Buying and Selling Your Davis, CA Home with Keller Williams agent Carmen Isais

Many people have high debt to income ratios and can still qualify for a mortgage loan. There are many options available out there for people who have a high debt to income ratio, also referred to as DTI. One solution to a high debt to income ratio is to work with a lender that allows for a high debt to income ratio. Typical good credit lenders allow for debt ratios around 40%, although many times an automated underwriting system may qualify borrowers with a much higher DTI too. Typical below average credit score lenders will allow a maximum debt to income ratio of 50%. Then there are even a few other lenders who will allow debt to income ratios up to 55%, and sometimes even 60% on rare occasions. Consult a mortgage broker today to find the right lender for your individual situation.

There are also no ratio loans that some lenders can provide.

There are also programs available for high credit score borrowers called No Doc loans. This is when a lender does not require income information from the borrower and will base the loan on the creditworthiness of the borrower.

If you are doing a mortgage refinance it may be possible to consolidate some of your other debts, such as credit cards, car loans, etc. into your new mortgage. By eliminating your other monthly debt payments, leaving you with just your new mortgage payment, you might find that this significantly lowers your debt to income ratio.

Even if you make more than enough money to comfortably pay for the mortgage you may find that you have to look at some of these other types of loans because the lender will not accept all of your income. Some examples would be a 2nd job, commission income, or bonuses that you have been receiving less than 2 years. Lenders may also not include rental income you receive if you rent out rooms in your home and do not have a signed lease, or proof of 12 months payments received.

If you fall into one of these categories you may need to look at a loan that allows a high debt to income ratio, even though your actual income may be more than sufficient to qualify.

Having a high debt to income ratio no longer means you are forced to accept the high rates and unfavorable terms of many subprime loans. If you have sufficient compensating factors, such as a perfect mortgage payment history and high credit scores, you may be able to qualify for a loan only slightly more expensive than someone with a low debt to income ratio. Be sure to ask your loan officer to submit your loan to various Automatic Underwriting programs prior to accepting a high rate subprime loan.

On higher debt-to-income ratio borrowers, a lender will sometimes require a certain amount of disposable income before approving this high debt ratio loan. Disposable income is calculated by taking the gross monthly income minus the monthly liabilities. If the borrower has a large amount of disposable income, say $3000 a month, then the lender is more likely to approve the loan.

Paying off high payment credit card and car loan accounts as part of a debt consolidation or cash out refinance is a great way to qualify for a lower rate mortgage.

Paying off debts will lower your dti ratio. There is a top and bottom dti ratio.
The top ratio is your housing expenses only. The bottom dti ratio is all your expenses. If you have any questions about any of this please feel free to give me a call!

-Darin Zabel

  530.753.5657

  Dzabel@mortgageitdown.com

CalSTRS has two programs available to First Time Home Buyers, FTHB.

One is 97% financing program and the other is 100% financing program, however, the 100% financed program has fallen out of favor this past year due to the inability to find mortgage insurers and the housing decline. Not to fret, the 97% financing program is by far the better of the two.

The 97% financial program is an 80/17. The first mortgage is 80% of the loan amount and the second mortgage is 17%. The 2nd mortgage also can be deferred for 5 years at the exact same rate as the first!!!

For example, if you were purchasing a home for 300K, then the first mortgage would be 80% of that amount, or 240K. Just for argument sake, let’s say the rates was 6.5% on the first mortgage. Therefore, the second mortgage, 17% of 300K is 51K, would be at that same rate, 6.5%. Thus, you would be able to purchase the home at 6.5% and at 97% of the value!!

But Wait, The Program Gets Even Better…

You can defer the second loan’s payments for 5 years! You don’t have to pay the second loan for five years, but simple interest is added to your second mortgage each year at the same rate, 6.5%. So using the example above, the 2nd mortgage of 51K at 6.5% will accrue ~$3,315 the each year for 5 years, so ~$16,600 at the end of the 5 years will be added to the second for a total of ~$67,600. The loan is then amortized for the remainder of the 25 years at 6.5%. Your payment will be ~$456!!

Lastly, the program allows you to receive a seller’s credit toward the closing cost, so theoretically you are able to purchase the home for 100% financing. Also, third party members, such as Realtors and brokers are also eligible to credit toward the closing costs. In addition, family members can gift the 3% for the down as well. The above are all options for you to purchase your first home. Just remember, if you are placing an offer on a home, PLEASE, make sure your Realtor places within the contract the seller’s credit toward closing costs because it is difficult to back track once the offer is given to the listing agent or the bank, especially if it is a bank owned property.

We promise you  at Equistar Funding Corporation, you will not find a sweeter deal than this one…Please give us a call if you have any questions regarding the rates, or this FTHB’s program at 530.753.5657.

Also, for your convenience the rates are accessible by clicking the link below. http://www.calstrs.com/Members/Home%20Loan%20Program/rates.aspx

We look forward to talking with you.

I’d like to talk a little bit about the FHA Secure Program. FHA accepts short-refinances and next week they are lowering FICO requirements again. Many homeowners, and you agents reading this, will qualify, or know a client that may qualify for not only this program but a “short-refinance too”. Below are some general guidelines about the FHA program. In order to see if you can get your lender(s) to accept a “short-refi”, please contact me through this forum. Many, many homeowners will qualify, but there are a few “key” trigger points that must be executed regarding timing…

SHORT REFINANCE EXPLANATION

SITUATION
If you are reading this, your situation can be described as follows. Your
mortgage now is an ARM( adjustable rate mortgage ) that had a “fixed”
monthly payment for the first two or three years and your monthly mortgage
payments have sharply increased because the payment is now based on a
higher adjustable rate. You are employed, have a reasonable household
income and your credit has always been good but the new mortgage payment is
now too much and you are behind on the mortgage payments. You have tried to
sell your home but discovered that your home’s value has fallen under your
mortgage balance and can’t sell. You are stuck and it looks like the only
option is foreclosure.

SCENARIO OF WHEN WE CAN HELP USING FHA
Let’s say you have a mortgage of ~$400K with a home market value of $335K
and that you would qualify for a better mortgage rate at ~6.625%-7.875% (
rates are subject to change ) if your mortgage balance was once again less
than your home’s value, which is $335K in this example. We may be able to
negotiate a reduction of your mortgage to below your home value of $335K,
making you eligible to refinance and then apply on your behalf. Below is a
comparison of the previous mortgage, rate, payment to what it would be in a
successful transaction.

*Example

Mortgage Rate Pymt Principle Pymt? Fixed?

Present
Scenario $400K ~8+% $2700+(I.T.I) No No

Scenario
if successful
(reduced by ~$325K ~6.75% $2100(P.I.) YES YES
negotiation)

BENEFIT SUMMARY

Avoid foreclosure

Keep your home and Secure an affordable mortgage with a FIXED rate/payment
including principle

Have a substantially reduced mortgage balance

DO I QUALIFY?
Allowable

Mortgage Delinquency and Foreclosure AFTER payment increase
No Reserves or Savings
Single and Multi-Family Homes
Extremely Low FICO Scores
Co-Borrowers that do not live in your residence

Not-Allowable

NOT A NEGATIVE AMORTIZATION (OPTION ARM) LOAN
Bankruptcy within 2 years
Investment Property
Mortgage Lates within 6 months of mortgage payment increase

Program Requirements

Monthly payments MUST HAVE ALREADY INCREASED
THE PROPERTY MUST BE A PRIMARY RESIDENCE
Your current mortgage must be an ARM (adjustable rate mortgage) that has
already increased in payment.

You must have been out of bankruptcy for 2 years with re-established credit
with the exception of the ARM mortgage if it has increased in payment.
Your income must be documented and pass a debt to income ratio of 50%.
(This can be explained to you in detail during an appointment)
For example, if we negotiate your mortgage down to $300,000, the DOCUMENTED
GROSS income between ALL BORROWERS and rental income should be at least
$7,000 per month to have a reasonable chance for approval. Please note,
co-borrowers not occupying your residence are permitted.

BASIC LIST OF REQUIRED DOCUMENTS TO HAVE AT APPOINTMENT

Original 1st and 2nd mortgage note ( what you signed at closing )
Current 1st and 2nd mortgage statement
2006 – 2007 W-2s for all applicants
1 month recent pay-stubs for all applicants
2 months of recent checking account statement
4th quarter statement of retirement assets or other financial assets
Driver’s License for all applicants
Social Security Card if permanent resident alien
Letter describing your current hardship

WHAT IS THE PROCESS AFTER APPLICATION?

After signing your application and disclosures and collecting
documentation, allow us to take over communication with you lenders and
start negotiating your mortgage reduction. If your lender is willing to
reduce your mortgage enough to make you eligible to refinance with the
agreed upon compensation to us, we will then order an appraisal to submit
with your application for the government mortgage program. If your lender
is NOT willing to reduce your mortgage enough to make you eligible to
refinance at the agreed upon compensation to us, we cannot be of further
assistance.

WHAT TO DO DURING THE PROCESS?

Continue keeping all your pay- stubs, bank statements and asset statements
and inform us of any anticipated changes in employment, income, credit or
any other factors which you think may affect your loan.

Again, please contact me anytime and have a GREAT day!

Darin Zabel

Equistar Funding Corporation

204 F Street, Suite B5

Davis, CA 95616

530.753.5657 office

800.515.8797 fax

626.676.3088 cell

www.lucentloans.com