Buy Almost 30% More With AMB

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With all of the chatter around the mortgage regulators making it tougher for buyers to qualify for financing, it’s good to know that there are plenty of programs out there that empower home buyers to stretch their qualifications.  As you’ve read, Qualified Mortgages (QM) have restrictions like 30-year terms and lower debt-to-income ratio requirements.  However, there are programs out there that have 40-year terms, lower qualifying rates and higher debt-to-income allowances.  Those programs allow for almost 30% greater purchasing power than the QM mortgages. 

For example, let’s say you have a client who makes $200,000 per year.  With a QM mortgage and using a 5/1 ARM program, the client qualifies for a $1,200,000 purchase.  However, using the same 5/1 ARM program with a 40-year term, the client can move up to a $1,550,000 home!*  In this environment with a surplus of buyers and a shortage of sellers, these more aggressive mortgage financing solutions may make the difference between searching for homes and buying a home.

For a comprehensive review of what financing solution works best for you or your clients, please contact your favorite Absolute Mortgage Advisor or visit us at www.absolutemortgage.com for more information.

*This example presumes 20% down, great credit, using a 3% note rate.

Equal Housing Lender Icon©2014 Opes Advisors, Inc., doing business as Absolute Mortgage Banking.  Licensed by the CA Bureau of Real Estate, 01458652 and NMLS 235584.  Equal Opportunity Lender. All rights reserved.

A Daisy of a Down Payment Assistance Program

DaisyWith mortgage interest rates continuing to be attractive, home affordability is still high and there are some GREAT first time home buyer programs out there. One of our favorite programs is called the Daisy, which gives qualified buyers up to $15,000 in cash toward down payment and closing costs at NO cost to the borrower!* Some of the details around this program include:

  • Loan amount cannot exceed $400,000
  • Of the $15,000 allowance, $7,500 must be for down payment with the other $7,500 for closing costs
  • First mortgage must be approved through an approved lender (like AMB)
  • The borrower’s income cannot exceed $120% Area Median Income, adjusted for family size
  • Prior to closing, the borrower must attend homebuyer or landlord (for those buying multi-unit properties) education sessions conducted by a HUD approved counseling agency
  • Eligible properties include single family, condo’s, PUD’s and 2-4 unit properties

The Daisy program is available to properties located in the following counties: Alameda, Contra Costa, Los Angeles, Marin, Orange, Riverside, San Bernardino, San Diego, San Francisco, San Mateo, Santa Barbara, Santa Clara, Sonoma and Ventura counties.
For a comprehensive review of what financing solution works best for you or your clients, please contact your favorite Absolute Mortgage Advisor or visit us at http://absolutemortgage.com/ for more information.

*The prorated balance due is repayable if the property is sold, refinanced, not owner-occupied as the primary residence or transfers title within the first 36 months. A rate & term, no cash-out refinance on the first mortgage is expected from prorated balance repayment. Please contact your Absolute Mortgage Banking Mortgage Advisor for specific information. Program subject to modification or cancellation at any time.

Equal Housing Lender Icon©2014 Opes Advisors, Inc., doing business as Absolute Mortgage Banking. Licensed by the CA Bureau of Real Estate, 01458652 and NMLS 235584. Equal Opportunity Lender. All rights reserved.

Being Pre-Approved is a Must-Have!

In most real estate markets today, if a residential property buyer isn’t fully pre-approved for a mortgage loan, the chances of any seller taking that buyer’s offer seriously is very slim. The reason is probably obvious, but a pre-approval is validation that the loan has been pre-underwritten (or at least it should be), which provides the seller confidence that the transaction will close. In order to become pre-approved, all information submitted on the loan application has to be verified by documentation provided by both the borrower and third parties. In fact, the average file today has over thirty components to validate a loan approval — 30+ components — more than half of which are third party!

pre-approved-loan

A pre-qualification is nothing more than a discussion around a buyer’s loan qualifications. For example, if one uses the AMB 5X Rule, which states that five times one’s gross annual household income equals the approximate loan amount one qualifies to receive, then we know that a $100,000 salary means that one may be able to afford a $500,000 loan. But then employment, income, assets, credit, obligations and declarations all need to be discussed to refine one’s qualifications. Taking the next step towards validating everything then fully vets a buyer’s true qualifications and approval allowances.

Most importantly, the biggest benefit to the pre-approval process is that it empowers the buyer to execute confidently. Think about it; if one has had a thoughtful, detailed discussion and analysis around the largest loan one will likely have, both short and long-term goals need to be taken into consideration. Questions around future employment, lifestyle, family planning, retirement, cash flow, housing goals, etc. all need to be taken into consideration to effectively pre-approve anyone and get them truly excited about a new property purchase. Doing so benefits both buyer and seller and makes for an ideal transaction.

Contact your favorite Absolute Mortgage Advisor or visit us at www.absolutemortgage.com for more information.

Equal Housing Lender Icon© 2014 Opes Advisors, Inc. doing business as Absolute Mortgage Banking.  Licensed by the CA Bureau of Real Estate 01458652 and NMLS 235584. Equal Opportunity Lender. All rights reserved.

Another Great Road to Recovery Mortgage Program

Texas Highway

Back in August of 2013 we wrote Buying Today Despite Short Sale Yesterday, which addressed the fact that those who were victims of a recent short sale (less than two years ago) could possibly obtain a mortgage for purchase or refinance, provided certain elements existed.  The elements for success included: 1. No other credit issues, 2. Solid equity/down payment of 30% or more, 3. Solid reserve funds and 4. solid income.  That program has been extremely effective, especially for non-conforming loans; in fact, an existing client is pre-approved for a $2.5mm purchase and the foreclosure occurred only two years ago!

Now, Housing and Urban Development (HUD) has stepped up their game with a similar program, the Federal Housing Administration (FHA) Back to Work Program.  In short, if a borrower lost their home over 12 months ago due to financial hardship and she/he have re-established credit (or maintained otherwise good credit), then they may qualify to get a new mortgage to purchase a home without the standard two to seven year waiting periods required under conventional mortgage programs.  A financial hardship is defined as a loss in income of 20% or more for at least a 6-month period and it must be documented.  The borrower must also document that she/he has fully recovered from the hardship.  Finally, the borrower(s) must attend a credit counseling class prior to submitting an application.  All other FHA requirements apply as well, but the rates are extremely competitive and help to stretch the qualifications of applicable borrowers.

For complete information on this program or any other mortgage program, contact your trusted mortgage advisor at Absolute Mortgage Banking.

QM? ATR? WTH?

Floating House

Despite all of the chatter around Qualified Mortgages (QM) and proving a mortgage borrower’s Ability to Repay (ATR), many local homebuyers will be UNAFFECTED by these recent Dodd-Frank changes effective January 10. Why? To begin with, all of the conforming, FHA and VA loans are given a temporary reprieve from these new provisions and are business as usual. Secondly, and frankly, these new rules are really Underwriting 101 for the most part since all fully-documented loans are underwritten to ensure that they are appropriate and affordable for the borrowers who receive them. Finally, all of the non-conforming (“jumbo”) options available today, like 40-year terms, interest-only payments, 100% financing, bridge loans, etc., will continue to be available to clients through mortgage advisors of reputable mortgage banks.

So what is a QM? In a nutshell, a QM:

• Is underwritten to ensure that a borrower has the ability to repay the mortgage
• Has a 30-year term
• Is absent of features like interest-only payments and negative amortization
• Has reasonable fees (for our area, total fees not to exceed 3% of the loan amount…)

What I find rather comical is the alleged “safe harbor” status that a QM provides to a lender, meaning that the lender can’t be sued if it issues a QM, yet the provision clearly states that a consumer can sue the lender if the consumer feels as though the lender did not properly follow the QM requirements.

One question that we’re all waiting an answer for is what the pricing impact with be on non-QM loans. While it’s certainly reasonable to presume that the rates will be slightly higher for non-QM loans, our prediction is that rates today will remain steady on non-QM loans and that QM loans will be slightly better priced in the future.

When you think about it, every loan is priced based on risk. As such, the higher the risk on a loan, the higher the price of that loan. And while QM loans may be considered as lowest risk, it’s hard to argue that a borrower who qualifies and desires a 15 year fixed mortgage is riskier than a 30 year fixed QM mortgage.