• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sonoma County Mortgages

Contact Us About Mortgage Financing

All financing provided by New American Funding

(707) 217-4000 | Prequalify Now

Search Sonoma County Mortgages

  • Home
  • Purchase
    • How Much Down Payment To Buy A Home?
    • How Much Income You Need To Buy A Home
    • How Much Should I Save For Buying A Home?
      • How Rates Affect Payment
    • No PMI Mortgages
    • FHA Loans
    • Sonoma County Disaster Loans
    • Jumbo Loans
  • Refinance
    • Mortgage Rates
    • Does It Make Sense To Refinance?
      • Get Your Refi Paperwork In Order
    • How To Pay Off Your Loan Faster
    • How To Remove PMI
    • How Lenders Price & Quote Loans
  • Loan Programs
  • Payment Calculator
    • Mortgage Affordability Calculator
  • Blog
  • Videos
  • About SCM
  • About Scott Sheldon

Primary Sidebar

Sonoma County Mortgages is a part of New American Funding

New American Funding - NMLS #6606

Get Your Latest Rate Quote Now!

Why Some Aspects Of Today's Lending Still Do Not Make Sense

February 2, 2015 by Scott Sheldon

Share on Facebook Share on Twitter Share on Pinterest Share on LinkedIn Share on Email

Banks want you to believe getting a these days is easier and that may be case if, you’re financial house is in order. Here is what you need to know about how to plan for the nuances, that may illogically arise…

The reality is that if you’re going to be getting a mortgage in today’s lending environment you need to prepare yourself for proving your ability to repay and meeting every threshold lenders have in place to ensure the loans they are making are nothing, grade A investments for the investors buying these mortgage-backed securities.  These tolerances and rules are identified by a checklist every underwriter in every mortgage company across the nation is going to be using with some subtle variances, but for the most part if any of these below items are applicable to you (as well as others), make sure you discuss details these upfront with your loan professional so they can make your financial package conform to the underwriter’s checklist…

Your Debt Ratio

Doesn’t matter how great your credit score is or even if you have millions of dollars to pay the mortgage off five times.Your credit score won’t save your debt load! Illogical right? If your payments on housing costs + credit obligations exceeds 45% of your monthly income, you’re not getting a mortgage. That is not without making some changes.

The solution: If you have consumer obligations preventing you from getting a mortgage such as a car payment or even minimum payments on student loans or credit cards for example- time to sharpen your pencil. Can any of these accounts be paid off in full? Can these debts be consolidated for lower total payment? If yes have a conversation with your loan officer and run these ratio numbers upfront with pragmatic figures. Most loan officers can look at your financial picture and advise you what debts need to be fixed to move your file forward with the processing of your loan.

Conditions Create Can Create More More Conditions

This one can be most frustrating for borrowers. Take this example of many …lender requests end of year pay stubs breaking down income for 2014. The end of your breakdown provides less income than previous years, for whatever reason, lender creates another condition based on this information for a letter of explanation about declining income. In short, conditions brought on by a mortgage underwriting can create more conditions based on the documentation provided to support the original conditions.

The solution: A few resubmissions (about 3) to underwriting during your loan process is quite normal.  Perhaps canceling the loan and starting over fresh with a clean slate with a clear direction can fix a runaway lending laundry list.

Undocumented Funds

Your money, but may not be able to use it. Make sense? No, but it will if you need a mortgage loan.

Yes, even if you are self-employed this “ask” will still pop up. Any deposits going into your bank account independent and separate from your income, need to be documented, explained and sourced in order for those monies to be considered loan eligible -both in terms of savings post sealing the deal as well as cash to close.

The solution: if possible, try to avoid depositing monies in your bank account that you are unprepared to document. Using alternative asset account without the deposit activity or obtaining documentable gift funds work as healthy alternatives.

Un-reimbursed Employer Business- IRS Form 2106

Your lender will not be ignore this.

IRS allows a taxpayer who incurs expenses in the course of their employment to write off these expenses against their income rather than being reimbursed for these expenses via their employer. These expenses might be comprised of uniforms, educational items, dues, tools things necessary to fulfill their job requirements etc.

Accountants will suggest writing these expenses as a means to offset a tax liability-perfectly acceptable for IRS……at the expense of getting a mortgage.  How it is viewed by the lender: these monies comes directly come off your income otherwise used to qualify you for a mortgage payment reducing your chances of qualifying/risking loan approval.  Banks average the most two years of these numbers, and use that average of these losses as negative directly to your income.

The solution: Just because IRS allows the deduction does not automatically mean you should take it.

If you have taken these expenses in previous years, it will be counted against your income unless there has been a change.  If these expenses are going to continue in the future, your qualifying numbers might have to be adjusted accordingly to offset this income risk.

The key is continuance -if the need to take these write-offs in the future is no longer necessary these write offs will not counted by your lender and would not hurt your borrowing ability. Here’s such an example example let’s say you are working full time as a police officer taking 2106 expenses. During that time you became permanently injured. The likelihood of you needing to take these expenses moving forward becomes unlikely.  Talk with your lender.

*Even if you have a documented solid mortgage payment history with a satisfactory rating,there still very well be be a multitude of factors that change the dynamic of your loan, or how you may be viewed on paper.*

Think today’s lending as a one-size-fits-all.  These credit guidelines are established by statistical modeling Fannie Mae & Freddie Mac use to predict default and the allowances used in the origination of the mortgage as determinants of what those likelihoods are the result of.

If you plan to get a mortgage, be prepared to tell your lender in great detail about any of the possible additional following items:

  • the origin of the gift monies you’ll be using
  • deferred student loans
  • a second job in existence for less than two years
  • a brand-new job or being brand-new to being self-employed
  • IRS debt, spousal support or alimony of any kind
  • Previous short sale, foreclosure, or bankruptcy of any capacity in the last 7 years
  • being self-employed less than two years
  • co-signed debt that someone else makes the payment for

Granted, for the people who don’t have any the following items and otherwise have a high credit score, strong equity, some savings, as well as a handle on payments to income, procuring a loan is a breeze.

As it stands, radical loose lending changes won’t soon be ahead until well into the future. Until then, understand when the lender asks for something that seems peculiar, redundant or unnecessary, it is not the loan professional whom you’re communicating with makes the rules, but rather a greater mass credit standards all lenders must abide by creating a level playing field. Do accept when applying for a mortgage, that what might pass for normal litmus test, does not necessarily carry over in “making sense” to a mortgage underwriter.

Looking to get a mortgage? Need help? Start by getting a free mortgage rate quote online now!

 

 

 

 

 

 

 

 

 

Related Mortgage Advice from Scott Sheldon

  • fannie made change to home appraisal covid_19
    Why harp refinances are dwindling

    One of the financial programs aimed at homeowners wishing to refinance in the economic downturn…

  • income for assets can hurt your home buying efforts
    Why using your income for a down payment may not fly

    Working on your down payment money to buy a home? Here's something you need to…

  • Why Your Second Job May Not Cut It For A Mortgage

    You have a great credit score, manageable debts, solid income even have cash ready to…

  • Should you go Fha or Conventional?
    Should you go FHA or Conventional?

    FHA loans and conventional loans remain the most popular financing type for today's mortgage borrowers.…

Filed Under: Loan Programs, Loan Qualifying, Mortgage Shopping, Underwriting Guideline Updates Tagged With: buying a house, mortgage comparison shopping, mortgage loan comparison shopping, mortgage rate quote, purchase real estate, sonoma county refinancing

Get Sonoma County Mortgages News and Updates in Your Inbox

Footer

SCM on Facebook

SonomaCountyMortgages.com

Connect on Facebook

SCM On Instagram

Follow Sonoma County Mortgages on Instagram

Follow on Instagram

SCM on Zillow

Zillow Reviews for Scott Sheldon, New American Funding

See Reviews on Zillow

Location & Contact

Sonoma County Mortgages and New American Funding are an Equal Opportunity Housing Lender

Scott Sheldon, Senior Loan Officer
NMLS ID# 287389
2455 Bennett Valley Road C107
Santa Rosa, CA 95405
1-707-217-4000
View SCM Map | Email Us!

Map of Sonoma County Mortgages New American Financing Office

View Map on Google

Copyright 2010–2023 SonomaCountyMortgages.com · About Us · Sonoma County Loans · Privacy Policy · Terms Of Use · Legal · Site Map

NMLS Consumer Access © New American Funding. All rights Reserved. NMLS ID#6606.
Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

State Licensing (Opens in New Window) | Privacy (Opens in New Window)
Terms of Use (Opens in New Window) | Electronic Consent Agreement (Opens in New Window)
Opens in new window Opens an external site Opens an external site in a new window