Ken "Yes You Can" Cook

Mortgage Tip #23 (Counting down to #1)

What exactly does "full doc" mean? It is used regularly when talking mortgage speak and we say it just thinking we and the people we know have the same mind picture when we say it. So, when a loan officer says full doc exaclty what are they saying?

Full doc means fully documented. When speaking of income it means when the borrower is able to provide all of the documentation required by the loan guidelines to prove their income. Usually it means the last two years of tax returns and the most recent month's worth of pay stubs. We say month's worth because it may be 2 checks or it could be 4 checks or it could be another number. We want to see how much the borrower actually earned in the last 30 days in case there is an up trend, or down trend, in their income.

Different loan programs have different guidelines. For example if you are dealing with a real estate investor who has written off depreciation or a big one time repair on their investment property that amount may be able to be added back to the Adjusted Gross Income. So while using the AGI line only the borrower may not meet the required Debt-To-Income ratio but when adding back repairs and depreciation they do.

Borrowers who have not recieved their previous year's tax returns because they have filed an extension will usually be asked for the previous three year's tax returns but using the most recent year's extension. The extension must also be shown.

The other choices would be stated income, which is very rare today, or bank statements as full doc. Bank statements as full doc are also rare but in that case the lender would ask for all pages of all bank statements during the required period.

If you have any questions about what a full doc loan is feel free to call!

Ken Cook 866-946-0120 extension 101

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Tips Countdown Roll Call:

Tips Countdown: #24 Seller Seasoning On Title

Tips Countdown: #25 Debt-to-Income Ratio (DTI)

Tips Countdown: #26 Non-Occupant Co-Borrower

Tips Countdown: #27 Prepping for Appraisal

Tips Countdown: #28 FHA Downpayment Assistance

Tips Countdown: #29 Using Private Funding

Tips Countdown: #30 Helping Speed Loan Approval

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

We receive calls every day from people wanting to borrow $20k, $18k, or $27k to purchase an investment property. We simply cannot finance a property that low in price for multiple reasons and one of them is that we must make a certain amount of profit to stay in business. The other is that finding an investor to actually lend that low of an amount is a major task.

So what can we do?

We could look at tying up another property with a line of credit -which I never recommend unless you have a very strong exit strategy- like your primary residence. There are still a few investors who will purchase second notes on investment properties but the cost is not that attractive and the qualifications are fairly prohibitive.

Another route, of course, is to simply write a check for the property. As a general rule (not carved in stone) the minimum loan amounts for conventional financing, especially for investment loans, is $50k (fifty-thousand).

If the property needs rehab it may be possible to acquire the property and finance the rehab using a private loan. The things you want to be careful in observing here all center around how you plan to get out of (repay) that private loan. If you intend to refinance you will need a minimum of 6 months of seasoning on title (how long you have owned the home) to use the new appraised value and repay the loan in full.

Rate and term refinances are based solely on the sales price and will not work for a loan which includes the rehab costs. In other words if the sales price was $20k and the rehab was $40k the rate and term refinance would be based on $20k and not $60k -even if you can demonstrate the $40k went into rehab and upgrade and the appraised value supports the full loan amount.

Obviously if you can sell the home and repay the private loan (hard money) this is a moot point.

Whatever you do as an investor make sure you are speaking with a lender/broker who fully understands real estate investments and real estate investment financing. There are very VERY few of us in the nation who have the level of experience as my staff members at Novation Mortgage. I can lend privately in most states, some corporate funding in most east coast states and conventionally in Georgia and Florida.

I can answer questions from coast to cost. Email me at REIBroker AT gmail.com

Ken Cook 866-946-0120 extension 101

TWITTER - UTTERLI - BLOGTALKRADIO - EZINE ARTICLES - KEN@NOVATION

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SEO SERP and Content Creation for your real estate related online success.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

Mortgage Tip #24 (Counting down to #1)

The seller purchased the property at auction on the 15th of February. They paid exactly $65,000 for the property. The listing price they chose is $110,000 which is 15% lower than the most recently sold prices in the neighborhood. They listed the property on the 16th of February and your client makes their offer of $100,000 on the 17th of February.

Don't count on getting a loan approval unless the seller has owned the property for 91 days. Unless the seller is the lender who foreclosed on the property or received it into inventory from a deed in lieu. The 90 day rule is an FHA rule but it is mostly adopted by Fannie, Freddie and even portfolio lenders.

The best thing to do is ask the loan officer the buyer is working with if the loan the buyer can qualify for has seasoning requirements on title. Now if the seller purchased the property, did some rehab and documented the cost of that rehab you may be able to get around this seller seasoning issue with Fannie. As a general rule, in today's climate, flipping for big profits without doing big work, is unlikely at best. It can be done and that is one of the things we specialize in but if we find out after the offer has been made and accepted you may find yourself making a new offer so call first. First as in before you make the offer.

So why did I bring up the subject if I'm not going to give answers? Actually, if I'm doing the loan, I will give answers -very specific and very correct ones. FHA, Fannie and Freddie are all different and within Fannie and Freddie the different loan programs have different parameters. Who you gonna call?

Ken Cook 866-946-0120 extension 101

TWITTER - UTTERLI - BLOGTALKRADIO - EZINE ARTICLES - KEN@NOVATION

-----

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Seasonal Special 20 articles of 200 words each fully optimized $40 each for ALL

Tips Countdown Roll Call:

Tips Countdown: #25 Debt-to-Income Ratio (DTI)

Tips Countdown: #26 Non-Occupant Co-Borrower

Tips Countdown: #27 Prepping for Appraisal

Tips Countdown: #28 FHA Downpayment Assistance

Tips Countdown: #29 Using Private Funding

Tips Countdown: #30 Helping Speed Loan Approval

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

Agents and Loan Officers Working Together to MAKE Deals Happen (Legally and Ethically)

Sometimes the borrower(s) have great credit, good income and good assets but they still do not qualify for the best loan. How could this be? The answer is simple: they spend too much on credit!

First let me define for you Debt to Income Ratio: It is the ratio of debt to income. (Okay, sorry, could not resist.) Debt to Income Ratio (DTI) is expressed in percent. So a 20% DTI means the applicant spends 20% of their gross income on credit purchases every month. The debt is determined by the amount of monthly minimum payments shown on credit:

Mortgage $1500
Car 1 $400
Car 2 $320
Credit Card 1 $65 (minimum payments)
Credit Card 2 $30
School Loan $100
Personal Loan $80
Revolving Account $15

Total debt $2510 per month
Total GROSS income $5500 per month

Debt / Income = DTI
2510 / 5500 = 45%

This ratio is called the BACK ration. The FRONT ratio is housing expense only. Depending on what type of loan your client is getting usually only the BACK is going to present a "challenge". In the example we showed a DTI of 45 (how it would be said by the lender/loan officer) which is probably not going to be a "challenge".

Don't guess about DTI, ask the LO if they have run DO, DU, LP - whatever is being used for the underwriting engine - and if the DTI is acceptable. If it is not acceptable there are things that can be done to fix it.

Feel like asking your customer's boss of they can get a raise? No joke - been there, done it, got it, closed the loan. (But that's why you should call me - ha! I'm witty tonight.) Actually getting a raise can greatly offset the DTI even more than the "easier for you" tip of paying off some debt. Back to our example ...

Let's pay off that Revolving Account and Credit Card 2:

2465 / 5500 = 44.8 (we round UP so it's still 45)

Now let's get the borrower a $1.00 per hour raise or $160 per month:

2510 / 5660 = 44.3 (we round DOWN so it's 44)

Do both and:

2465 / 5660 = 43.5 so pay down Credit Card 1, rescore or repull and now you're in that magic 43 DTI range for FHA.

Once again, never guess on this and always see what the underwriting engine returns. A good processor/loan officer can make or break a loan on how the debt and income is structured in the submitted file.

Thanks for reading - please share. Want to know how to ask the employer for a raise? You have to call me :)

Ken Cook 866-946-0120 extension 101

TWITTER - UTTERLI - BLOGTALKRADIO - EZINE ARTICLES - KEN@NOVATION

-----

SEO SERP and Content Creation for your real estate related online success.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender

Mortgage Tip #26 (Counting down to #1)

It happens. Neither the borrower nor their spouse nor both combined earn enough income to qualify for the loan they need to purchase their first, or next, home. We see this most often on first time home-buyers where one or both of the spouses do not qualify for any of a handful of reasons.

Since there are different rules for different situations and since lenders augment or modify the guidelines from Fannie or Freddie and often go over-kill on FHA I will not publish a list but rather ask you to develop a relationship with a mortgage broker or loan officer who has experience doing NO/CB loans. This is one that is easy for a novice or inexperienced agent to blow.

Here are some reasons to ask a mortgage professional about an NO/CB loan:

Occupant borrower (OB) is new in a commissioned job and only shows salary, not commission, on previous tax returnes.

OB is a first time home-buyer with limited credit (not bad credit - that still ends in a denial).

OB simply doesn't have enough income on their own to qualify for the loan amount.

Remember this: if the OB has bad credit the NO/CB will not be enough to get an approval. The NO/CB must be a relative of the OB. The NO/CB is more than just a co-signer, they are a co-BORROWER with equal liability in repayment of the loan. A late payment or missed payment or foreclosure goes on the credit of the NO/CB. If the NO/CB has assets and there is a foreclosure the mortgagee (lender) may be able to get a judgment against the NO/CB and take their assets.

Fannie Mae and Freddi Mac both allow NO/CB but make sure the program counts the income of the CB for the purpose of qualifying. With Fannie the OB must qualify on DTI on their own. Again, you need the mortgage professional, one with experience in these more difficult loans, to advise and councel.

Loans requiring NO/CBs are not for the green or low volume mortgage person. You really need to have someone who know what they are talking about. Even most lender Account Executives do not know all of the requirements and caveats of every loan program where an NO/CB is used.

There are also caveats when community assistance is being used on the mortgage.

So why did I bring up the subject if I'm not going to give answers? Actually, if I'm doing the loan, I will give answers -very specific and very correct ones. FHA, Fannie and Freddie are all different and within Fannie and Freddie the different loan programs have different parameters. Who you gonna call?

Ken Cook 866-946-0120 extension 101

TWITTER - UTTERLI - BLOGTALKRADIO - EZINE ARTICLES - KEN@NOVATION

-----

SEO SERP and Content Creation for your real estate related online success.

THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.

EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.

Copyright©2008 Ken Cook. Georgia and Florida real estate investment loans, FHASecure and FHA Home Loans, nationwide commercial hard money and small business loans, non-recourse loans for real estate investors

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 FHA Lender - Equal Housing Lender