The Mortgage Brothers Show: Recent Episodes

Eddie and Tom Knoell

From Phoenix Arizona, Eddie and Tom Knoell answer the mortgage questions that buyers, sellers, and real estate agents have when it comes to the process of getting a home loan in Arizona. Eddie and Tom's family has been living in Phoenix for 4 generations and they have a 30 years combined experience in the mortgage and real estate industry.

00:00 Welcome everyone, Mortgage Interest Rate Update for today

In this presentation we’ll update you home loan interest rates today. Whether you are looking to refinance your mortgage or purchase a home, we recommend that you go with a Mortgage Broker. You’ll get a lower rate, have lower costs, and receive better customer service.

Thanks for listening and reading the Mortgage Brothers Show. If you would like to contact us;

📞 Call us at 480-565-7843
💥 Email us at rates@azmortgagebrothers.com
💥 Visit us online at https://www.azmortgagebrothers.com/

Be sure to ask us for a free quote on your next mortgage in Arizona. We’ll personally work with you and help you through the whole process.

Source materials in the presentation have been taken from county records, Redfin, Zillow, Freddie Mac and the Economic Research at The Federal Reserve Bank of St. Louis. Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS 210917 and 1618695. Equal housing lender

Conforming Loan limits just went up!

Today we’ve got an important announcement. So, we just want to get right to it.

Conforming loan limits just went up!

They’re now at… drumroll…

$625,000

And this is from the previous (i.e., this year’s) $548,250.

Normally, this increase goes into effect January 1st, but we have access to this new loan amount right now.

This is a big increase.

Between 2021 we saw ~7% increase in the loan limit, and this year we’re seeing ~13%, which is just fantastic.

In terms of purchasing power…

With the minimum down on conventional loans being 5%, with the $548,250 loan limit and the minimum down, the max purchasing power you had was ~$577,000.

But now, with the new limit that we have early access to, with the minimum 5% down on the conventional loan your purchasing power jumps all the way up to ~$657,000.

This is, again, fantastic and it helps keep you out of that jumbo loan range. This is huge news too if you’re looking to cash-out. There’s a lot of lenders who aren’t able to offer this. Thankfully, we are. If you’re interested in this or learning more give us a call at 602-535-2171 or shoot us an email at one of the addresses below.

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Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

We’re talking about what it means to hold title on a property and some different ways you might hold it. If you want to dig really deep into this, we suggest checking with legal counsel. We’re simply mortgage experts trying to answer some questions. It’s not an exhaustive list, but let’s dig into some common questions and scenarios.

What does it mean to hold title?

Holding title means you own the property. Being on the loan doesn’t mean you hold the title or that you actually own the property.

Holding title as a sole owner

This would mean that you’re holding the title all by yourself and that when you die it would be directed to wherever your estate designates to go. You would need to give instructions and you may have to set up a trust. This is a simple, straightforward way to hold a title.

Can you still hold title as a sole owner if you’re married?

You can still hold sole title as a married person. However, often the title company insuring the title will require that the other spouse specially relinquishes their right to the title establishing that both parties are okay with this situation.

What does it mean to hold a title with co-ownership

This means that the property is owned by two or more people.

Co-ownership as community property with rights of survivorship

If you’re in a community property state, you can take the title as a community property with rights of survivorship. The rights of survivorship means that if one of the owners dies, the deceased party’s ownership is automatically transferred to the surviving owner. This is the same if there are more than two owners. If the third dies, and there is a right of survivorship, the other two would receive the third party’s share.

Holding Title as Joint Tenants

This is another type of co-ownership. This is a type of property ownership by two or more people who don’t necessarily have to be married. However, they do need to own the property in equal interests. For example, if there are ten people on the title, you’d all need to have a 10% stake in the title. What’s cool with joint tenancy is that you can each separately convey your ownership to whoever you want, depending on the agreements of the tenancy. It’s also possible, if you want to, do this with rights of survivorship.

Tenancy in common

This is ideal for people who are buying for investment or the like. If someone puts up a lot of money and one person owns, say, 80%, and then you could have, say, ten other people who each own 2%. This is the most autonomous way to own property. You can sell it by yourself. You don’t have to get anyone’s permission. However, you can’t sell the whole property, just your share in it.

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We hoped this helped orient you a bit about some different ways to hold title. If you have any more questions you can give us a call at 602-535-2171. We’re always happy to help.

Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

How Does My Car Loan Payment Affect My Mortgage?

· Car payment of $250/month: It will reduce your purchasing power $50,000

· Car payment of $400/month: It will reduce your purchasing power $90,000

· Car payment of $600/month: It will reduce your purchasing power $141,000

· Car payment of $1000/month: It will reduce your purchasing power $235,000

PMI Calculation example based on these 7 factors:

· 5% down

· 200K loan amount

· 1 borrower

· 760 credit score

· Single family residence

· Primary

· Debt to Income Ratio

FHA

- If the loan is a purchase or a rate and term refinance, the client cannot have more than 2 X 30 lates in the past 12 months from the application date.

Fannie & Freddie

- The client cannot have any 60 day lates in the last 12 months prior to the date the credit report was pulled through closing.

- Borrower can have 30 day lates within the last 12 months but we need Approve/Eligible

VA

- The client cannot more than 1x30 day late payment in the past 12 months from the credit report date but we need Approve/Eligible

How Much Home Can You Afford VS How Much Home Should You Buy?

A lot of people ask us “how much can we qualify for” or “how much should we qualify for?” when it comes to applying for a mortgage. In other words: What prices of home should I be looking at?

No matter where you are in the market, the prices are what matter. There are so many variables that go into this, but really the questions are:

How much should I be willing to spend?
What do you need to keep your mortgage payment below?
How does this translate to a home price?”

If you’re already budgeting (how much you spend on your car, eating out, insurance, etc.) you’re going to want to add in your potential mortgage and see how that would fit in with your current expenses.

Let’s take a look at an example.

Let’s say your income is $100,000 a year, and you have $750 dollars of credit debt. This doesn’t include your bills and the like. It’s just what shows up on your credit report. We’re also basing these estimations off a 4% interest rate. We know this isn’t where things are right now, but we want these calculations to err on the conservative side.

So, with these numbers you’d likely get approved for a loan amount up to $475,000, which translates to a 30-year fixed mortgage with a monthly payment of ~$3,000.

Could vs. Should

On a percentage basis, a loan of $475,000 with a monthly payment of $3,000 a month would account for ~35% of your income. Now this is what you could afford. But that’s not the same things as what you should afford, or budget for.

What’s the responsible amount of your income put toward a mortgage payment?

As a general rule of thumb, we recommend that you keep your mortgage payment making up no more than 25% of your annual gross income. So, if you’re making $100,000 a year and you have $750 a month in debt, we wouldn’t suggest you get a loan above $342,000, which would translate to ~$2,080 as a monthly payment.

What amount of my income should go toward my mortgage payment if I’m getting a second home?

If you’re getting a second home or a vacation home or that cabin in the woods, we still think that your combined mortgages shouldn’t require up more than 25% of your gross annual income.

Budgeting Is Important

Everyone’s financial circumstances are different, but regardless of where you live and how much you make it can never hurt to be conscientious with how you spend your money and how much you are able to put toward housing or a mortgage. This is where good loan officer comes in. They’ll help you figure out what the bank can do for you and they’ll help you identify what sort of mortgage you should get. We do this all the time and we’d be happy to help.

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Let us know if you have any questions you’d like us to answer on our podcast. You can email your questions to team@azmortgagebrothers.com or give us a call at (602) 535-2171.Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

What’s the BIG Deal About Escrow Accounts?

Why do banks encourage borrowers to have an Escrow Account? What is the purpose

Banks want to make sure they know that a borrower’s taxes and homeowners insurance is being paid on time…why?
Unpaid taxes will become a priority lien on your property…banks don’t want that to happen.
If your homeowners insurance policy not in effect due to any issues of non payment, the bank is unprotected against fire and destruction. The home is collateral for the loan.

What are the pros of an Escrow Account?

You don’t have to deal with paying your taxes twice a year and your homeowners insurance once a year
The bank is putting those funds aside for you, and so, they are basically saving the money for you without you having to think about. If you pay taxes and homeowners insurance on your own you’ll have to bite of those big invoices a couple of times a year. Having the escrow account keeps your budget nice and stable.

What are the Cons of an Escrow Account?

Taxes and Homeowners Insurance change every year so it is very possible that annually your mortgage payment will have to adjust a little bit. Some homeowners find this annoying that they have to adjust their autopayments etc.
The money that you have in your escrow account is setting at the mortgage company bank so you are technically not earning interest on that money. Most of the homeowners that we talk to tell us this is the primary reason why they don’t want to have an escrow account. The interest is so minimal that it really isn’t a good reason in our opinion.

This Podcast is to warn borrowers about the effect of Trigger Leads. What is a Trigger Lead? The 3 credit bureaus notify businesses, who purchase trigger leads, when you have your credit pulled. Trigger leads can lead to scammy phone calls from other mortgage lenders who try to give the impression that they are associated with the transaction that we are working on. They are trying to hijack the mortgage process and get you to give them all your personal information and ultimately do you mortgage.

Solutions to prevent this;

Go to https://www.optoutprescreen.com and it will guide you through the steps to opt out of unsolicited offers
https://www.donotcall.gov/The do not call list is a good way to slow down the number of unsolicited phone calls

The Federal Trade Association page here is a really good resource to help direct you to all the different opt out options available https://www.consumer.ftc.gov/articles/0262-stopping-unsolicited-mail-phone-calls-and-email

Lender considers your mortgage late if your payment is received after the 15th of the month. Typically a 5% fee is assessed (of your loan amount ). This will not be reported to the credit bureaus

Credit Bureaus will consider you late if your lender hasn’t received your payment by the end of the month. Credit Bureaus will reflect 30, 60, 90, and 120 day lates.

Keep in mind that if you are 90 days late on your mortgage payment, your lender will likely start the foreclosure proceedings. The lender will send you a notice in writing warning that your home will be sold at auction within 90 days if you do not get your payment current.

If income is eligible to be grossed up, here are the gross up limits;

· Gross up to 25% on Conventional loans

· Gross up to 15% on FHA loans

· VA loans do not allow grossing up any income

The Following Income types never subject to taxes that can be grossed up with Conventional and FHA loans:

Adoption Income
Foster Care Income
Child Support Income
Military Income - Regular Military
Military Income - Reserves or National Guard
Supplemental Social Security Income - Received on Behalf of a Client
Supplemental Social Security Income - Received on Behalf of a Non-Client
VA Income Benefits - Service Connected Disability Compensation
VA Income Benefits - Non-Service Connected Pension
VA Income Benefits - Program of Comprehensive Assistance for Family Caregivers
VA Income Benefits - Dependency Indemnity Compensation
Temporary Disability or Temporary Leave Income (Workers' Compensation)

The following sources of income may be subject to income taxes depending on the client's adjusted gross income, and therefore may or may not be grossed up depending on amount of income that is not taxable according to borrower tax returns.

Annuity Income
Housing Allowance
IRA Distribution Income
Private and Long Term (Permanent) Disability Income
Pension Retirement Income
Recently Retired and Not Yet Receiving Pension Income
Retirement Account Income (401k, 403b, Keogh)
Social Security Disability Income - Received on Behalf of a Client
Social Security Disability Income - Received on Behalf of a Non-Client
Social Security Retirement Income - Received on Behalf of a Client
Social Security Retirement Income - Received on Behalf of a Non-Client
Social Security Retirement Income - Recently Retired and Not Yet Receiving Income

How Fast is Too Fast to Close a Home Loan to Purchase a House?

What is defined as a Fast Closing? On a purchase transaction closing in 25 days or less would be considered a very fast closing. And we recommend strongly that buyers avoid closing any sooner than 25 days from the start of a contract.

Why shouldn’t a buyer try to close fast? What can go wrong?

· Buyer stress is typically higher with short closings…everything is a RUSH.

· Due Diligence on the house is rushed and often important issues are overlooked

· Paperwork is RUSHED. As a result human error on paperwork is more likely to be an issue with RUSHED closings. Buyers will have to be very flexible with the process and since they will have little time to review paperwork and review what they are signing. Extremely detailed and Picky borrowers will not be a good candidate for Fast closings.

· Appraisal order is RUSHED, E-signings is RUSHED

· The entire purchase transaction can leave the buyer with a bad taste in their mouth about their purchase which can lead to buyer remorse.

Exceptions: Cash buyers and Investors can close as fast as they want, we still recommend buyers be cautious and do their due diligence.

Where does the pressure to close early come from? Answer is: primarily from real estate agents. Why is that? They typically are motivated to differentiate their buyer’s offer from other offers, they are trying to make their buyer’s offers more attractive.

What if a buyer NEEDS to close early, Can we do it? Answer is: Yes, but we want to make sure we set realistic expectations from the very beginning. Buyers need to be uncomplicated (cannot have layers and layers of income, assets, moving funds to here and there, etc.) and buyers need to be a bit tech savvy…we don’t want buyers sending us documentation through their phone camera images, low resolution docs…etc. Buyers need to know how to access their documents as .pdf files for example. Buyers will have to be very flexible with the process and since they will have little time to review paperwork and review what they are signing. Extremely detailed and Picky borrowers will not be a good candidate for Fast closings.

What is the recommended time needed to close a home purchase loan?

Answer: 30 days

We get asked all the time if real estate is a better way to build wealth than the stock market. Often times these questions lead to the conversation around comparing real estate investing to other traditional investment vehicles. So, today we thought we would break down what it would look like if you took $12,000 savings and put it into the stock market making 10% a year over 10 years and compare it to what it would look like if you took $12,000 savings and used it to buy a home that is appreciating at the standard inflation rate of 3%. The results are stunning!

We get asked all the time about real estate investment loans, and using 401k money towards a home purchase, etc. Often times these questions lead to the conversation around the comparison of real estate investing vs other traditional investment vehicles. So, today we thought we would discuss it

Second home mortgage rates vs. investment property mortgage rates

● Compare rate options

● Same factors as primary apply (anything additional?)

● Talk about DTI requirements briefly

Second home financing

● Second home: one you’ll live in for part of the year, but not full time.

● Occupancy: part-time occupancy required

● Second home interest rates: slightly above market

● Down payment: usually 10% or more

● Credit score: 640 or higher

Investment property financing

● Investment property: one you will not live in at all and plan to rent out year-round.

● Occupancy: not required

● Investment property loan rates: 0.50% to 0.75% above market

● Down payment: 15% to 25%

● Credit score: 640 or higher

Compare to: primary home financing

● To give you a clear idea of what those benchmarks are, here are the typical lending rules for primary home mortgages:

● Occupancy: required

● Interest rates: standard market rates

● Down-payment: starting at zero percent (with grants)

● Credit scores: Starting at 500

Why the rules are different

● The home you live in (your “primary residence”) is seen as the least risky form of real estate.

● Of course, borrowers will find different lending standards for different types of property, depending on the lender and the mortgage program. So it’s important to compare loan options before financing a second home.

Can you avoid higher rates?

● It might be tempting to list your second home as a primary residence, and profit from lower rates or easier qualification. But it’s unwise to do so.

Other FAQs

● Are you allowed to have overnight rentals?

● Are there limits regarding how many nights you can rent?

● How much time must you spend there for it to qualify as a vacation home instead of an investment property?

● Can you have an accessory dwelling unit?

Common Questions

Can I use money from my business accounts as part of the down payment?
Can I Use Cash or a gift as Part of the Down Payment?
Do I have to put a larger amount down on investment properties?
What is the minimum down payment for a mortgage (Are there zero down mortgage loans)?
What’s better to pay PMI to save my cash?
What is the connection between the down payment and the LTV?
If the appraised value of a home exceeds the sale price, can the difference be applied to the down payment?
Can a home seller contribute to the buyer’s down payment?
Is it wise to withdraw funds from a 401K to make a down payment?
Can the lender contribute to the buyer’s down payment in exchange for a higher interest rate?

What is Mortgage Insurance and how does mortgage insurance work?● Mortgage insurance makes it possible to hand over a much smaller down payment and still qualify for a home loan. It protects the lender in case you default on the loan.
● Explain what a conventional mortgage is: PMI is required with less than 20% down.
● With an FHA you’ll pay for mortgage insurance regardless of the down payment amount.
● VA mortgages require a “funding fee,” rather than mortgage insurance.

PMI vs. MIP and others● FHA mortgage insurance premium (MIP)
● PMI for conventional mortgages
● VA mortgage insurance

Is Mortgage Insurance a bad thing? How is it calculated?● How much can it affect your DTI ratios?
● Are there positives to PMI? More savings vs large down?

This week, my brother Eddie and I discuss "New Strict Rules for Mortgages During COVID 19?" The virus is causing mortgage lending and bank guidelines to continually evolve and tighten down. Banks want to protect themselves from the risks that mortgages inherently have during times of uncertainty. Some borrowers will find it more difficult to get pre-qualified in the current climate compared to before the virus.

Things to be aware of re COVID-19 (Purchase/Refinance) Mortgage;

Credit Scores More Critical
Lower Debt to Income Ratio Requirements
Cashout Refinances have stricter requirements
Self-Employed Borrowers will be scrutinized. 75% of your net income could be used by some banks. Self employed borrowers need to prove they are actively in business within 10 days of closing
Jobs in affected industries will require some overlays

In General, the following apply to all banks during COVID 19 currently

· Longer Review Times (Purchases VS Refinances)

· Reserves (in general are becoming more important)

· Verifications of Employment (w/ in 24 hours of funding)

· More Frequent (10 day prior to COE & with 24 hrs) verification of employment

· Borrowers are signing Extra Rep/Warranties

When to consider a 15-year fixed-rate mortgage notes
● The main draws of 15-year fixed-rate loans: lower interest rates, and quicker payoff
● Like any fixed-rate loan, they also offer stability; the monthly payment won’t change no
matter what happens to inflation or market interest rates. Compare rates to 30 year.
● Monthly payment will be much higher than that of a 30-year loan for the same property
due to the shorter term, and that will make it harder to qualify for the loan.

When to consider a 30-year fixed-rate mortgage
● If you want to maximize your loan amount, a 30 Year fixed will keep your Debt to Income ratio lower, allowing you to get approved for a higher loan amount.
● You can claim a sizable tax deduction based on interest payments for your 30-year loan,
especially in the early years, when most of your payments go toward interest.
● If you don’t plan to stay put for several years, or if you want a lower rate, a 15-year
fixed-rate mortgage or an adjustable-rate mortgage might be a better option.

Forbearance: Forbearance lets you make reduced payments or no payments for a set period of time, though your loan continues to gain interest during this period. The skipped payments are then due at the end of that designated timeline. In some cases, a lender may let you spread those skipped payments out over a few months.

Deferment: Deferment also allows you to skip payments, and sometimes it puts your interest on pause, too. With deferment, your payments may be due once the designated time period ends or they may be tacked onto the end of your loan (basically extending your loan term).

The Mortgage Brothers, Tom and Eddie Knoell, discuss cashout refinances during the COVID 19 pandemic

We are getting a lot of questions like these:

“How stable is the economy right now, are we going into a recession?”
“Will housing values drop like a ton of bricks, and if so should I be taking advantage of
the equity in my home now before it does?”
“Having cash on hand right now can add a sense of security - but is it worth leveraging
my home to do it?”

All great questions and concerns so we figured we would dive into this topic and break down 3 considerations to look at:
● Current Home Price Trends - what are home values doing right now and how
does it compare historically.
● Current Rate Trends - what are rates doing and how does it compare historically.
● What if scenarios - what if the market goes down what if rates go up and vice
versa.

SBA Loan Information https://www.sba.gov/funding-programs/...

Eddie and Tom Knoell discuss 4 SBA Loans For Corona Virus Relief that are available. 1- Payment Protection Program...2- $10K Economic Injury Disaster Loan Emergency Advance...3- SBA Express Bridge Loans...4- SBA Express Bridge Loans

Keep in mind that 1099 Independent Contractors should be able to apply for the PPP (Payment Protection Program) loan starting April 10th 2020

Eddie and Tom Knoell discuss how the CARES Act (signed into law March 30th 2020) affects Homeowners with Mortgages. Is the Government going to forgive your mortgage payments? What is mortgage payment forbearance? Can you qualify for mortgage payment forbearance? If so, for how long?There is a lot of misinformation and misinterpretation out there. Eddie and Tom hope to clear some things up.

Tom and Eddie Knoell discuss how past due or delinquent accounts can quickly be turned over to a collections department or agency that will then become responsible for collecting the debt. Debt collectors can be intimidating to consumers, especially when their attempts to collect a debt lead to daily calls, emails, letters, and text messages. The idea of facing off with debt collectors can be overwhelming, but knowing what mistakes to avoid when dealing with debt collectors can be beneficial to consumers.

This week, my brother Tom and I discuss "How High will your Lender allow your Insurance Deductible to be? $1,000? How about $5,000? Maybe $10,000?" As many of you know the higher your deductible, the lower your premium. If you are intrigued about the idea of having really low premiums and a high deductible, watch this episode...banks don't let borrower go above a certain amount. Listen to our podcast to get the quick details and be sure to share this episode

Customers will say "I pay my credit cards off every month" but when we pull their credit report, we'll see large balances reported on their credit report and their credit scores will be lower than they thought. We discuss why that happens and the trick to avoid the bureaus reporting a high balance on your credit cards.

This week, Tom and Eddie Knoell discuss "How to refinance student loans into a Mortgage without it being considered a cashout refinance'. Did you know that if you take cashout of a your home in a refinance, the interest rate is higher? There is an exception with student loans, but there are some details you need to know.

The VA department has made some exciting changes effective January 1st 2020. There will be no VA loan limits for borrowers who purchase a home, subject to them having no outstanding used entitlement. What an incredible opportunity this is for borrowers who are looking for larger home values!

If you are getting a conventional loan on a refinance or purchase, you might not need to get an appraisal done on your home...you read that right! About 20% of loans today are receiving 'Appraisal Waivers' in the underwriting process. Tom and Eddie Knoell discuss what an appraisal waiver is, how it works in the mortgage process, and the benefits to consumers.

In Arizona and most of the USA the 2020 FHA loan limits have been increased from $314,827 to $331,760. Listen to our podcast to learn why this is great news for Arizona buyers and sellers.

In Arizona and most of the USA the 2020 conventional loan limits have been increased from 484,350 to $510,400. Listen to our podcast to learn why this is great news for Arizona buyers and sellers.

How to Freeze and Unfreeze Credit Reports when getting a Home Loan Mortgage

· Easiest, most efficient, and cost effective way to protect your credit from hacks and theft is to freeze your credit report files

· That being said, you don't want a credit freeze to cause a lot of hassle in your life. We know a lot of borrowers who have had to spend hours on the phone trying to figure out how to unfreeze their credit so that we can pull their credit to get them pre-approved. Don't let that happen to you...

· Equifax and Transunion are free and easy...we recommend just freezing those 2 bureaus

· It is easy to temporarily freeze and unfreeze your Equifax and Transunion bureaus online. It literally just takes 60 seconds to do

· You can elect to unfreeze for specific dates. This is very helpful especially if you are getting a mortgage - There are Pins to unfreeze your credit over the phone or mail...be sure to store your pins somewhere safe

· Of course, Please keep your login info safe and security. You don't want to go through all this effort just to make it really easy for a hacker to get into your credit file

How to count Commissions and Bonuses and Tips

Conventional

Commissions and Bonuses are treated very similarly
Conventional need 12 months receipt of commission/bonus with no job gap greater than 30 days
Ok if borrower changed employers with same industry and line of work
Conventional requires 24 months of tip income NO GAPS receipt and employer need to confirm that the tip income is expected to continue

VA Loans

VA requires 24 months receipt on commission/bonus with no job gap greater than 30 days
Conventional requires 24 months of tip income NO GAPS receipt and employer need to confirm that the tip income is expected to continue

FHA Loans

FHA requires 12 months receipt on commission/bonus with no job gap greater than 30 days
FHA requires 12 months of tip income NO GAPS receipt and employer need to confirm that the tip income is expected to continue

Home Loans with Gaps in Employment
- All programs are fine with job gaps less than 30 days

- Fannie Mae technically does not have any Job Gap max allowed limit like Freddie Mac. Technically borrower can be out of a job for years and come back to workforce along with letter of explanation and be okay- only full time hourly or salary allowed

- Freddie Mac: If the gap is greater than or equal to 6 months, a letter of explanation from the client is required explaining the circumstances surrounding the gap in employment. Freddie needs a 12 month work history in the last 24 months - only full time hourly or salary allowed

- FHA - job gaps over 6 months are issue. They are doable if borrower has been with current employer for 6 months and they a consecutive 2 year work history prior to any job gaps

- VA requires borrower to have 12 months history on current job if there are job gaps over 60 days with the last 2 years. Explanation letter needed - and only full time hourly or salary allowed

Did you know that in certain circumstances a parent can purchase a home for their child without the child being on the loan AND we would do the loan as a 'primary residence'? Yes, its true. Also, vice versa, a child can purchase a home for their parent without the parent being on the loan AND we would do the loan as a 'primary residence'

Combo Home Loans - What you need to know

Simultaneous Close - Purchase or Refinance
OR you can do a Pos Closing combo loan
90% combined loan to value limit
680 minimum credit needed
Minimum initial draw of $25,000
Max home equity line of credit loan amount $500,000
45% maximum debt to income ratio
No asset verification
Follow Fannie Mae seasoning on Bankruptcies, Foreclosures, and Short-sales

How to navigate a home loan after a Divorce

Arizona is a Community Property State (50/50 Ownership)
Advice – find a good attorney; financial planner, and mortgage broker
MOST TYPICAL SCENARIO WE SEE – One spouse stays in home & refinances the other spouse out.
- To take cash-out to pay a spouse off (No pricing hit or LTV hit for cash-out if equity needs to be paid to ex-spouse per decree)

Income (Alimony & Child-Support)

NEED 36-month Continuance (for all programs)
Conventional Loan = must have at least 6 months receipt
FHA & VA Loan = must have at least 3 months receipt
Jumbo Loans = must have at least 12 months

Debts (Alimony & Child-Support)

Decree overrides what is in the credit report re liabilities
Each Spouse will stand alone and will need to qualify based on their own credit and income (taking into account Debt to Income Ratio)
If one spouse doesn’t earn enough, maybe think about getting a co-signer!

What documents are typically needed?

Final Divorce Decree
May need bank account documents from ex (so keep good relationship as possible)
No need to pull ex-spouses Credit (after the divorce decree)
Quit Claim Deed (or Disclaimer Deed…if done before divorce)

This week we discuss "What Self Employed Borrowers need to show us to get a mortgage". Self employed folks are perhaps the hardest working borrowers we come across on a daily basis and unfortunately banks don't cut them any slack when it comes to getting approved for a mortgage. These mortgages are the toughest and most time consuming loans out there but we don't shy away from them.

How many tax returns? One year versus two years Tax returns
Schedule C versus Schedule E
Single member LLC or multiple member LLC
Net income versus gross income
Depreciation and depletion can be added back to income

Detached Guest Homes and Casitas - how they affect home values- The square footage is not added to the main living area of primary home
- The appraiser only gives a line item adjustment for a guest house
- Common to have adjustment of only $20,000 for guest house even though it could cost $100,000 to build
- Appraisers need to use comparable sales that have detached guest houses. It is hard to do
- Guest houses are hard to compare becuase they are going to vary greatly in age, quality, and size

Two Major Refinance updates:
1 - Starting September 1st 2019 FHA cashout refinances will be limited to 80% loan to value. Prior to this, FHA cashout refinances were allowed up to 85% loan to value.

2 - The VA agency has announced that cashout loans exceeding 90% loan to value will officially be ineligible for VA loans starting November 1, 2019 (so that essentially means that VA cashout refinances that close after September 30th 2019 will be limited to 90% loan to value). VA cashout refinances were previously allowed up to 100% loan to value prior.

When buyers start the process of getting pre-qualified, they often hear their loan officer throw out statements like these …“In your case a Conventional loan would be best because you have a large down payment” OR… “In your case a FHA loan is going to best for you because your credit scores are in the mid 600’s”. Many buyers want to understand the difference between a Conventional and a FHA loan. What is the advantage of one program over the other?

Visit our VA page at https://www.azmortgagebrothers.com/va-loans/

This week, we discuss "What you need to know about buying a home with a VA Mortgage". We have a great discussion about how we help Veterans go through the VA Home loan process. The VA home loan is hands down the best loan in the market.

If you’re an active duty service member or a military veteran looking for a great deal on a home loan, you owe it to yourself to look into today’s VA loan.

With incredibly low rates and minimum credit score requirement of 580, VA loans are one of the best loan programs in the mortgage market. And with recent expansion to more veterans than ever, you might be surprised how easy it is to qualify and be approved for your home loan.

Job link: https://www.ziprecruiter.com/job/954b2612

We are looking for a charming, detail oriented person for a Junior Mortgage Loan Officer position who has some minimal processing experience. There is NO COLD CALLING in this position.

NEED: Must have NMLS License

NEED: Minimum of 6 months of mortgage processing experience

NEED: Minimum of 6 months of mortgage loan officer experience

IMPORTANT: We will be training the you to be a Junior Loan Officer to process your own loans. Goal is to have you originate and process up to 5 loans per month, and ideally no more than that so you can give great service to the clients. You will be working closely with loan officers and processors in the office to receive training. You will need to to be able to accurately qualify clients, develop relationships with our clients and partners, and provide a world class experience every step of the way for the borrower.

Compensation: Base + Bonuses

Base salary ranging from $30,000 to $40,000 per year
Additional Bonus expected to range from $5,000 to $40,000 per year.
What you will need to have:

6 months experience as a loan officer
6 months experience as a mortgage processor
Have current product knowledge of FHA, VA, Conventional and other loan programs.
Must be familiar with DU and LP
NMLS license is required
Excellent communication skills and ability to develop strong relationships
Open minded learning the team's sales process… MUST BE COACHABLE
Organized and Detailed
Ability to handle multiple projects and move the pipeline forward to close loans in a timely manner
What you'll be doing: Actions

Working closely with 2 Senior Loan Officers to assist them and will be given leads from them
You will be trained to be a Junior Loan Officer and Process your own loans. In some cases, you will be processing any overflow loans during high volume months. Being flexible is very important.
Taking loan applications, field borrower questions and interview client to gather sufficient information to issue proper needs and expectations
Evaluate borrow income and assets documents for pre-approval
Assist in evaluating possible loan scenarios and determine which financial products meet the borrower’s needs
Send out Pre-qualification forms and status updates through whole loan process

PLEASE DO NOT APPLY WITHOUT 1 YEARS MINIMUM EXPERIENCE AS A PROCESSOR

The Federal Reserve just lowered rates .25% - What does it mean and how does it affect us?
- Prime rate is directly tied to The Fed Rate
- Prime rate was at 5.5% and now it is at 5.25%. Prime rate affect consumers - Credit cards, Home Equity Lines, Auto Loans, Personal Loans
- Fed Funds Rate was 2.5% and now it will be 2.25% - The Interest % that banks borrower money from each other - affect CDs, Bank Savings Deposit rates, Money Market Accounts

Buyers and sellers, and real estate agents should review the HOA addendum for accuracy
Are the dues correct? How about the frequency? Any special assessments?
Besides the HOA fees are there any Master Association fees? What is the difference?
We need to know the Master Association contact information and if there is an addition fee
Discuss Transfer Fees, Prepaid Association fees, and Disclosure fees
Buyer always pays Prepaid HOA fees
Seller always pays HOA Disclosure fees

How does Personal Property in a Purchase Contract affect Lenders?Why are we talking about it?

Avoid pitfalls when personal property is tried to be made part of a purchase contract
It becomes problematic when it is viewed as a Seller Concession or type of Inducement for Purchase (& Seller just doesn’t CARE and wants it gone!!!)
Lender wants only the house to be the reason for the purchase because the house is what secures the loan.

What are the basic things to know? There Two Types of Property

1- Real Estate

Buildings & Land
Real Estate is also items that were purchased as personal property and then affixed to the property. Once you affix it to the property, it becomes a part of Real Estate.
Example: Built-In Book Case become real estate once they are affixed to the property
Example: Chandelier become real estate once they are affixed to the property

2- Personal Property (Non-Affixed)

Can be defined as property that is not attached or affixed to the property.
Examples: Furniture; Painting; Grill, Lawn-Mower; Dishes, sheets, etc

What are the basic restrictions to be aware of? Any Non-Affixed Personal Property besides the following should be handled outside of the purchase contract

In Arizona purchase contract Lines 56 – 60 Dishwasher; Washer-Dryer; Refrigerator; Window Treatments;

Lenders are not involved in the BINSR process directly. We want to discuss how the BINSR and home inspection process affects a mortgage indirectly

1. Buyer has 10 days by default on the Purchase contract to do their home inspection

2. Buyer uses the BINSR form to respond to the seller with any items they would like repaired or remedied

3. Seller has 5 days to reply to the buyers request

- Lenders need to order the appraisal with no less than 21 days from the close of escrow..., that being said we typically like to wait to order the appraisal after the BINSR has been negotiated OR when we receive a clear signal that there are no deal killers in the home inspection. Lenders should have a conversation about this with buyers and buyers agent to set their expectations.

- Buyer and Seller should finalize any seller concessions through the standard contract addendum and not through the BINSR. This helps us keep underwriters looking at the BINSR and any inspection issues with the home. That can open up a can of worms.

LSU Forms - Loan Status Updates and what you need to know

We go through the LSU (Loan Status Updates) which is an Arizona specific form. This is an important form that lenders will need to send to the sellers throughout the purchase transaction. We give our insight on the form and highlight the items we think are important for seller, buyers, and Realtors to be looking at.

The Arizona Prequalification form- We highlight the important line items that borrowers and realtors need to look at in the Arizona Prequalification form
- We talk about the advantage of showing a higher loan amount on the prequalification form to show strength if it is a competitive market and multiple offers are expected on homes for sale
- We discuss the importance of borrowers sending income and asset documentation so sellers can feel confident in the buyer's ability to qualify

What is a “Delayed Financing” (vs delayed financing)?

Delayed Financing (Defined Term) has more to do with avoiding normal Seasoning Requirements (6 months) when doing a Cash-Out Refi then really anything else. It could be called “No Seasoning Cash-Out Refinancing”. Basically Someone delays getting financing by first paying cash (or can be from a HELOC, or secure loan) and THEN decides to put financing on the property after COE but doesn’t want to wait the standard 6 months seasoning!

2 scenarios could happen-

Not realizing it Ahead-of-Time: Use your own cash to buy and then you decide to replenish cash and don’t want to wait the std 6 months seasoning requirement for CashOut.
Planning Ahead-of-Time: same concept above

Why would someone ever want to do Delayed Financing (what is the benefit)?

Avoid Seasoning Requirement for Cash-Out Refi
Want quick COE and save time by paying cash
Better negotiating position by offering to pay cash

Requirements

Follow standard Cash-Out LTV & Cash-Out Interest Rates
New Appraisal Required
Money replenishes where money came from

Example for Delayed Financing

Bought Home For: $200,000
CCs/PPs: $5,000
Max Loan: $205,000
New Appraised Value = $230,000 x .80% LTV (for Primary) = $184,000 Max Loan
Like having put an original 8% down-payment

Alternate way to do delayed financing”. Example - Parent buying a home for child with cash and then child does R/T refinance to cashout parent. Requirements:

Parent would have to have basic standard loan with child (deed of trust etc…title company can really help) and then child would do normal R/T Refinance to pay Parent off
R/T Refinancing LTV and Interest Rate % would apply
New Appraisal would be required

3rd Party ContributionsWho is a typical interested party in a purchase transaction? Sellers, Buyer Agents and Listing Agents are 3rd party contributions.

3rd party contributions are allowed on purchase transactions but can only be applied toward closing costs and prepaids.

3rd party contributions cannot be applied toward Down Payment

Contribution limits apply to any and all 3rd party contributors as an aggregate limit. So, if seller and buyer agent are giving a contribution, the total of their contributions cannot be more than the MAX limits.

We discuss the importance of not having too much 3rd party contributions because of running the risk of leaving money on the table. It is not easy for a lender to estimate exactly what total costs will be because of title aggregate adjustments and seller prorations for taxes, interest, and insurance. We like to be conservative in our number

- FHA loans have is 6% contribution limit no matter what down payment amount
- VA loans have is 4% contribution limit no matter what down payment amount

- Conventional loans on primary and 2nd homes with 10% down or less - MAX is 3% contribution

- Conventional loans on primary and 2nd homes with 10%-25% down - MAX is 6% contribution

- Conventional loans on investment properties on any loan - MAX is 2% contribution

Recasting a loan: Great strategy to delay large principal reduction and reduce mortgage paymentI) What is a Re-Cast?
a. The borrower has the option to make a large principal reduction at nearly any point in the life of the loan and request a “Recasting” of the loan. What that means: Recasting is the result of a one time “paying down” of the principal and then re-amortizing the loan so the payment actually goes down. Terms of loan stay the same (Int %, fixed term, etc. except PMI could drop) but payment goes down!
i. Its like going in a Time Machine back to when we did the loan and you putting a larger down-payment down which lowers your monthly payment
II) Who would ever do a thing like this (who ALL OF SUDDEN HAS LOTS OF MONEY)
a. People Not wanting to sell current primary until AFTER buying new primary
b. People receiving an unexpected large bonus from work!!
c. People maybe receiving an unexpected inheritance
III) Every loan can be a tiny bit different but to Recast you need to do the following:
IV) To recast:
a. The borrower must have made at least their 2 payments
b. The principal reduction must be at least for $10,000. Higher reductions are fine.
d. Fees to recast range from $100 to 350 in most cases
e. Recast only available on Conventional loans, not FHA or VA
V) WHAT’s NEXT - Ok, you’ve sold your old primary home, or got that BIG juicy bonus from work – now what??
a. The borrower generally sends three things to servicer: i) a request for recasting in writing. ii) the check in the amount of the requested principal reduction. iii) a check for the Recast fee. Once received, they will process the request and within 30 to 45 days, the recasting will be completed and the loan modification documents sent to borrower. The modification letter details the new reduced monthly payment.

This week, we discuss a common question they we from borrowers "How do Solar Panels affect the mortgage and closing process?" We discuss what borrowers need to know about Solar Panels whether they are owned or leased, join us as we dive and discuss the pros and cons of solar panels from the lenders perspective. This is a great episode to share!

Why insurance is required by a lender?
How do we come up with the replacement cost?
How can coverage and deductibles impact loan qualification?
Why an “independent agent” is the better way to go over a “captive agent”?
When does a borrower pay the insurance company in the purchase/refinance transaction?

Why is it important for the bank that you have a down payment? - Skin in the game
Why do they care where the money comes from if I have BIG down payment?
Does the amount of the down payment matter more than where it comes from?
Can a borrower use cold hard cash they have saved?
Can borrowed money be used? Say you borrow against equity in your home or a personal loan? – Technically yes BUT the loan needs to be secured by collateral, so it can be a car loan, boat loan, or house equity loan. It cannot come from a personal loan or credit card advance (those would need to be seasoned for 60 days).
Can gift money be used? VA "yes", FHA "yes", Conventional primary "yes"2nd homes require 5% of own funds and investment properties do not allow gifts
What about 401K loans and/or IRA distributions?

In today's podcast, we discuss the following;

What is a Condo Exactly?
What Makes it different from other property types?
What are the other basic property types (for reference)?
Important things for buyer’s to be aware of with a Condo vs Single Family Home
Warrantable vs Non-Warrantable
What is a Condo Questionnaire?
What is the difference between the Master Policy vs Homeowners Policy
Though cheaper than single family residence, the extra expense of a condo HOA takes away a lot of buying power, approximately $38,000 in purchasing power loss

Escrow Accounts for Prepaids:- We explain impound accounts and prepaids. Why are they helpful to the banks and borrowers? What is annoying about them?
- 3 prepaid items; Taxes, Homeowners Insurance, and Interest
- How many months of Taxes and Insurance do banks want prepaid?
- How many days of Prepaid Interest?
- Most banks charge 25 basis points to waive the escrow account, Waivers can be done with 20% equity
- We have access to bank/s that do not charge for the escrow waiver
- If the property in flood zone (requiring flood insurance) then the property must have escrow account

Tom and Eddie Knoell discuss a popular question they get from borrowers...How many Points do you charge?...What are points?...can I pay points to buy down my rate? This is a great show to share!

How do student loans affect qualifying for a mortgage?70% of college students graduate with a significant amount of loans. Student loans balances are climbing every year and it can greatly affect these borrowers when they try to get approved for a mortgage. Tom and Eddie address the impact of student loans on mortgage and which loan programs are more 'student loan' friendly.
- Conventional loans will allow $0 payment if borrower has income based repayment plan setup. If borrower loans are in deferment, we will need to count 1%.
- FHA and VA require 1% minimum rule. If borrower is in repayment, we need to use the greater of the monthly payment on the credit report or 1%

Tom and Eddie Knoell discuss how Credit Scores affect Mortgage Home Loans.
- What is credit score made of of and how do they relate to mortgages?
- What difference do they make on your mortgage options?
- FHA and Conventional loans have different credit score requirements
- Conventional loan PMI (private mortgage insurance) is influenced greatly by credit scores
- Jumbo loans are very strict on scores

Tom and Eddie Knoell discuss whether Down Payment Assistance Programs are the best programs for First Time Home Buyers. They warn first time buyers what to watch out for and point out what to consider when it comes to DPA (down payment assistance) programs. You'll learn about a great loan program with only 3% down that is a much better alternative to down payment assistance programs with great interest rates and low mortgage insurance.

It's March 12th 2019 and millions of people are in the process of filing their 2018 tax returns. In today's show, Eddie and Tom Knoell go through the parts of a Mortgage that are Tax Deductible based on the 2018 tax rules. They discuss whether principal, interest, taxes, or insurance are tax deductible as well as what closing costs are tax deductible.

The Mortgage Brothers give borrowers a helpful quick method for determining how much they might qualify for on a mortgage.

Example:

Take Gross monthly income $4,000
Divide Income in half ($4,000 / 2 = $2,000)
Then count currently monthly debt that would show up on credit report. For this example, assume it is $500/month
Subtract $500 from $2000 = $1,500
Divide $1,500 by $6.50 = 230 which is in thousands, this borrower qualifies for a loan possibly up to $230K