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

 

 

 

 

michaelfoote com

A Bird in the Hand is Worth “No Points” in the Bush

Written by Michael A. Foote, CMB on . Posted in bad boys, direct lender, good faith estimate, high ltv, interest rates, Lending, Loan Processing, mortgage banker, mortgage broker, mortgage finance, mortgage regulations, refinance

I share real world stories with my clients always. They always help me and my clients make good informed decisions. I ran into a bad story that is good to share with all of you in regards to mortgage financing.

Too often we get stuck on getting the best deal, the easiest deal, or both. It’s a Californian’s drive to ‘grind’ people for better deals or better treatment. Sometimes it works, sometimes it doesn’t. Today’s example is of when it doesn’t.

-Paralysis by Analysis

A friend, who I’ve known for years, asks about a jumbo refinance in 2013… Yes, I said 2013. We spoke and talked about his current adjustable loan, which only interest was being paid on each month, and a recasting of this adjustable would take place in the next couple years. The new payment would be higher but the payment would be fixed and amortizing. He wasn’t willing to take the increased payment and his credit score needed to be a few points higher to obtain the slightly better pricing. The value needed to be a little higher maybe as well so we could include the HELOC that was maxed out and needing to be converted to fixed rate debt.

He moved on.

Over the next few years… rates changed very little, values shot up and in 2016, we talk about the mortgages again. Values are probably high enough to combine that pesky HELOC (which is basically a $100,000 credit card balance sitting out there…Albeit at a nice low compounding adjustable rate. The debt load was now lower so the DTI shouldn’t be an issue either. Comps are there.

We chatted, I quoted, He moved on.

Here is what the average rate and points for a conforming loan during this timeline:

2013 – 3.980% @ .70 points

2014 – 4.100% @ .60 points

2015 – 3.850% @ .50 points

2016 – 3.650% @ .50% points

2017 – 4.125%  @ .50% points

What I didn’t fully until this point was that my friend, and I still consider him a friend, was speaking with other lenders behind the scenes and had applied at a few. One lender, a super techy-awesome mortgage bro-company advertised on the TV and Radio that has a Hip Cool Name, took his application and as a crappy mortgage company does, proceeded to drag the application and underwriting process out for weeks… No matter the companies techy nature, bad service is bad service, and worse further is working with people who don’t understand the real world of underwriting and rely on the computer to make all their decisions and push their workload…and the client gets turned down. All the while talking with me about, “what I thought about what the lender was telling them”. Yes, still my friend…Yes, those are painful conversations for us Mortgage Professionals. You mean you trust me enough to tell you if the other guy is hosing you… But not trust me enough to do the deal with? <Me swallowing my pride> OK, Thanks. My kids

As a reminder, I had already done all the homework, pointed out the concerns I had to the client, who went elsewhere, because someone said, ‘It’. The two most dangerous words commonly spoken by the mortgage sales people that give ALL OF US a bad name,

“No Problem”.

There are no two more dangerous words you can hear from a Mortgage Originator…If you are a consumer, Realtor and hear these words…don’t walk, run to another Originator. Because, those two words mean its gonna be a problem! You can count on it.

So after that techy-awesome So-Phisticated FIn-Tech Lender declined my friend we spoke about where he was now. We looked at his credit report, at this point, the constant credit pulls and changes he was told to make with his debts and cards, had pushed his scores from 719 to 680-ish… Almost a death blow for a Jumbo loan.

But I still had options and presented a plan of attack.

We worked on the credit, got the scores back up. And when we were ready to get started he applied at yet another lender.  I graciously as possible accepted the call and notification that, yet again, he was going to work with someone else.

I don’t hard sell my closest friends or anyone for that matter. But I do regret not being more forceful and reminding him I’ve been doing this for almost 30 years, I’ve been right from Day 1, and oh yeah I’m your friend and trusted adviser? Maybe not? Still a friend though.

Sure enough the lender got the loan into underwriting… Which by the law is like suing someone, anyone can do it.. But getting an approval remains a difficult but precise process. Bad/Poorly Educated Salesmen = Low percentage of approvals.

My friends loan wallows in underwriting. Lot’s of “we are taking a look” or “I’m waiting to hear from the underwriter about the exception” or ” I’m gonna need another something”. All generally not good signs.

My friend was turned down again.

At this point we are in 2017 and the borrower home has peaked in value and it is probably the best time in the last four years for him to consolidate the first and second mortgages and get everything on a fixed rate, after all this is the house he wants to stay in with the wife and kids.

I quoted him again… at this point… I acknowledge that he will probably be applying somewhere else. I told him, I would have more input with underwriting, since I understand the file better than most, and I would do my best on pricing. After all after four years, it matter more to get it done than not, right?

He finds a quote that is cheaper than mine, again. Always amazing to me when there is always a LOWER quote. People… it doesn’t make it real. If you take anything away from this article, please realize you can be lied to by a mortgage sales person still. Shocking? It really shouldn’t be. People lie in all industries to win business.

I call him to check in one last time on the mortgage last week…

…And he still applied at yet another bank…

And he lost his job as well… Big paying tech job. I worry for him and his family. I am sure he will land somewhere and all will be fine.

He did say he would apply with me IF I COULD MATCH THE RATE & PRICE. I told him knowing he had lost his job is a non-starter for me as I would have to disclose it, which is pretty much a guaranteed decline at this point.

Still a friend though. I hope he lands a job, and I wish I could have made him trust me more.

Michael A. Foote -Certified Mortgage Banker & Trusted Mortgage Professional for 30 years.

949-584-4600

mfoote@calpropre.com

Apply Today

 

Child Support and Loan Processing | When Life Inserts Itself Into The Mortgage Process.

Written by Michael A. Foote, CMB on . Posted in fha mortgage, fha mortgage insurance, fha mortgage loans, FHA purchase loan, Loan Processing, mortgage broker, Mortgage Processing

Case Study:

We try to share real world scenarios with you to educate the public and the professionals alike in our industry. This week we have a buyer who qualifies all around. He works hard, gets overtime and can afford to buy. He is the perfect candidate. He has a child and lives with his girlfriend. And here is where it gets a little weird.

Most will agree that the modern family isn’t always a husband and wife and 2.3 kids anymore. In fact, more and more couples aren’t even married. But whether married or not, families have issues and arguements. and here is one case where an old wound rears its ugly head to throw a wrench in the mortgage process.

When qualifying for a mortgage we take into consideration all income, all credit report payments, and all loans and other items disclosed as liabilities, including alimony and child support.

In our case study, the buyer/borrower had a baby with a girl. Then he decided to go to college and play sports but decided not to pay his child support. The “baby momma” then filed a claim with the family court. These delinquent payments are reported on the credit report.

Since then the buyer has reunited with his “baby momma”, and it feels so good, they’ve decided to buy a home. All parties are getting along and that is great for the child and for the mother and father. However, they never update the family court and completed the proper filings releasing the father from having delinquent obligations.

Underwriters are tasked with making sure all borrower obligations and potential obligations are accounted for and documented as to why they are or are not included. Since there was no order updating the status of payments the buyer/borrower still appears to have outstanding child obligations, and delinquent at that.

It’s easy but takes borrower focus to get this rectified. If the mother and father simply go to the court and ask for new filings to update the credit bureaus and inform the underwriter of the current status of payments, if any, the mortgage process can be completed. With the borrower showing delinquent obligations and no current payments being made, the underwriter cannot properly account for the debt to income ratio and therefore not approve the loan to close.

Moral of the story, if you filing something with a city, county, state, or federal agency, make sure you update those agencies of any updates, like thefamily is together and all is good! So update those family orders and make sure you are prepared to buy.

 

 

 

Contract Processing Saves Money

Written by Michael A. Foote, CMB on . Posted in Loan Processing, mortgage broker, mortgage finance, Mortgage Processing, NMLS Approved Processing

In today’s tough lending climate, not only is business tough to get, it’s also tough to keep consistent. Some months are better than others and having salary, office space and support for operation employees isn’t always ideal. To handle increases in business and more so slow downs, it makes sense to use contract mortgage processing.

  • Eliminate payroll taxes,
  • Pay for what you close,
  • Eliminate Human Resource Issues
  • Still have access during work hours
  • Take time off when you need
  • Focus on Sales and Marketing
  • Work with Processors who have more experience

The benefits are countless. Check into outsourcing your mortgage processing today.

 

 

Top 5 Steps for a Smooth Mortgage Loan Submission to your Contract Loan Processor

Written by Michael A. Foote, CMB on . Posted in Loan Processing, mortgage banker, mortgage broker, mortgage finance, Mortgage Processing, NMLS Approved Processing, Uncategorized

Hey Everyone,

Here is a quick animated video tutorial that outlines the Top 5 steps to submitting the perfect loan to your processor. Even to your contract loan processor (like California Property Resources).

Please feel free to share and if you’d like to see more videos or have them created for your company, please visit eSimpleSolutions.com they do great digital marketing.

Click the link below to watch the video!
Contract Mortgage Loan Processing