The Bank Statement Mortgage

Written by Michael A. Foote, CMB on . Posted in 100% financing, bad boys, bank statement, direct lender, Loan Processing, mortgage banker, mortgage broker, non-prime, purchase loan, Real Estate, refinance

The Bank Statement Mortgage:bkstatementloan

Once again new mortgage products are hitting the market and serving a smaller more niche segment of American consumers. This is a great alternative product for the homebuyer and homeowner. Typically coming with 30, 25, 20, 15, 10 year fixed, adjustable rates and even some interest only options. Let’s take a look at the bank statement mortgage, the “Good Bad and the Ugly”. Let’s start with some negatives.

The Bank Statement Mortgage generally comes with a higher than average interest rate. It makes sense. The more risky a mortgage is, the more it costs. Using bank statements as income to qualify is by itself more risky. The lender is basically acknowledging you may not be able to qualify for a mortgage if you used your traditional income documentation, like tax returns, W-2’s, paystubs etc. Expect an interest rate at least 1.5% over the going conforming market rate and cost. You will almost certainly pay fees/points to get a manageable rate. But again, it is an Alternative when you’ve been turned down for a conventional conforming mortgage.

You don’t get to use ALL your deposits.  Typically, you cannot use all your deposits. Lenders will typically disallow, returns, refunds, cash (unless typical for business) and transfers from other bank accounts you control. You will also most likely have an expense factor subtracted from your deposits… Oh yeah and your deposits need to usually be within your Profit & Loss Statements stated income. It’s not JUST your bank statements being used it the whole financial picture. A qualified licensed Loan Officer is critical for a smooth bank statement loan.

You may be able to use business or personal bank statements. This mortgage product sometimes allows wage earners to use personal bank statements and self-employed borrowers to use business bank statements. The percentage of deposits you can use, can be impacted by the number of owners of your company.

You can borrower up to 90% of your home’s value. Or put down as little as 10% if you are buying a home. This program has slowly expanded and there are programs that can allow you to borrower up to 90% of the value of you home. Purchase, Cash-Out or Rate and Term Refinances are available.

There isn’t usually any Mortgage Insurance required on these products. So no mortgage insurance payment every month if you borrower more than 80% of your value.

Don’t forget to check for a prepayment penalty. Some of these products carry with them a prepayment penalty, in the event you pay the loan off early.  Make sure to read your loan documents carefully!

 

Michael Foote 

michael@michaelfoote.com 

Certified Mortgage Banker, Licensed Real Estate Broker. NMLS 235435, 1059372

Owner – Broker – Operator – Originator

 

 

 

 

Freddie Mac Loan Prospector LP Open Access Relief Program

Written by Michael A. Foote, CMB on . Posted in 1% cap, 100% financing, 125% Mortgage Loan, bad boys, direct lender, fannie mae bankruptcy, FHA lending, FHA lona refinance, fha mortgage

By: Michael A. Foote

A frequent occurrence today in the life of a loan originator involves telling your optimistic potential borrowers that they don’t have enough equity to refinance and lower their payments. A fact that rubs salt in the wound is that the clients have undoubtedly made all their mortgage payments of time for many years.

To aid in helping underwater or low equity borrowers refinance into a new lower fixed rate interest rates, Fannie Mae and Freddie Mac have developed and launched a very successful refinance program. Fannie Mae’s program has seen wider adoption as LP Open Access was not pushed to many third party providers. Most likely the lack of interest was due to the banks potential losses from the program.

In any event LP Open Access is now more widely available from brokers and banks alike.

The program offers up to 105% LTV and unlimited CLTV which basically means if your home was worth $100,000 and you owed $105,000 on your first mortgage and $100,000 you would potentially be able to refinance that $105,000 first mortgage and leave the 2nd mortgage where it is at.

Although the second lien holder needs to subordinate, that lender has an incentive to approve the subordination since the borrower is most likely saving money on the first leaving an even less likely chance the borrower would default on the second mortgage.

So, if a borrower is at 6% fixed he could easily get a new mortgage rate in the 4% range with NO Mortgage Insurance. A full appraisal is required for this product and the existing loan cannot currently contain MI and the loan also must have been originated/funded prior to May 31, 2009. Minimum required FICO scores are also near or as low as 620. This program follows the temporary and permanent high cost loan limits. 1-Unit to $729,750 for another couple weeks then it will drop to $625,500 in high cost areas. 1-4 Units are eligible up to $1,403,400 and will drop to $801, 950 as noted earlier.

The program is clearly worthwhile and to find out if you are qualified you only need your mortgage professional to look-up your property address. This requires the last four numbers of the borrower as well.

If you are preliminarily qualified for the LP Open Access Relief Refinance Program, the process is very similar to getting a regular mortgage, in fact, it is almost identical.

Rates and programs are 30 and 15 year fixed are the only options available and rates are in the range of regular 30 year fixed agency paper. In some cases even lower.

So if you’ve been turned down recently for a refinance make sure you’ve looked at all options. Don’t fret. Call your local mortgage broker professional and ask about the LP Open Access Relief Refinance Program and its sister product, Fannie Mae DU Refinance Plus.

Michael Foote is a twenty plus year real estate and mortgage professional with multiple state licensing and over $1 billion dollars in personal production.

USDA Mortgages? I thought they graded my beef not my credit.

Written by Michael A. Foote, CMB on . Posted in 100% financing, rural housing loans, usda, usda mortgages

Yes, it is the same USDA that grades and approves our meat and many other components of our agriculture industry. But in fact, USDA also offers mortgages via guarantees made to lenders both large and small. One of the key departments within USDA is Rural Development, whose mission is to bring housing, modern telecommunications, safe drinking water and a bumper crop of benefits to our country’s rural communities.

Although our government and economy have been ravaged from the mortgages originated over the last many years, government agencies are in fact trying to stabilize our housing market by providing support for capital markets, guarantees for lenders, and through government subsidized programs such as these. One of the most popular programs is the USDA Guaranteed Rural Housing Mortgage.

So what is a USDA 502 Guaranteed Rural Housing (GRH) Mortgage like anyway? It happens to be one of the only true 100% No money down purchase products on the market today. The other 100% mortgage product is the VA mortgage. Some basic qualifying guidelines are, the borrower must occupy the property, is a citizen of the country or admitted for permanent residency, does not have non-occupying co-borrowers, and will sell their existing home, if one is owned.

Some program highlights are the property must be located in eligible rural area. These are normally any town with a population of 25,000 or less – and it cannot be adjacent to a large metropolitan area. There are no loan limits and sales price limits…Yep I said it, no limits. There is a one-time USDA Guaranteed fee – and yes, you guessed it that fee can be financed. You can even roll in all closing costs if the appraisal comes in higher than the sales price.

The USDA 502 program does not require monthly mortgage insurance. This is a significant advantage over FHA financing in that respect. This savings can be as much as .55% per year and most likely more if FHA raises their monthly mortgage insurance requirement. These purchase transactions can even include new construction.

USDA even allows refinance of an existing USDA GRH loan provided there is a financial benefit via rate reduction or payment reduction. This program ONLY allows 30 year fixed rate mortgages that are fully amortized. The program allows for condominiums and PUD’s along with the standard Single Family Residence.

If you have credit issues, this program may still be for you. Although 620 credit scores and higher are preferred, 580-619 are considered with compensating such as reserves, job stability and more. Less than 580 credit scores are regarded as a much higher risk and require more due diligence then most lenders are willing to commit to in today’s market.

So is this a great program, in a word yes. Clearly 100% I hard to find and without Mortgage Insurance, makes the USDA Guaranteed Rural Housing program represents the highest amount of leverage available for a primary residence purchase on the market today.

So where do you start? Find a lender that offers USDA financing. Mortgage Lenders, Banks and even mortgage brokers have access to this program. Finding an educated Loan Officer however may pose a challenge. Since the USDA Rural program is fairly small in the mortgage landscape, your typical mortgage call center loan officer is just not going to be familiar with this loan. So make sure to do your research and feel comfortable with the person originating your loan and always check references.