Establishing and Improving Your Credit

By: Chad Moore

Originally Published: Cape Gazette - July 3, 2019

Home Loans for Self-employed and 1099 Income Borrowers
By: JoAnn Moore

Originally Published: Cape Gazette - August 23, 2021

Jumbo Home Loans are Back
By: JoAnn Moore

Originally Published: Cape Gazette - April 2, 2021

Lenders are back to offering jumbo home loans, which involve loan amounts

over the conforming limit of $548,250.

This is great news for many homeowners and home buyers. The down payment

for a jumbo is lower than what you would traditionally need. Loan-to-value ratios

go up to 89.99 percent with no mortgage insurance required.

Prime jumbo loans disappeared when the COVID lockdown started but are now back and worth considering.

These are available for primary, second and investment homes, and they can be used for purchase, rate/term and cash-out refinances. Thirty-year, fixed-rate terms go up to $2,000,000 loan amount.

The minimum credit score is 680 and the maximum debt-to-income ratio is 45 percent. Only one appraisal is needed for loans up to $1,500,000; two appraisals are required for higher loan amounts. These loans are readily available at attractive pricing.

A one-unit primary or second home can be purchased with a 680 score and 10.01 percent down. Investment properties can be purchased with 20 percent down and a 680 score.

A one-unit rate/term refinance on a primary home can be done with a 680 score and 10.01 percent equity. A second home requires 20 percent equity and a 680 score. Investment properties can be refinanced with 25 percent equity and a 700 credit score.

Cash-out refinances are quite generous with loan-to-value ratios. Primary homes are 89.99 percent LTV and 740 credit score. Second homes are at 75 percent LTV and a 700 score. Investment properties are at 75 percent LTV and a 720 credit score.

Useful Mortgage Tips for Homebuyers
By: JoAnn Moore
Originally published: Cape Gazette - February 17, 2020

Dispelling Myths About VA Mortgages
By: Chad Moore

Originally Published: Cape Gazette - June 3, 2019

Homebuyers may benefit from knowing the following mortgage tips:

Paying one extra month’s principal and interest along with your first scheduled

payment will normally result in one year off the term of a 30-year fixed-rate loan.

Some lenders allow you to recast your loan amount if you make a significant principal payment. This allows for a reduced monthly payment. This is ideal for people who purchase a new home while still owning the one they just moved from. Once they sell and put the proceeds into the new loan, they can have it recast to a lower payment.

Some lenders allow you to choose between 15 and 30 years for the term. So, for instance, if you want to refinance but you don’t want to extend it out another 30 years vs. the 26 years left on your current loan, you can choose a 26-year term.

Many people think a 15-year term loan would be twice the payment of a 30-year term. On a $150,000 loan amount, the 30-year payment is $739.18 vs. a payment of $1,094.65 on a 15-year term. This is a difference of $355.47 per monthly payment.

You can request the insurance and property taxes to be waived from your payment. In years past, there was normally a charge of ¼ point at closing to have this option. Plus you would need to have a loan to value of 80 percent or less. Now some lenders do allow for higher than 80 percent loan to value when allowing the taxes and insurance to be paid directly by the borrower.

You can significantly reduce the number of years of your repayment when you pay one half of the mortgage payment every other week vs. a full payment once a month. It helps with planning your budget as well when the borrower’s pay periods are every two weeks.

You can qualify for lower interest rates based on your credit score. One way to increase your scores is to open a couple of credit cards at your local bank or credit union. Then use them for a small purchase each month and pay on time each and every month. The other way to increase your scores is to make sure your current credit card accounts are paid down to one third of the limit allowed. This shows you have discipline to wisely use your credit accounts.

Seven Easy Ways to Reduce Your Mortgage Payment
By: JoAnn Moore
Originally published: Cape Gazette - July 19, 2021

If you are paid with 1099 income or are self-employed and don’t qualify
for a conventional, FHA or VA loan, there are other options. There are
loan products targeted specifically for those outside the ranks of normal,
​everyday W-2 income earners.

For borrowers who are paid with commissions or as an independent contractor receive 1099s for each year, 1099 loan products can be used for primary, vacation or investment homes. The minimum loan amount is $100,000. Gift funds are allowed once the borrower contributes 5 percent of the purchase price. Sellers can help with closing costs up to 3 percent.

The income will need to be documented for a two-year period but may still qualify if the borrower changed from W-2 income to 1099 income during the last 24 months if in a similar type of work.

Some examples of what this loan can be used for: Primary home purchase, 90 percent loan to value, up to 50 percent debt to income and a credit score of at least 680.

Self-employed borrowers can qualify for loans the same as W-2 earners in regard to loan to value, debt to income ratio and credit scores. The only difference is in calculating the income. The allowable income on a Schedule C is the net profit plus depreciation, business use of home, and some mileage.

Self-employed borrowers using bank statements can base loans using the deposits on bank statements over the last 12 or 24 months, personal or business. One of the borrowers must earn the primary income through self-employment, and that borrower must own 25 percent or more of the business.

Gift funds are allowed once the borrower puts 5 percent into the transaction. Sellers can contribute up to 3 percent of the purchase price toward the borrower’s closing costs.

Examples of how this loan can be used: Primary home purchase, 90 percent loan to value, up to 50 percent debt to income ratio, and a credit score of at least 660. Primary rate/term refinance, 85 percent loan to value, and minimum credit score of 660. Vacation or investment home purchase and rate term refinance, 80 percent loan to value, 50 percent debt to income, and minimum 680 credit score.

In my ongoing research, as well as in recent conversations, I have discovered
there are a number of misconceptions about VA mortgages making sellers
​hesitant to accept offers from qualified buyers and keeping veterans from

using the benefits they’ve earned.

Many assume that a VA mortgage will come with a lot of red tape to cause delays in the sale. In reality, the process involved with VA loans isn’t much different from that of any other mortgage program. Whether it’s conventional, FHA, USDA, or VA, my team and I frequently close loans in 30 days or less. As long as all parties work together and complete the necessary steps promptly, there’s no reason a VA mortgage should take an excessive amount of time to move from contract to settlement.

It is also believed that VA appraisals take longer to schedule, and that they are more “nitpicky” than the appraisals performed under the guidelines of other mortgage programs. While it is true that VA appraisals are comprehensive, it is for the buyer’s protection. You wouldn’t want to sell a home with lurking repairs to an unsuspecting family.

As for the appraisal timeline, it all depends on the volume of applications the lenders are experiencing, not the mortgage program itself. There seems to be some misunderstanding of the “non-allowable fees” associated with VA loans as well. The VA does have a list of fees that a buyer cannot pay; however, that doesn’t mean the seller is automatically required to pay them. Many of the fees on that list, such as mortgage broker fees, application fees, lock-in fees and processing fees, aren’t even charged by most mortgage companies.

If your estimated fee sheet includes any of these charges, no matter what kind of mortgage you’ve applied for, you should talk to another mortgage company.

The VA home loan was specifically designed to help our nation’s veterans become homeowners. As such, the program does have provisions for borrowers with lower credit scores, down to 500, in some cases, but all borrowers go through a thorough underwriting and approval process.

In fact, VA loans have had the lowest default rate of any mortgage program for the past five years. VA mortgages are appealing to buyers because they require $0 down, have no private monthly mortgage insurance, provide protections and can even be assumed by qualified buyers when/if the property is sold again. There is an upfront funding fee, but it is waived for any veteran considered at least 10 percent disabled by the VA.

Veterans also want to use the benefits they’ve earned through their service. Sellers should give equal consideration to offers from VA buyers because they are a qualified and growing demographic. Anyone wishing to sell their home should field as many offers as possible and not limit their pool of potential buyers, especially when those decisions are being made based on outdated, incorrect and often anecdotal information.

Credit scores and credit history are two of the most critical elements when applying for

a mortgage. Whether you need to establish a credit profile, rebuild after a derogatory 

credit event, or would simply like to improve your credit to qualify for better mortgage

programs or interest rates, understanding how credit works and knowing a few helpful

hints can mean the difference between treading water and getting ahead. 

If you have no credit history, and need to build it from scratch, you’re in a great position to achieve an excellent credit rating. You'll want to start by opening a few small-limit, "entry level" credit cards and/or store cards. Use them a little and pay the balances off every month. You could also become an authorized user on an account, or get a co-signer for a personal or auto loan.  

After 6 months of managing your new credit in this manner, you should have sufficient history for the bureaus to generate scores. At this time, you may wish to add a few more accounts, or replace cards that have annual fees with ones that don't. As long as you've been paying these accounts on time and have avoided letting any other accounts go into collections, you should have nothing but positive credit on your report and some fairly good scores. Many mortgage lenders like to see a minimum of 12 months credit history, so keep managing your new accounts, and your scores should be even higher at the end of that first year. 

Should you find yourself needing to repair your credit after some questionable decisions or unfortunate events, all is not lost, and you can accomplish a significant improvement by following many of the same steps previously outlined. Consumers new to credit may get more offers and lower interest rates, but there are still plenty of options for those needing to re-establish and rebuild their credit profiles. Secured credit cards, where the limit is backed by a deposit, are often used for this purpose. 

If you're still having difficulty increasing your scores, you may want to consult a credit specialist or mortgage professional who has access to a credit enhancement program. Many of these programs are free, and analyze credit reports to provide specific, detailed instructions for each consumer. If you sign up for a credit monitoring service like Credit Karma, or use the scores provided by your credit card company, just keep one thing in mind: while these services are a great way to keep an eye on your credit, the scores they provide are NOT the same as the scores a mortgage lender will get. In order to find out if you qualify for a mortgage, a loan officer will need to pull and review your credit report. 

A 620 is typically the "magic number" for almost every mortgage program on the market. A 640 opens up a few more options, and you start to see a real difference in what interest rate you qualify for at 680.  

It's never "too early" to take the first step on the path to home ownership. Contact a mortgage professional today, and start exploring your options. 

Know the 10 Commandments Home Buyers Must Follow
By: Andrea Moore

Originally Published: Cape Gazette - December 5, 2017

Welcome to the home loan approval process! Now, there may be 60 days between the
application date and the closing date, so it's important for applicants to remember that
​mortgage approvals can be revoked at any time prior to funding.

As mortgage applicants, there are many events that are out of your control – job security and health matters, for example. But there are also events that are within your control. Knowing that mortgage approvals can be fragile, here are 10 things you should absolutely not do while your home loan is in process. It may be the difference between being approved by the bank and being turned down.

Thou shalt not change jobs, become self-employed or quit your job. Changing jobs will result in a delay of your settlement because the underwriters will need to completely re-underwrite your file, and you will need to provide at least 30 days of pay stubs. Even if you switch to a better-paying job, be sure to consult your loan officer prior to changing your employment.

If you do not consult your loan officer, we will find out when the lender calls your employer the day before settlement to verify your employment. Also, if you are applying for a USDA loan, keep the income limits in mind. If you switch to a better-paying job, you might put yourself over the income limit and no longer be eligible. And most importantly, do not switch from salaried employment to commissioned employment. If you do, don't plan on applying for a mortgage for another two years.

- Thou shalt not buy a car, truck, van or boat (or you may be living in it)!
- Thou shalt not use credit cards excessively or let your accounts fall behind.
- Thou shalt not spend money you have set aside for closing.
- Thou shalt not pay off any collections, unless it is a condition of the loan. By doing so, the old collection becomes new again, even though it's now paid off, and will negatively impact your credit score.
- Thou shalt not buy furniture. Wait until you are in your home, and then you can buy anything you want.
- Thou shalt not originate any inquiries into your credit. The lender will see this and assume you are applying for new credit.
- Thou shalt not make large deposits without first checking with your loan officer. This may cause the lender to think you are being loaned money, which would then create a new liability for you.
- Thou shalt not change bank accounts.
- Thou shalt not co-sign a loan for anyone.

Any one of these things could significantly impact your credit score and/or loan approval. We check your credit scores in the beginning of the process, and the lender will check them at least one more time before settlement. They will also verify your employment and assets only a few days before settlement.

Mortgage lending is full of "gotchas," and with underwriting times stretching to 45-60 days, it's a lot more likely that a mortgage applicant will trip into one. Following these 10 rules, though, is a good start.​

If you currently pay private mortgage insurance with a conventional loan, you may

be able to remove it.

​Home values have increased dramatically, so your loan balance may now be 80 percent or less of today’s value. Check with your mortgage company about the process. You most likely will need to order an appraisal.

The private mortgage insurance comes off automatically once the loan balance is 78 percent of the purchase price, but you don’t need to wait until then.

In Delaware, you can request a deduction in the school taxes portion of your property taxes. Requirements are that it is your primary home, you have lived in Delaware for at least three years and are age 65 or older.

Check out your homeowner’s insurance. Inquire about lower rates from bundling your auto insurance with your homeowner’s insurance, or go with a higher deductible.

You could possibly recast your loan. Check with your lender if you intend to pay a significant payment toward your principal. There are some lenders that allow this. The payment is reduced in relation to the new loan balance.

You could refinance your loan for the exact amount of years you have remaining on your current loan. If you go with a lower interest rate than you are paying now, your payment will go down as well.

You can request to have your escrows waived. This way you pay only the principal and interest each month. You would pay the homeowner’s insurance and property taxes as they come due. Overall it is not a reduction, but it helps with monthly cash flow.

If your current loan is FHA, you are paying a mortgage insurance premium. If you think your loan balance is 80 percent or less than the value of your home, it would be a good idea to check into refinancing into a conventional loan. In recent years, the FHA loan product has the MIP attached to the loan for the entire 30-year term.

The Mortgage Market of Delaware