Getting a mortgage loan in 2018 is still a very bureaucratic and compliant process. People getting mortgages today are still paying for the sins of borrowers’ past. Here are some things to consider…
- You must be able to document and specifically show all forms of income period. While it is true some things can be stretched such as self-employment income it’s still a very tight world of credit. If you’re self-employed you can provide one year of income tax returns if you’ve been in business for the last five years. Don’t have your most recent income tax return filed yet? Provide a copy of the unfiled return at the mortgage company to approve the loan with the unfiled returns since it’s due in October 2019 anyway. If you’re any employee, you’ll also need to provide W-2s and pay stubs and the mortgage company will need to obtain a written verification of employment. A good thing however that has changed recently is you can get a mortgage as aW-2 employee with an offer letter and a verification of employment no need for you to be on the job for 30 days anymore with a pay stub.
- You must be able to document and specifically source the monies used in the transaction. FHA Loans require explanations on all monies regardless if that money is being used for transaction. Conventional loans are flexible where the monies must be used only need to be sourced. Here’s a quirky example let’s say you gave your child a $100k didn’t create a note between you and that person recently they place that money back into your account, then you try to buy a house then the lender asks where that money came from. Let’s say you’re buying a rental property which does not allow gift money -you have a sourcing problem. The solution is to wait 60 days for the monies to season in the bank or find another way to get a new down payment money, so the unsourced money is not a roadblock.
- You have student loans and FHA Loans do not mix. This FHA guideline is a toughie. The FHA guidelines require the mortgage company to use the greater of 1% of the total student loan outstanding balance or the total monthly amortized payment regardless of whether the loan is in deferment or income-based for qualifying. That means for example if you’re paying $100 a month for a $100,000 loan the lender must use $1,000 a month which is 1% of $100,000 or they must use the specific amortized payment based on the term of what it would be and the only way that this can be documented specifically is from a letter from your student loan servicer. So, in this situation if you have student loans either get the letter from the servicer right out of the gate or go with a conventional loan.
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