For nearly 17 years now I have originated somewhere over $450,000,000 in mortgages on everything from $75,000 starter homes to over $1 million estates from California to Miami. While every day is a new day I believe I have seen the best and worst situations imaginable. Over the years I have taken all of these experiences and use that inform each customer that calls me even if I never close their loan. I have been blessed with so many incredible relationships and opportunities I feel that it is only right to share that with you and maybe I can help you make your transaction the best it can possibly be. I could do a Top 50 but here is my opinion of the Top 10 that come to mind.
How a to find a good realtor
Custom Rate Lock
Lock and Shop Mortgage Pricing
Mortgage Loan Approvals on a To Be Determined property
Maximum seller concessions
Maximum seller paid closing costs and pre-paid items
maximum third-party contributions
Last week we received a call from a young professional who is gearing up to make his first home purchase. He had good credit, steady annual income, and enough money saved for a small down payment on a new home for the family. During the call, he voiced concern about the pre-approval amount he qualified for because of his student loans. He had basically no debt other than a little over $130k in student loans all in deferment for the next 11 months and was of the mindset that this debt would not count against him as a result. His credit report showed a $0/mo payment and he was a little confused as to why when he spoke to different lenders local, regional, and national each offered very different opinions on the purchase amount he could qualify for.
In the universe of mortgage financing student loans are analyzed by credit underwriters according to three main data points that normally appear on your credit report in order of importance: Repayment status, monthly payment, and current balance.
While monthly payment and balance don’t need further elaboration, knowing your repayment status and how it impacts how your payment is viewed by creditors is a little confusing. For anyone seeking a mortgage your student loan is considered to be in a Regular Repayment status if the monthly payment is fixed and is fully amortized over full term (i.e. 5,10, 15 or 20 years) of the loan. The best case scenario here is when the fully amortized monthly payment amount(s) appear on the credit report along with your balance(s). In some cases you can be at the start (or restart) of regular repayment status, but the payment amount does not show on the credit report and you can clear this up with documentation from your student loan servicer showing what the payment should be.
If your student loan is not in a regular repayment status you are most likely in Deferment, Forbearance, Graduated Payment plan, or an Income Drive Repayment (IDR) plan. No matter what your scenario, having one of these status means you are paying an amount less than the fully amortized payment or you aren't paying anything at all. When applying for a mortgage your credit report will show one of the following: no monthly payment (as in no number appears in the payment field), a $0/month payment is listed, or a payment significantly smaller monthly payment with respect to the balance of the student loan(s). None of this disqualifies you from getting a loan but the debt will most likely be counted toward your debt ratio using several different methods which will impact what you can and cannot finance.
FHA: FHA underwriting is the most inflexible next to USDA with respect to student loans. If you are not in regular repayment status, FHA will use the greater of 1% of the outstanding principal balance or the monthly payment on the credit report. While highly unlikely, if documenting the fully amortized payment over the life of the loan proves to be less than the 1% or payment showing on the credit the fully amortized payment can be used.
USDA (Rural): USDA underwriting always defaults to 1% of student loan balance monthly payment calculation method or the payment that appears on the credit report, whichever is more, no exceptions. Combined with the most conservative debt ratio across the board the USDA loan can be very difficult for any borrower(s) with student loans. Other restrictions like family household income limits and property eligibility also apply to USDA loans. Just as with FHA, USDA loans have great offerings too.
Conventional: If you are talking to a lender, regardless if you have student loans, ask if they offer both conventional loans underwritten by both Fannie and Freddie Mac. If they don’t and you are buying/refinancing in Alabama or Florida call us at 888-269-8335. We say this because not all conventional loans are the same and this advice will be true even if you have no student loan debt.
So for our example above using a conventional loan underwritten by Freddie Mac versus Fannie Mae, Freddie is twice as flexible with the student loan debt in that it would calculate our borrower’s projected student loan payments at $650/mo versus $1,300/mo.
VA: For eligible veterans it is no surprise that the VA is likely the most flexible with student loans. VA underwriters will use the greater of the student loan payment listed on credit report or 0.42% of the balance (that is 5% divided by 12 months). If the 0.42% is greater the actual payments can be used with a letter from the servicer. IDR plans resulting in a monthly payment greater than $0/mo can be used, and IDR plans resulting in a $0/mo payment can be used if they continue 12 months beyond the loan funding date. Also loans deferred loans beyond 12 months of the loan funding date can be calculated at $0.
If our borrower would have been eligible for a VA loan, the payment calculated by underwriting would be $546/mo versus $650 (Freddie) or $1,300 (Fannie Mae).
Jumbo: Other than to state our own, there is no industry-wide standard for student loan requirements on jumbo loans (amounts over $484,500 as of Oct 2019 in AL and FL (exclude Monroe Co)). Loans in repayment can use the payment on the credit report or documentation of actual. Any loans showing a $0 payment will use the 1% of balance monthly payment calculation. We have other info available on this blog for Jumbo Loans and Jumbo Construction Loans.
If the numerical differences between how these student loans are calculated from program to program doesn’t seem important, know that for this buyer it meant being able to afford the $325,000 home in a much better neighborhood with better schools over a $210,000 property. For some it might mean the ability to buy versus not being able to buy at all. For others it might mean being unable to refinance their existing loan.
Other than Google (j/k Google) there is no evil company preventing people from getting the most truthful information. With loan guidelines that are updated several times a year and lenders enacting their own overlays on top of those rules will only result in growing public confusion on this and many other topics related to mortgages. Missing just a little information about how debt impacts you can lead to all kinds of financial decisions that can impact you and your family today and for many years to come. We believe that empowering yourself with solid information and picking a lender with the highest level of expertise in the marketplace are your keys to success with home buying and refinancing.
If you have student loans and are buying, refinancing, or building a home in Alabama or Florida we urge you to seek out information like this and contact us with questions. No two scenarios are ever the same and we’d love the chance to get to know you and help you plan your future.
If you want to find out how much you can qualify for today, complete our online application 24 hours a day, 7 days a week.
Can I buy a house if I have student loans?
Can deferred student loans keep me from getting a mortgage?
Do deferred student loans count when applying for a mortgage?
Will student loans in forbearance keep me from getting a mortgage?
Can I afford more house if my student loans are in a graduated re-payment plan?
Does student loan forgiveness in the future allow me to buy a house now?
A few months back we received a call from a nice family from Fort Deposit, Alabama asking about building a new home after having outgrown their current home. We had given them several options and a plan for building on land they already owned with an FHA construction-to-permanent loan. Ultimately after researching and planning for several weeks they decided nine to ten months to have their new home built was just too long for their needs.
After a quick re-evaluation, we pre-approved them for a several other loan products including a USDA loan with the disclaimer that any property they found would first need to be eligible for USDA financing. A few days later they contacted an agent and found a great home on 14 acres with a similar floor plan that was built in the last ten years for under $260,000. The property was loaded with amenities like granite counter tops, hardwood floors, custom tile bathrooms, and an outdoor kitchen as well as energy saving options like spray foam insulation in the attic and tank-less hot water heater/circulation system. Not to mention to surrounding land was loaded with mature pines and provided the privacy they were hoping for (see more pictures below).
Within a few short days the home was under contract and we had USDA loan approval. The contract was written for 45 days and we had their loan ready and clear to close in 41 days. The sellers and agents were all very pleased and closing went very smoothly as planned. Most importantly the hard-working family who thought they would build found using a USDA loan and buying an existing home ended giving them an attractive home in a short amount of time, with little to no money out of pocket (seller’s concessions applied), and very affordable payments.
As it was with this family, the home buying process doesn’t always end up exactly where you start and that is why it is important you choose a lender that is an expert in closing loans custom fit for you in your market in Alabama or Florida. Many lenders pretend, we deliver.
There is never any fee or obligation to learn more about the buying process, research your different loan options, get a quote, or get pre-approved. You can visit us online for quotes and pre-approvals 24 hours a day or for more information give us a call at 888-269-8335 during normal business hours 8-5pm M-F.
In the last 24 hours we have received a fourth call in just as many months from a potential borrower/buyer who states that several local banks and credit unions in their area have denied them mortgage pre-approval on a conventional loan because their non-US residency status was “permanent resident alien” but not because of insufficient credit, income, or assets. As I assured yesterday’s caller and others before them who were in different states and markets, having a permanent resident alien status is does not bar you from getting a conventional loan.
A few months back a couple who had been refused a loan at 5 different local banks across two cities were very hesitant when I echoed this same information to them. They were very hesitant at first and with very good reason. Just like we do many other loans we had them approved in 48 hours and closed iin about 22 days with no issues.
If this is true, why is the answer from one lender to the next so different for conventional loans? The short answer is Fannie Mae doesn’t require them to write these loans and you can read their most recent explanation here. As for us, we attribute our ability to provide loans for permanent resident aliens with open arms based on good partnerships in the business who provide us the most flexibility in all loan products. This is why Gulf States Financial was created and this is who we are.
Are you or a family member a permanent resident alien who can’t find financing? Fill-out our secure online pre-approval application 24 hours a day or call us during business hours at 888-269-8335.Our guidelines related to this topic and others subject to change at any time without notice. Gulf States Financial NMLS #835698. Equal Housing Lender
A Better Way to Lock
All New Custom Rate Locking - Many times a contract closing date calls for locking a loan for longer than what is needed. This has been the trend in the mortgage industry for many years. To capture better pricing for our customers we are excited to announce the ability lock the rate only for the time the borrower needs. If the borrower needs 22 days we can lock for 22 days not 30. Combined with custom rates and the ability to shop and lock we are really looking forward to tailoring each loan for each customers needs.
The US Median home price in January 2019 was $249,900 and the South was $219,800 according the NAR. Combined with significantly lower property taxes compared to North and Western regions, the southern states still remain a significant value in terms of affordability in housing.
Home Prices: Corelogic notes that the rate of home-price growth as of December 2018 was 4.7% which is the lowest level seen in nearly 7 years.
Inventory: According to NAR Existing homes on the market are up 6.2% as of December 2018 compared to one year ago but shortages still remain in lower-price tiers. Rising inventory is good when considering new housing starts in the last decade were under 10 million where demand for housing based on population growth is believed to be around 15 million.
Do you want to see how a custom rate quote compares to a standard rate quote? Email us your questions or have them submit a pre-approval application from any mobile device 24 hours a day. Disclaimer
Tapping Equity - Buying Second Homes and Investment Properties
We typically get several inquiries a week from people all over the country who want to learn more about what it takes to finance a second home or investment property from Huntsville to Miami. Most are shocked to learn that they only need 10% down for second homes and 15% down for investment properties (excluding condos). Among those that inquire we find that most have sufficient credit and income to easily qualify but don’t have enough assets in hand to make the down payment on the “perfect place” they really love or the ideal property that will generate the most rental income so they do not take action.
With several publications announcing home values grew at national average just under 7% year or year as of QE4 2018 (which equates to nearly a $17,000 average increase) the average consumer who has owned for three years or more has much more equity than they realize. With the Fed’s announcement for 2019 and rates hitting 12 month lows two weeks ago, there hasn’t been a better opportunity for your customers to capture some of this equity and put it to work.
No two customers are ever the same and neither are the solutions on how to access equity. HELOCs are an excellent answer and will normally allow cash-out up to 90% of the appraised value while fixed rate second mortgages follow close at 85-80%. If requirements such as credit score or income for HELOCs and second mortgages are too strict, refinancing of a primary mortgage primary may be a feasible solution. Below is a current summary of what the loan-to-values allowed based upon occupancy.
Owner Occupied:VA = 100% (minus any funding fee)FHA = 85%Conventional = 85% (Freddie requires 740+)Non-conforming = 85% (porfolio and Non-QM)Conventional = 80%Jumbo = 80%
Second Homes:Conventional = 80%Jumbo = 65%
Investment PropertyConventional = 75%Jumbo = 60%
We work with a range of customers from first time buyers of second homes and investment properties to those with large portfolio holdings. If you have a customer who might be in the market who wants to discuss their scenario with one of our licensed loan officers please feel free to have them call, email, or apply online 24 hours a day.
*High Balance loan limits for both AL and FL are conforming loans between $484,351 to $749,525Disclaimer
Federal Reserve – announces on March 20th, 2019 no rate increases through the rest of 2019 – great for purchases and refinances
Interest rates across the board hit 12 month lows early last week and are trending back upward as of late last week. Rates spent the majority of 2018 climbing so this is great news not just for purchases.
The power of a refinances is big and can help realtors too – borrowing money for second homes and investment purchases against a primary residence is the cheapest money out there. In combination with good rates and higher loan to value maximums, there has not been a better time in over a year to refinance. We will talk maximum LTVs for on cash-out refinances next week.
If you missed out last week key conventional guidelines are freeing up much needed money for both condo buyers and existing owners. The details of the full article are here.
Do you have a financing scenario you are helping a customer with? Send us your questions or have them submit a pre-approval application to us directly from any mobile device 24 hours a day.
In the last three years the most successful way to finance a condo anywhere in the country was to find a unit that was in an eligible project (less than 1 in 10 chance) or put anywhere from 10% to 30% down and hope that whatever made that condo project ineligible would be avoided in a limited review. This situation and the host of problems it created have forced the masses to seek portfolio or private financing with 20-30% down payment requirements thereby barring most from ever owning a condo.
As we have mentioned before regardless of limited review or full review status, Fannie Mae knows the number one killer of conventional condo financing is high investor concentration, high single entity ownership, and an associations involvement in litigation. Realizing how damaging this has been to existing owners and potential buyers here is summary of what has changed:
Conventional – more updates coming in June 2019
Conventional LTV Updates
Like Fannie Mae It is noteworthy to echo that “Spot approvals” from HUD are now re-branded as “Single Unit Approvals” are rumored to be released in May 2019. Not seen since 2010 these allow a lender to approve loans on units that don’t have project approval subject to minor limitations. Once this change is released this will open up FHA financing for condos in all markets across the country.
At the time of this post there are 124 Approved in FL and 21 in AL but FHA condos projects but the update here is not non-Florida condos can be approved in as little as 48 hours. Existing HUD approved condos can still be found here
VA CondosIn closing it is important to mention that VA condos never expire. In Florida there are 1612 with “Accepted” status and in Alabama there are 166. If you want to know if certain projects in your area are approved, please email us and we can generate and send you a printout.
If you would like to learn more about condo financing in Florida or Alabama, you can apply online 24 hours a day or contact a licensed originator by phone during normal business hours at 888-269-8335.This information is subject to change at any time. The information herein does not constitute a commitment to lend.Photo Credit: Jeremy Kierez @jeremykierezDisclaimer
Unlike any other loan, the property you want to buy (or refinance) needs to be USDA eligible. There is a huge misconception about what USDA defines as rural and most people are shocked to learn that millions of properties close to major cities are eligible. You can check a property’s eligibility yourself by clicking here (click “accept”, Single Family from the top menu, and input the address). If the property is eligible, you need to know if your income is below the limit for the state and county where you are buying (or refinancing) in. You can check to see if you are beneath the household income limit here.
If your income is within the limit and the property is eligible, you are ready to see if your credit and income qualifies. There is no way to lay out all the guidelines, but it is important for all to know that USDA sets the floor for credit scores at 580 and they like to see a 680 score or better. If your scores are acceptable USDA also prefers a few (say 3) established credit accounts as well as 12 months of prior rent or mortgage payment history. Many lenders will say we are incorrect but alternative tradelines such as utility, insurance, and cell phone account history can be used. Underwriting a USDA loan manually is something many lenders avoid but we welcome with open arms.
It is true that USDA has tighter debt to income requirements (43% back end debt ratio) compared to FHA (45% and more) and conventional loans (up to 45%), however this one disadvantage is in many cases offset because of better interest rates and monthly mortgage insurance premiums as previously mentioned.
We do not pretend as if two scenarios are ever the same but having this background can help shape your decision making. If you want a free, no obligation USDA rate quote without applying click here. If you would like to get pre-approved, you can visit us online 24 hours a day or give us a call at 888-269-8335 during normal business hours 8-5pm M-F.Disclaimer
There are and will continue to be many benefits you need to explore on the topic of borrowing within conventional loan limits regardless of what your plans are but when building a new home the single biggest challenge of exceeding this limit is when borrowers are forced to (or believe they must) use a construction loan versus a construction to permanent loan. This can be unfortunate because a regular construction loans can cause the following common problems:
The good news is that as of today you might not have to deal with these headaches, make these sacrifices and/or be subject to these potential risks with the help of our New Jumbo Construction-to-Permanent Loan!
While it is impossible to highlight all the ins and outs our Jumbo One Time Close product here, the good news is if you are building your primary residence you might be eligible to borrow up to $1,000,000 with a 760 credit score with just 15% down or 15% total equity, up to $1,500,000 with a 720 score and 20% down/total equity, and up to $3,000,000 with 30% down/total equity.
Also new for this specific product is the ability to finance a second home with a construction-to-perm loan. Under this program a second home requires a 720 score across the board and will allow up to $1,000,000 with 25% down/total equity, up to $1,500,000 with 30% down/total equity, and $2,000,000 with 35% down/total equity, and $2,500,000 with 40% down/total equity.
As with conventional construction-to-perm loans, you can lock in your permanent rate up front and have just one set of closing costs. Likewise Jumbo Construction-to-Permanent interest rates will vary with the construction time period selected in addition to credit score, loan-to-value and other factors. However the major Jumbo advantage is that build periods have been expanded to 12, 18, or up to 24 months for projects up to $1,000,000 and beyond so this limits completion date stress significantly.
To see if you qualify, to get more information or to discuss your construction-to-permanent scenario with one of our licensed professionals please feel free to email us 24 hours a day or call 866-269-8335 during our regular business hours.
Product guidelines and terms may be subject to change at any point without notice.