviewed their credit and financials? Have you ran the file on AUS (automated underwriting system- DU- desktop underwriter (fannie) or LP- loan prospector (freddie)
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Will my mortgage payment change during the loan term?
If on a fixed rate loan, the mortgage payment itself cannot change. However, clients will call from time to time complaining their monthly payment has changed which is always the taxes and/or homeowner's insurance (also known as hazard insurance)
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Will I need Mortgage Insurance (MI/PMI)?
If going FHA or USDA- will have for life of the loan. If going conventional- will have if don't have 20% equity. VA has up front guarantee fee but no monthly mortgage insurance.
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When is my first payment due?
If closing between the 7th and end of month, your first payment will be due typically the first of the 2nd month following closing. If closing between the 1st and 7th of the month, we have the choice between the first payment being due on the 1st of the month following or 1st of the 2nd month following. Mortgage payments are always due on the 1st of the month and past due on the 15th.
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What goes into a mortgage payment?
PITI- principle, interest, property taxes, interest. You can also have mortgage insurance, 2nd mortgage, and HOA's.
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How do I make my mortgage payments after I close?
You will be given instructions at closing on the first payment as well as letters/emails on how to make all future payments.
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How do I get rid of my PMI? (3 ways)
On conventional only. 1) Refinance. 2) Pay the loan down to 78% of the original value. 3) If have lived in home for at least 2 years and home values have increased- petition current servicer to do an appraisal to see if the 20% equity is there (homeowner will have to pay for the appraisal)
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Can I prepay my mortgage if I have extra money?
As long as you do not have a prepayment penalty- absolutely.
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I've heard I can put down less than 20% on a conventional loan and not have any PMI. Is that true?
Only if the borrower buys out the mortgage insurance or the lender bumps the rate and does lender paid MI.
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Can I buy out my mortgage insurance up front?
Yes- there is borrower paid which is equal to about 4 years of mortgage insurance or lender paid where the lender bumps the rate and uses the extra premium to pay for the mortgage insurance.
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I'm leaving my primary residence and buying a new primary residence. I want to turn my old primary residence into an investment property. Can I use the projected rent to help me qualify for the new home?
Yes, get a 12 month lease agreement- and can count 75% of the rental income to offset the mortgage payment. May need an appraiser to verify the rent is average for the area.
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If purchasing a rental property, can I use the projected rents to help me qualify for the mortgage?
Yes. If buying an investment property- typically can use a rent comparable sheet from the appraiser. If vacating a home to rent it out- need minimum a 12 month lease agreement. Be careful if new home is FHA- old home must be at least 100 miles from old home to count rental income.
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When can I lock my interest rate?
As soon as we have a complete loan file, the purchase contract (if purchase) and the go ahead from the client.
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What is the difference between locking in an interest rate or floating?
Lock in guarantees the interest rate. Floating is like playing the stock market.
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What if I cannot close before my interest rate lock expires?
Sometimes we can get a free extension but usually we are paying extension fees.
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What can I do to get a better interest rate?
Buy owner occupied, single family unit with at least a 740 credit score. Watch out for condos on conventional because that can come with a higher interest rate.
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If interest rates raise after I've locked in an interest rate, could I be subject to a higher interest rate?
Yes, if the loan does not fund by the lock expiration or if credit drops.
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If interest rates drop after I've locked in an interest rate, can I get a lower interest rate?
Depends. Sometimes we have a one-time float down option.
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What are the credit tiers on a conventional loan? Start with rate needed to get the best interest rate.
740 and then in 20 point increments.
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How much will my credit score affect my rate?
For conventional- big time. 740 and higher gets the best deal and then every 20 point decrease (720-739, 700-719 and so forth) typically raises the rate an 1/8 point. Government loans start at 720 for the best rate and every 40 point drop raises the rate a little.
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Can putting down more money get me a better interest rate?
Sometimes yes, sometimes not. On primary residences, at 25% down there is a small price improvement and at 40% down. On investment properties, there is a big difference between putting 20% and 25% down.
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Who pays for the home warranty?
Typically the seller pays for the home warranty. In a small percentage of time, the seller does not pay for it and then the buyer has the option of purchasing one for themselves or not. This is negotiated for at the time of acceptance.
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Where do I go to close my mortgage?
All mortgages are closed at the title company. Title companies can be mobile and can come to the borrower's home or lender's office as well.
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When does it make sense to refinance?
Typically when rates drop at least a half percentage. Or if you need to pull money out of your home or if getting divorced and need to remove/pay off the ex.
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When buying a primary residence, how much time do I have to move into the home?
When buying a primary residence, you are certifying that you will occupy the home for 60 days and intend to occupy for at least a year.
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When buying a home, what are the dates I need to be aware of?
Probably 2 of the most important dates for lenders are the Finance and Appraisal Deadline and the Settlement Deadline. The Finance and Appraisal Deadline is important because this is the day that the borrower’s earnest money goes hard. I like to have the file out of underwriting before this deadline so that we know for sure where we stand and what is left, if anything, to complete the loan. The Settlement Deadline is the day that we are to sign for the purchase of your home. Before we can sign, the CD needs to be signed at least 3 business days prior to closing. Be sure that your lender communicates with you when the CD will be coming to the borrower so that it can be signed the 3 days before Settlement.
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What types of homes qualify for residential lending?
Residential homes that are 1-4 units are eligible including single family units, townhomes/PUD's (planned unit developments), condos, 2-4 unit properties, manufactured and modular homes. Anything commercial or farm is typically not eligible for residential loans.
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What type of mortgage is best for me?
If someone is eligible for a VA loan- that is typically the best loan. USDA is 2nd best. If going between FHA and conventional, typically if the credit score is over 700- conventional is best. Between 680 and 700- run both options. Under 680- typically FHA will be best. Utah Housing is what I call the loan of last resort.
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What loan programs charge an upfront or guarantee fee?
FHA has an upfront fee of 1.75%. VA has a funding fee of 2.15% for regular military (2.4% for reserves) for a first time use and 3.3% with any subsequent use; these may be waived if there is a disability stated in the Certificate of Eligibility. USDA has a guarantee fee of 1.0%. Utah Housing FHA loans have an upfront fee of 1.75%. Conventional has zero upfront or guarantee fees.
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What is the mortgage process?
This is the process of getting a mortgage loan. Once the loan application is filled out and your lender has your income documentation, they will review your information to get you pre-approved. When you have a home under contract, your loan can be locked in. Your lender will request any other necessary documentation to process your loan, get the home appraised and send it to the underwriter. Once it has been approved, you will sign the final loan documents with a title company. Your loan will typically fund and be recorded at the county the following day at which point the home will be yours.
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What is the difference between a manufactured and modular home?
For lending purposes, modular homes are considered regular single family units. Modular homes, like manufactured homes are built in a factory and shipped to the site- but are built to higher standards. When dealing with a manufactured home- plan on increased guidelines.
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What is earnest money and does it go toward my closing costs and/or down payment?
The Earnest Money is the deposit made to the seller on a new purchase to show commitment. The money can be applied to your down payment or closing costs, or on certain loan types, can be refunded at closing. The buyer must furnish the earnest money to the buyer's agent or title company within 4 calendar days of acceptance of contract.
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What is APR?
APR stands for the Annual Percentage Rate. It is what your lender charges you to borrow money or the “price” of your loan. In general, the APR reflects not only the interest rate but also any points, origination fees, and other charges that you pay to get the loan. For that reason, your APR is usually higher than your interest rate.
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What is an escrow account?
An escrow account is an account set up to manage the money required for your property taxes and homeowner’s insurance premiums. A portion of each mortgage payment is put into this account each month. Your lender will pay your insurance premiums and real estate taxes when they are due.
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What is a jumbo mortgage?
A jumbo loan is a loan that exceeds the conventional loan limits for the area. At the time of this writing, the nationwide conventional loan limit is $484,350 for a single family; therefore, any loan amount over that would be a jumbo loan. Jumbo loans usually have stricter guidelines than conforming loans. They typically have higher interest rates, can require a higher credit score and don’t want to see any significant derogatory items on credit. They usually require 20% down payment and may require reserves (6-24 months). One potential way to avoid having to put 20% down is with a piggy back 2nd mortgage. You could put as little as 5% down on a purchase price of up to $800,000 with a 2nd mortgage.
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What are some of the biggest mistakes people make during the mortgage process?
They don’t talk with a mortgage loan officer and get prequalified. This helps avoid easy mistakes made by many first time homebuyers. Some of these include opening a new line of credit, purchasing a new vehicle, paying off or closing an account and missing a payment. Other potential problems include depositing large amounts of cash or money that cannot be sourced and withdrawing money from bank accounts that is needed for closing. Also, don’t change jobs during the loan process without talking with your loan officer about the effect it will have. Sometimes clients don't realize we have to verify everything so they will exagerate their monthly income or not report debts.
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What are discount points, and should I pay them?
Discount points are fees paid to buy down the interest rate and lower your monthly payment. 1 discount point is 1% of your loan amount. You will want to consider how long you plan to be in the home and if it is worth the added cost at closing. Rarely does it make sense to buy the rate down on a 30 year fix since it typically costs about 1/2 point in fees to buy down 1/8 percent in interest rate.
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What is the big negative of a 15 year?
Payment is typically 35-40% higher than a 30 yr fix.
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What is the benefit of a 15 year mortgage over a 30 year?
lower interest rate. Lower mortgage insurance.
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Should I get a 15 or 30 year mortgage?
If monthly payment is not an issue- a 15 year generally is a great way to go. The shorter the term, the lower the interest rate. A 15 year mortgage is typically 3/8-1/2 percent lower, but your monthly payment will be around 35-40% higher than a 30 year fix.
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Should I choose a fixed-rate or an adjustable-rate mortgage?
99% of people choose fixed rate. Adjustable rate mortgages (or AIR- adjustable interest rate loans) have lower initial interest rates but are only fixed for a certain period of time. If, for example, you know you will be in the home less than 4 years, a 5/1 ARM (fixed for the first 5 years) may be a good option.
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Me and my boyfriend want to purchase a home together. Where we are not married, can we still get a mortgage?
Yes, for all loans except for VA, you do not need to be married to your co-applicant. VA is the exception- anyone else on the loan must be married to the main borrower- the veteran.
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Do I need to be married to my co-borrower to get a loan together?
No problem on all loans except VA as long as both parties will be occupying the property.
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I've heard the lending process can be difficult, is that true?
Yes, it can be very difficult. We always warn people up front that we will ask for many things.
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I'm selling a home, but it won't be sold until after I purchase a new property. Once I sell the old home, can I take the proceeds and pay down my new mortgage and get a lower monthly payment?
If government loan- you can pay down, but the payment will stay the same. If going conventional, you may have the chance to do a "re-cast" or "loan reamortization" where they can lower the monthly payment to the new principle balance. Typically requires a $250 fee.
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I'm buying a home that requires some fixups- can I raise my mortgage to pay for these repairs?
On regular loans- no way. FHA does have a 203k loan and conventional has a home renovation loan, but be super careful of those.
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I'm buying a condo or a PUD (planned unit home such as a townhome) that has an HOA. What should I be aware of?
Condo’s need a certificate (condo cert) showing the community is free and clear and lendable. A normal PUD does not need a Condo Cert. All HOA’s are different so clarify if there are HOA transfer fees and what the monthly fee covers. It may cover hazard insurance already.
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I want to turn my current home into an investment property and purchase a new home with an FHA loan, what must I be aware of?
Both loans will need to be FHA and you will need at least 25% equity in one of the properties. Also, if you want to count rental income on the home being vacated, it must be at least 100 miles from the new home, otherwise you cannot count rental income on FHA.
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I currently own a home and wish to purchase a new property with a USDA loan, can I do so?
No, USDA will not allow you to currently own another home. It must be sold prior to funding of the USDA loan. Can close on sale and purchase on same day.
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How soon until I can refinance my mortgage?
For a conventional cash-out refinance borrower needs to be on title for at least 6 months unless it was acquired by inheritance or by a divorce decree or if it is delayed financing and meets all the requirements. No wait time for limited cash-out or rate and term as long as one of the borrowers was on title at least 1 day before. FHA & VA typically require waiting 7 months (210 days). USDA typically requires a year. Be aware- if refinancing to FHA, client must have owned the home a year before the case number is pulled to go off the new appraised value. Be super careful on refinances- if our client pays off the mortgage typically before they've made 6-7 regular payments- we can get hit with an early payoff penalty.
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How long should I plan to close a mortgage?
Typically 30 days.
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How long must I live in my primary residence until I can legally turn it into an investment property?
1 year for all loans except Utah Housing. Utah Housing does not allow you to rent the home out while the utah housing home is in place.
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How is my mortgage payment determined?
Your monthly payment has several parts. First is the P/I or principle and interest or also known as the actual mortgage repayment. It is simply based off of the loan amount and the interest rate. Next part is 1/12 of the property taxes (known as the "T" in PITI). Then 1/12 of hazard or homeowner's insurance (known as the 2nd I). Also, if going FHA, USDA or less than 20% down on conventional will have PMI/ MI/mortgage insurance. HOA fees, if applicable, are not paid with the mortgage but we always count those in our debt to income ratio. Last, if there is a 2nd mortgage- that payment needs to be taken into account also.
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Name all the parts that go into a monthly payment (and the 3 possible extras)
For sure- PITI. Extras- HOA, PMI, 2nd mortgage.
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How do I know if I have a good mortgage lender?
They work for Security Home Mortgage.
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How do I know if I can be qualified for a mortgage?
We need to take a full application and at minimum review bank statement and income docs. Clients need a good 2 year work history, sufficient down, sufficient credit.
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How can I really frustrate my lender?
Lie to them or misrepresent information. Not get us what we need when we need it, but then get upset when we are not ready to close on time. Consistently harass us.
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Do you charge to get pre-approved or to lock in the interest rate?
We do not charge to get pre-approved or to lock in an interest rate. Unless someone wants a 6 month lock and then it's a 1/2% of the loan cost.
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Can I use a FHA or VA loan to purchase a secondary home or investment property?
No, FHA, USDA, Utah Housing, and VA are primary residence only. Conventional only for 2nd homes and investments.
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Can I refinance and pull cash out?
Yes, we can do cash out refinances on FHA and conventional to 80%. (recent change at the time of this writing- FHA was always 85% before). 90% for VA. (used to be 100% for VA)
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Can I raise my mortgage loan amount to cover the minimum required down payment?
Never on FHA or Conventional. USDA and VA have no need.
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Can I quit or switch jobs during the mortgage process?
Yes, but it can potentially kill the mortgage. At minimum will need a full paystub (underwriters prefer 2) at the new job. May be able to get by with a full employment contract that clearly specifies salary amount or 40 hour wage. Any variable on contract could make it so you need two paystubs. If client is doing anything but 40 hours hourly wage or salary (things such as piecerate, 1099, straight commission)- could cause the client to not get a loan for 1-2 years.
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Can I get the seller to pay my closing costs?
Yes, seller and agent are considered "interested parties." Interested parties can pay up to 6% of the purchase price on government loans. 3% on conventional loans, owner occupied and 2nd home. 2% for investment properties.
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Can I buy a new cell phone (they'll look at my credit) while getting a mortgage?
Cell phones should not be a problem- however our standard answer is to avoid all credit pulls, if at all possible, during the loan process.
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Can I buy a new car or open a new credit card while getting a mortgage?
Yes, but it's strongly discouraged and can jeopardize the chance to get a mortgage. If credit is really good and debt to income ratio is low- typically not a problem- but will have to get note and paperwork and add it to the loan. If going USDA will have to pull a brand new credit report and I saw one client's credit scores drop 50 points. If debt to income ratio is tight- no way am I letting client do this.
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Can I buy a 2, 3 or 4 unit property as a primary residence? What must I look out for?
Yes- as long as buyer will owner occupy the unit for at least a year. If going conventional, 15% down required for duplex and 25% down required for 3 and 4 unit properties. FHA only requires 3.5% down as long as there is not a cosigner. (then it's either 15 or 25% down required)
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Can I bring cash or a personal check to title for my down payment?
Cash, personal checks, and ACH transfers are never allowed to be brought to title. Money for down payment is always paid to the title company. If under $10,000- cashier's check or wire are acceptable. If over $10,000 money must be wired. (Be super careful of wire fraud). Never give client wiring instructions. Have them get directly from the title company.
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How often can interest rates change?
Interest rates are like gas prices and stock prices and can change at anytime.
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Are interest rates always the same?
Interest rates are constantly changing according to the market- just like gas prices and stock prices. They can change once per day, multiple times per day, or not fluctuate over certain periods of time.
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Why does the lender ask me for bank statements and question some of the deposits?
We have to verify where every penny is coming from on the down payment to make sure it's truly the borrower's funds and coming from acceptable sources.
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What is the minimum down to purchase an investment property?
15% for single family unit (includes condos and townhomes), but strongly not recommended. Rate is much higher and mortgage insurance is higher and does not drop off at 20% equity. 20% down to avoid PMI. 25% down required on 2-4 units investment. 25% down also gets you a better interest rate. On this unrelated note, if going regular conventional and buying condo, there is a hit to pricing if less than 25% is put down.
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What is the minimum down to purchase a second home?
10%
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What is the minimum down to purchase a primary residence?
0% for USDA, VA, or Utah Housing. 3% for Home Ready or Home Possible. 3.5% down for FHA. 5% for regular conventional. 15% if buying duplex owner occupied. 25% down for 3 or 4 unit- even if occupying one of the units. (remember- primary residences require the client to occupy within 60 days and live in for at least a year. Utah Housing does not allow any rentals while the loan is in place)
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I'm self-employed- can I use my business funds for a down payment?
Yes, this can be an acceptable source of funds. Many times the underwriter will require a CPA letter or some proof that pulling the funds out of the business will not negatively affect the business moving forward. One place to be careful on this- if self-employed person got one year waiver- cannot use business funds for the down payment and use one year of tax returns.
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If an agent is buying his/her own home, can they use their commission toward closing costs and/or the down payment?
Agent can always use their commissiosn toward closing costs as long as between them and the seller they do not exceed the interested party max contributions. For down payment- always double check this but at the time of this writing- FHA and Freddie allow an agent's commission to go toward the minimum down payment on their own home. Fannie does not.
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I don't have any money. Can I still buy a home?
Yes, clients can get gifts, borrow from 401k, take a home equity loan out (if own other home), go Utah Housing, USDA, or VA with no money out of pocket. They can get a signature loan or any unsecured loan only if they do it at least 2 months in advance and then the money is considered "seasoned" as long as we can see it has been in the bank account for 2 full bankstatements. (make sure the money is in before the bank cycle begins 2 months previous)
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How much of a down payment do I need?
Primary residences can be bought with zero down (VA, USDA, Utah Housing). 3% down for home possible and home ready. 3.5% down for FHA. 5% down for regular conventional. 10% down for 2nd homes. 15% down minimum for single family homes- investment (although 20 or 25% down is absolutely recommended). 15% down for owner occupied duplex, conventional. 25% down for 3 or 4 unit properties regardless if owner occupied or investment property. (Cannot do 2nd homes on multi unit properties)
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Do I really need 20% down to buy a home?
No. The funny thing with this myth is there is no true minimum 20% down program. Primary residences can be bought with zero down (VA, USDA, Utah Housing). 3% down for home possible and home ready. 3.5% down for FHA. 5% down for regular conventional. 10% down for 2nd homes. 15% down minimum for single family homes- investment (although 20 or 25% down is absolutely recommended). 15% down for owner occupied duplex, conventional. 25% down for 3 or 4 unit properties regardless if owner occupied or investment property. (Cannot do 2nd homes on multi unit properties)
185
What must I be aware of while using a gift to obtain a mortgage?
For conventional, we need a gift letter signed by both borrower and giftor, stating relationship, amount being gifted, and account number. We need proof that the money was wired from that account. The easiest thing to do is to have the money wired to title from the giftor's account. Make sure you emphasize that what they put on the gift letter- that exact amount is wired. On FHA, we need all the same stuff but also a recent month's bank statement from giftor which many giftors are not too happy to have to provide- FHA rules, not ours. Make sure giftor does not black anything out- otherwise you've got to go back to them. MAKE SURE ALL THESE STEPS ARE FOLLOWED.
186
Can I use a gift for the down payment and/or closing costs?
Yes, gifts from family members are acceptable for down payment and closing costs. Agents can gift part of their commission (or all) for closing costs. If agent is related to borrower and going FHA, possible to gift part or all of their commission to down payment.
187
What are closing costs, and how much should I expect them to be?
There are two parts to closing costs. The actual hard costs and the prepaids. Hard costs are the lender fees, typically an origination fee from 0-1% and underwriting and processing fees. Then there are the 3rd party fees which include the appraisal and credit report. Last are the title fees which include their closing fees and title insurance. The prepaids are separate but included. Prepaids include first year of homeowner's insurance, money to setup the escrow account for taxes and insurance which are 2-4 months on purchases and can be 2-14 months on refinances. Also, there are days of interest that will be charged which are typically the daily interest amount times the number of remaining days in the month after closing.
188
List 2 hard costs/closing costs.
Lender fees, title fees, 3rd party fees.
189
List 2 prepaids
Taxes, insurance, days of interest.
190
Which 2 loan programs do not allow cosigners/non-occupant co-borrowers?
VA and USDA
191
Which 2 loan programs allow co-signers (non-occupant co-borrowers)
FHA & Conv
192
I can't show enough income to qualify for the home I want, can I get a cosigner?
Yes, FHA and Conventional allow non-occupant cosigners to help qualify. We combine everyone's income and debts and make sure the debt to income ratio is good. Everyone on loan needs sufficient credit. FHA requires cosigner to be related to borrower. Anyone can cosign with Conventional. VA does not allow. I do not believe USDA allows. Always use lowest middle credit score.
193
Can a cosigner help someone get a loan with bad credit?
No
194
My credit score is too low to get a mortgage, can a cosigner help me get a mortgage?
No- cosigners don't help with low credit. Only high debt to income ratios.
195
What is the minimum credit score for USDA?
640
196
What is the minimum credit score for conventional?
620
197
Do I need great credit to get a mortgage? What is the minimum credit score I'd need?
People with fair credit can definitely also get a mortgage. Conventional requires a minimum 620 mid score. FHA and VA can potentially go a little lower. USDA- plan on 640 or higher. For Utah Housing, first home and home again require a 660 score. NOMI requires at least a 700. Utah Housing's Score program only requires a 620. Alway run files on AUS before issuing preapproval letter.
198
How can I raise my credit?
Fastest way to raise credit scores is to pay off credit card debt. 2nd to make sure any false derogatory items are removed. Get on someone else's good tradeline.
199
When does wait time start and end on a foreclosure or shortsale?
Date client actually goes off title to application date.
200
I don't have any credit, can I get a mortgage? (and how can I get a credit score?)
There are a couple options to get someone a loan with no credit- they have to get "non-traditional" lines of credit- cell phone, utilities, etc. Best thing to do is get them their own credit card, keep the balance to limit ratio low and wait 6 months. Can get score faster if they can jump on spouse or family members credit.
201
Why is my mortgage credit score way different than Credit Karma?
Credit Karma's credit scores are not always the same as a mortgage report. They use a different scoring model. Sometimes our scores match, sometimes we are 80 points higher, sometimes we are 80 points lower.
202
What if I have really good credit, but my spouse has no or poor credit?
We cannot use someone's income if they do not have sufficient credit so we will need to make the deal work with the spouse with the good credit or get a cosigner.
Try to qualify on just the spouse with the good credit.
203
I'm currently in a Chapter 13 bankruptcy, can I get a mortgage?
Quick note: Chapter 13 bankruptcy is where someone reorganizes their debt and puts together a payment plan to repay everyone. (Chpt 7 is where debt is wiped out).Yes, as long as your credit is sufficient, you've made 12 payments on time and the judge allows you. However, in 19 years of doing this- I've never gotten one of these approved. Credit has never rebounded.
204
Can someone get a mortgage in a Chapter 13 bankruptcy?
Technically yes- after 12 on time payments and court approval- but I've never been able to get anyone approved due to credit not rebounding yet.
205
I've got collections showing on credit, can I get a mortgage?
Medical collections are typically not a problem. With other collections, it just depends. Run AUS and see what it says.
206
I've had a Chapter 7 bankruptcy in the past, can I get a mortgage?
Quick note- Chapter 7 bankruptcy is where someone wipes away all their debt. VA requires a 2 year wait. USDA- 3 years. FHA- 2 years if no home included, 3 year wait if a home was included in the bankrupty. Conventional is typically 4 years.
207
I've had a foreclosure in the past, can I get a mortgage?
Yes, you just have to wait long enough. VA- 2 years. USDA and FHA- 3 years. Conventional 7 years. If foreclosure was VA- you most likely will have to pay the VA back before you can get another VA loan.
208
I've had a shortsale in the past, can I get a mortgage?
Yes. VA 2 years. USDA 3 years. FHA 3 years. Conventional 4 years. If VA took a loss- most likely will have to pay VA back to get a new VA loan.
209
Note on derogatory credit issues such as bankruptcy, foreclosure, and short sales.
Wait times start when bankruptcy is dismissed or client goes off title on short sale or foreclosure. Wait times end on application date- this is super important.
210
When does wait time start and end on a chapter 7 bankruptcy?
Dismissal to application date.
