Mortgage and Portfolio Loan Guide

What are FHA Loans for Bad Credit?

A question that is frequently asked is: are there FHA loans for bad credit? The answer is yes. FHA loans are available with as low as 500 credit score on home purchase, refinance, and cash out refinance. These are federally insured mortgages with competitive rates and costs, and have less strict rules than conventional loans.

Below you’ll find everything you need to know about getting approved for an FHA loan even if you have poor credit.

Can I get an FHA loan with a 500 credit score?

Yes, it is possible to get approved for FHA loans for bad credit even if your middle credit score is 500. But if you are below 550 credit score, it can become a bit more challenging.

In fact, I would argue that many lenders flat out say that it’s not possible to get approved on an FHA loan if you’re below 580 credit. That’s absolutely not true.

With that said, not all FHA loans for bad credit are approved.

Here are some of the main factors that underwriters look at when considering an approval on a low credit FHA loan (and all FHA loans for that matter):

Key Points – FHA Loan Requirements

  • Credit score – the underwriter will use the middle credit score for a qualifying score. So if you’re 498, 552, and 509, the qualifying score will be 509. If you only have 2 credit scores, the lower of the 2 scores will be used.
  • Debt-to-income ratio – Typically you want to be below 43% debt-to-income ratio. This means if your monthly debt is 5,000 (including your mortgage) then your monthly income would need to be 11,700/month. However, there are some cases where FHA loans can get approved up to 57% debt-to-income ratio.
  • Equity (or down payment) – Loan-to-value RatioFHA loans for bad credit check mark
    • Home Purchase – On a home purchase, if your credit is below 580 credit score, the minimum down payment is 10%. If you’re above 580 credit score, the minimum down payment on FHA is 3.5%.
    • Refinance – On a refinance or cash out refinance, the maximum loan to value ratio is 85% (or 15% equity). So if the home value is $300,000, max loan amount would be $255,000
  • Payment history – If you have more than 1 payment that is over 30 days late on your mortgage in the last 12 months, the loan is probably not going to get approved on FHA. Same goes for other installment types of loans like car loans and student loans.
  • Recent credit events
    • Bankruptcy – For FHA you need 2 years to pass after chapter 7 bankruptcy, and 12 months on time payments to pass on a chapter 13 bankruptcy.
    • Foreclosure and short sale – 3 year waiting period on FHA from when the title was transferred out of your name until you can purchase or refinance a home.
  • Only allowed on primary residence. No vacation home or investment property allowed

Max Loan Limit

There are also loan limit maximums that vary from county to county all across the US. Check max FHA loan limit in your county here.

Automated Underwrite vs. Manual Underwrite

There are two different ways that FHA loans for bad credit are underwritten – Automated and Manually.

When a lender accepts your mortgage application, the data on your application is run through a desktop (digital) underwriting system. The desktop underwriting system weighs all factors of your application. That data includes credit scores, loan-to-value ratio, debt-to-income ratio and pretty much everything I described in the above “key points”.

The desktop underwriting system will determine eligibility with a response of Approve/Eligible, Refer/Eligible, or Refer with caution.

Findings

  • Approve/Eligible – means the loan will be underwritten based on normal FHA standards and current application appears to meet FHA guidelines.
  • Refer/Eligible – means the loan will be heavily scrutinized and current application may not meet FHA guidelines.
  • Refer with caution – means the loan does not meet FHA guidelines and application cannot proceed with FHA loan.

The goal is to get Approve/Eligible findings in order to proceed with loan process with as little friction as possible. You still need to provide supporting docs (income, assets, ID, etc.).

If you have Refer/Eligible findings the payment history requirements and debt-to-income ratio requirements are more strict. The loan needs to be manually underwritten to determine eligibility. Many lenders to not allow manual underwrite due to being labor intensive, but some lenders do.

More on manual underwrite mortgage here.

How to Get Approved for FHA Loans For Bad Credit

What if I don’t qualify for FHA Loans for bad credit?

If you have poor credit and you don’t meet the requirements for FHA, there are alternatives.fha loans for bad credit home 5

A portfolio loan may be your solution if you do not meet FHA standards.

Portfolio loans are mortgages that have non-traditional lending standards and have a more common sense approach to the approval process.

For example: let’s say you have a 516 credit score, and 40% equity in your home, but you missed 3 mortgage payments in the last 12 months due to a temporary layoff at work. That scenario wouldn’t work on an FHA loan because of the late payments, but with a portfolio loan you’d have a chance to get approved.

Portfolio loans are a temporary fix, for temporary circumstances. Typically, borrowers refinance out of their portfolio loan after 6-12 months of successful on time payments, and get back into something more traditional.

Key Points – Portfolio Loan Requirements

  • As low as 500 credit score
  • Available on primary residence, vacation home, and investment property
  • Available on home purchase, refinance, and cash out refinance
  • No PMI
  • Alternative documentation loans available for self-employed borrowers and real estate investors
  • Minimum down payment on home purchase is 10%
  • Maximum debt-to-income ratio is 50% with compensating factors
  • Recent bankruptcy, short-sale, foreclosure okay

More on portfolio loans here.

In Summary

An FHA loan is a great option to explore even if your credit is as low as 500. And if it turns out you don’t qualify for FHA, a portfolio loan may be a perfect alternative. If you’re not sure if you qualify whether you have good or bad credit please feel free to reach out.

I have been able to help many homeowners who have been told by other lenders that they don’t qualify.

portfolio loansI invite you to reach out.

Get your questions answered.

If I cannot help, I should be able to point you in the right direction at the very least.

 

 

self employed home loans

Adam Lesner | NMLS 198818

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona,

California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.

Bank Statement Mortgage | Self-Employed Home Loans

For business owners or private contractors a bank statement mortgage may be the option you need to turn to when looking to get a mortgage if you show low income on your tax returns.

What is a bank statement mortgage loan?

A bank statement mortgage is a home loan that uses a borrower’s bank statements to calculate their income. This is considered an alternative documentation loan type since tax returns are not used to calculate income.

These loans are for self-employed borrowers or private contractors who have substantial tax write offs. When showing low income on tax returns it can be challenging to prove the ability to repay the mortgage. By using bank statements to qualify, there is a more accurate approach to calculating income.

Requirements

  • At least 10% down payment (or 10% equity on refinance)
  • 600 minimum credit score
  • 12 months bank statements. Income will be averaged over 12 month period
  • Year to date profit and loss
  • Must be self-employed at least 2 years (rare cases allow for less than 2 years self-employed)
  • Primary residence, second home, and investment property allowed
  • Single family home, 2-4 unit, and condo allowed
  • Available on home purchase, refinance, and cash out refinance

Bank Account Types

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Personal Bank Statements – When using personal bank statements to qualify, the deposits will be carefully reviewed to determine where deposits are coming from.

If deposits are consistently coming from another account, account statements (two months) will need to be provided to confirm it is an account associated with the business.

If using personal account to qualify, you do NOT need to be 100% owner of the business, but all individuals listed on the account must also be on the new mortgage loan.

Any large/unusual deposits will need to be sourced to confirm they were from business activity (as opposed to a deposit from the sale of an asset, or a loan). If the deposit was from a source other than business activity, that deposit will be excluded from the income average calculation.

Business Bank Statements – When using business bank statements to qualify, the deposits will be used minus an expense factor. For simplicity purposes some lenders will use a 50% expense factor. Example: if total deposits are 200K in the last 12 months, the qualifying income would be 100K.

Some lenders will allow a more precise expense factor based on CPA letter or profit and loss statement. Going that direction may allow for higher use of business account deposits.

If using a business account to qualify you MUST be 100% owner of the business.

Bank Statement Mortgage | Self Employed Home Loans

Bank Statement Mortgage Interest Rates

When getting an alternative documentation loan like a bank statement mortgage, interest rates are not the same as what you would see on a conventional or FHA mortgage.

Using bank statements to qualify is an nontraditional process of calculating income. For that reason the loans are considered slightly “higher risk”. Since that is the case, you can expect that interest rates are higher than traditional mortgage loan types.

You can typically choose from a couple different options: 5/1 ARM or 30 year fixed.

  • The 5/1 ARM (adjustable rate mortgage) means the rate is fixed for the first 5 years, and then has the ability to adjust (once per year after the first 5 years). There are always caps on how much the rate can adjust after the first 5 years, and each lender has different guidelines on what the caps are, so be sure to ask.
  • The 30 year fixed option will be a higher rate than the 5/1 ARM, but it gives you the long term comfort of knowing it will never change.

Keep in mind, most people do not keep a mortgage for more than 5-7 years. A lot can change in 5-7 years. You may end up wanting to: upgrade, downsize, relocate, or refinance. Which is why many times, a 5/1 ARM ends up being a good option to take into consideration.

Either way, you can decide which option suits you best.

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Get a bank statement mortgage rate quote today here.

24 Month Bank Statement Mortgage Loans

If the deposits on the bank statements over the most recent 12 months are a bit inconsistent, the lender may ask for an additional 12 months of bank statements to demonstrate consistency/stability.

Typically only 12 months bank statements are needed, but in some cases having the full 24 month bank statement history will further solidify the borrower’s ability to repay.

One Month Bank Statement Loans

In some (rare) cases it may be possible to use one month’s bank statements to get approved.

This loan type has more strict credit and down payment restrictions than other comparable bank statement loans.

For the one month bank statement loan: minimum 650 credit, 25% down payment (home purchase), 30% equity (home refinance), and no mortgage delinquency in the most recent 5 years.

In addition there can be zero NSFs (non-sufficient fund fees) on the month provided and year-to-date.

Lastly, there is zero tolerance for any new charge-offs, collections, or tax liens in the most recent 3 years for the one month bank statement loan program.

That program is meant to provide simplicity for the well qualified borrower.

In Summary

A bank statement mortgage loan is a fantastic alternative documentation loan for self-employed or private contractor borrowers.

If you have been told you don’t qualify for a mortgage due to unique income circumstances on your tax returns, a bank statement mortgage may be your ticket to accomplish your home ownership goals.

portfolio loans

 

I invite to you to reach out.

 

Get your questions answered.

 

I’ve been able to help many borrowers who have been told by other lenders that they don’t qualify.

If I cannot help, I should be able to point you in the right direction at the very least.

self employed home loans

 

 

Cash Out Refinance with Bad Credit

Tapping into your home’s equity to do a cash out refinance with bad credit may be a great option if you’re looking to consolidate high interest debt or make improvements to your home.

Here you’ll find everything you need to know about how to get approved for such a loan and what to expect when refinancing your home with a cash out or debt consolidation mortgage.

What is a cash out refinance?

When you own a home, typical market conditions provide natural appreciation of your property. This means over time the value of your home increases. As the value increases, you gain more equity in your home.

With a cash out refinance, you can tap into that equity to accomplish your financial or home improvement goals. When you refinance you pay off the existing mortgage loan and get extra cash out to cover other debt you’d like to pay off or make home improvements.

Why would a homeowner do a cash out refinance?

A cash out refinance is done for many reasons. Here are some of the most common scenarios:

  • Consolidate high interest credit card debt
  • Make improvements to the home
  • Pay for children’s college
  • Pay off medical bills or other collections
  • Increase cash reserves for unexpected emergency

Cash out refinancing is available for perfect, good, fair, and bad credit. The main factors that are considered are equity (amount borrowed vs. home value) and income (ability to repay).

A cash out refinance can be done on a primary residence, second home (vacation home), and investment property. The max loan to value ratio will depend on property type, occupancy, and credit score.

Example: if you have perfect credit, and it’s a 2 unit investment property, you may be limited to 70% loan to value. If it’s a primary residence and you have 620 credit score you may be limited to 85% loan to value.

Cash out refinance loans are available for credit as low as 520. Must meet equity and income requirements.

What are the benefits of doing a cash out refinance on your home?

When you consolidate your high interest credit card debt with a cash out refinance there are several incredible things that happen. Paying down your credit cards typically results in higher credit scores.

The credit bureaus (experian, equifax, transunion) score you based on the amount available in comparison to how much you have used. The lower amount you have used compared to the amount of credit available to you will only help your scores in a positive way.debt consolidation mortgage

The interest rates on credit card debt are typically much higher than mortgage rates. AND the interest on credit card debt is NOT tax deductible. The interest you pay on your mortgage IS tax-deductible. Many home owners’ largest tax deduction is their mortgage interest.

By rolling your credit card debt into your mortgage you not only decrease you overall monthly payments, but you also set yourself up for success in terms of tax deductions in many cases.

Take a look at your most recent credit card statement. How much of your payment went toward principal? Not much right?

The tricky thing about credit cards is the minimum payment is manageable, but the minimum payment never gets you anywhere in terms of paying down the principal balance.

By consolidating it into the mortgage, you create a manageable plan to pay off your debt.

Cash out refinance to complete home improvements

Using the equity in your home to improve your home will likely increase the fair market value of your home. Keep in mind, it’s not a dollar for dollar trade-off. Just because you put $20K into new floors and appliances, that doesn’t necessarily increase the value of your home by $20K.refinance mortgage bad credit

Every market is different and some upgrades provide more value increase than others.

The biggest benefit of using your home’s equity to make improvements is it allows you to do the things that you have always intended on doing, but have been unable to save for because life gets in the way.

Improvements like:

  • A new deck/porch
  • Replacing carpet
  • New appliances
  • Roof
  • Improved landscaping
  • and more

What if I have bad credit, can I still do a cash out refinance?

There are several different mortgage options available when looking at getting approved for a cash out refinance. For good credit a conventional loan will probably be the best route to take. For fair to poor credit, an FHA loan will probably be your best route.

If you are a veteran of the US armed forces, and eligible for VA financing, you may be able to do a cash out refinance up to 90% of your home value even if you have credit below 580.

If you do not meet FHA or VA guidelines because you have had a more recent bankruptcy, foreclosure, or short-sale; a portfolio loan will likely be your best option.

Portfolio loans are for scenarios that are more unique and require a “common sense” approval approach. Portfolio loans are less strict than traditional financing, and are intended to be a short-term fix for short-term circumstances. Once you meet traditional lending guidelines you’ll want to refinance out of the portfolio loan.

More on portfolio loans here.

  • Low Credit scores okay
  • Primary residence, vacation home, and investment property
  • Single family home, 2-4 unit, condominium, manufactured homes allowed
  • Recent bankruptcy, foreclosure, short-sale considered

In Summary

There are many benefits to doing a cash out refinance. If you are not sure if you qualify for a cash out refinance whether you have good or bad credit please feel free to reach out.

I’ve been able to help many homeowner’s who have been told by other lenders that they don’t qualify.

I invite you to reach out. 

 

Get your questions answered.

If I cannot help, I should be able to point you in the right direction at the very least.

 

 

self employed home loans

Adam Lesner | NMLS 198818

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona,

California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.

What is a Non-Warrantable Condo?

Finding out that the condo you’re looking to buy is considered to be a non-warrantable condo can be heartbreaking.

When a condo is identified as a non-warrantable that means it does not meet conventional guidelines (meaning Fannie Mae and Freddie Mac won’t buy the loan).

This is kind of a big deal because Fannie Mae and Freddie Mac pretty much buy all conventional loans. If they won’t give the thumbs up on the condo, you and the seller are in a bit of a tough position.

The first thought that comes to mind for most people is “okay, well what about FHA, VA, or Rural Development? Why don’t we just do a government loan?”

Great question.portfolio mortgage lenders

For the condo to be eligible for FHA financing, it has to be on the FHA approved condo list. If it’s not already on the list, it’s probably best you move onto something else because getting a condo on the FHA approved condo list isn’t exactly a walk in the park.

Same thing goes for getting a condo with a VA loan.

The department of Veteran Affairs actually has their own list of approved condos. Again, not the easiest thing in the world to get on that list.

For a Rural Development loan, the condo just needs to meet the conventional condo guidelines to be eligible for financing. There is no USDA Rural Development condo approved list.

Chances are, if the condo doesn’t meet conventional guidelines, it probably doesn’t meet government guidelines either.

What makes a condo non-warrantable?

Some companies will have their own overlays as to what is considered acceptable, but we’ll look at some of the most common reasons for a condo to get flagged as non-warrantable:

  • Projects where a single entity owns more than 10% of the total units (for projects with 21 or more units).
  • Project has inadequate insurance coverage.
  • Condo project has similar characteristics and is managed as a hotel (condotel)
  • Project (HOA, sponsor, developer) is in litigation that relates to safety, structural soundness, functional use or habitability of the project.
  • New construction condos.
  • Established condos that have additional phases in need of completion.
  • High percentage of non-owner occupied units.
  • High number of units being delinquent on association dues for more than 60 days.
  • Project budget is not appropriately structured.
  • And many more.

The most frustrating thing about buying a non-warrantable condo…

Many lenders wait until the last-minute before ordering a condo questionnaire (which tells them if the condo is warrantable orportfolio loans not).

Why?

Well, your guess is as good as mine. Maybe it’s their “policy” to get the condo questionnaire at the final stages of the loan approval process. Maybe the loan officer didn’t realize how detrimental a non-warrantable condo can be to the process.

It would seem that the most logical thing to do would be to get the condo questionnaire completed before even ordering the appraisal! Think about it, a condo questionnaire costs about $150 (sometimes free), and an appraisal costs $400 – $500. Wouldn’t it make sense to order the questionnaire first, to see if the home can even be financed to begin with?

But many times the opposite happens. Borrowers get under contract on a home, get appraisal done, get fully approved though underwriting, take selfie’s of themselves in front of their new home a week before closing, and then get a call an hour later from their loan officer who say’s “hey man, I just heard from Freddie Mac, they said your condo is non-warrantable”.

Really?

The loan officer is going to place the blame on Freddie Mac?

I know it seems insane. I agree. But there is hope…

How to buy a Non-Warrantable Condo

There are 3 ways to buy a condo that is not warrantable:

Buy the condo with cash.

Yeah, because so many people have hundreds of thousands of dollars lying around.

Buy the condo on land contract.

This is where the seller acts as the lender. This is a good option, but the problem is that there aren’t a ton of sellers willing to do this. Buying on land contract really limits you to what you can buy. Also, land contract holders usually want to be paid in full within 5 years.

Buy the condo with a portfolio loan.

You can find portfolio loans with small banks or credit unions. These are what some would call “common sense” loans. Portfolio loans provide the opportunity  for borrowers (and condo projects) to get looked at from a common sense standpoint.

Often times portfolio loans are a breath of fresh air for folks who have been denied for traditional financing. It gives them an opportunity to own the home they want if the big picture makes sense.non-warrantable condo

Portfolio loans are not “no-documentation” loans.

All income has to be verified. All assets have to be verified. An appraisal has to be done. All components of the approval process have to be legitimate. The main difference between the portfolio loan approval process and the traditional loan approval process is the chance to get the whole story looked at.

Portfolio lenders do not take a check-in-the-box type of approach unlike the traditional lending process. They/we truly look at all of the circumstances when making a decision.

These loans are kept on the lender’s portfolio, and are not sold on the secondary market like most loans.

The pricing on portfolio loans vary based on risk. And every portfolio lender has their own take on what each type of risk costs.

You’ll typically find that rates on portfolio loans are reasonable when considering the alternative (renting).

If you have been told you’re stuck because of a non-warrantable condo…

portfolio loans

I invite you to reach out to me.

You won’t be talking with some new loan officer, or a customer service rep, you’ll be connecting with me directly.

I have been able to get many borrowers approved when other lenders said it couldn’t be done.

If I am unable to assist, I should be able to point you in the right direction at the very least.

pre approved home loan


Non-Warrantable Condo | Financing Available | Portfolio Loan

Adam Lesner | NMLS 198818 | Troy, Michigan

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona, California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.

5 Awesome Advantages of Owning Real Estate

Buying a house isn’t for everyone.

The truth is, it’s kind of a pain in the you-know-what to be a homeowner sometimes. If the power goes out, it’s on you bro, better get a generator. If a window breaks, sorry dude, figure it out.

Even though there are some big responsibilities that come with owning a home, there are some excellent advantages worth mentioning!

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Your payment goes toward something.

Yup, it’s called a mortgage. Every month you pay that sucker, the balance of that home loan goes down (just a bit at first). The only time that isn’t true is if you have an interest only mortgage (not a ton of those still out there), where your payment only goes toward interest for the first X number of years. But for the majority of people, their house payment goes toward building equity and paying that bad-boy down.

The alternative? Pay rent (aka pay someone else’s mortgage for them). This leaves you with a lease agreement that you have to stick with, in a house you really can’t change to your liking. The result? You despise writing that rent check every month because you know that even if you did stay there for 30 years, you would still have next month’s payment due on the 1st. Keep in mind, rent typically increases every year. So not only achievement-18134_640would you be paying someone’s mortgage for them, but when it’s all said and done you’ll be paying a higher payment on something that has no liability attached to it. I know, I know, most people don’t rent in the same house or apartment for 30 years. But whether it’s 30 years or 3 years, do you really want your hard-earned money going into someones pocket and have nothing to show for it after 3 years?

I hear the chirping already… “Adam, not all homeowners have equity after a few years of owning. Heck, some were underwater on their homes in 2009 and they made mortgage payments for 10 years before that.”

Yes, you’re right. I am aware of that. Don’t forget, many people put themselves in that place because they used their home like an ATM. Taking cash out of their home to buy a shiny car, or to keep up with the Joneses. I agree with you… if you continue to cash in your equity, you won’t have any equity to speak of. Yes there were other factors that played into the housing crisis like people getting approved for loans they can’t afford, appraisers trying to meet the needs of lenders, and straight-up fraud. But the mid-to-late 2000’s housing bubble was an exception to the rule. Historically, housing prices move steadily (but reasonably) upward.

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Increased sense of pride.

Yes, too much pride can be a bad thing, but being a homeowner is confidence builder. The thought and preparation it takes to buy a home figure-25590_640requires a lot of guts and strategy.

Think about it… You are sitting in your apartment. Channel surfing. You “accidentally” leave it on HGTV while you reply to a few text messages. “Property Virgins” is on, and buying a house looks fun. You suddenly decide that you are capable of buying a home. You Google: How to buy a home. You find a blog that talks about home ownership, and now you’re feeling super geeked. You call a local Realtor, and she asks you if you’re pre-approved for a mortgage. “Pre-approved?. Umm not yet.” Your Realtor insists that you get pre-approved first, and get your ducks in a row.

You ask your friends and family who to call for a mortgage. The next thing you know you’re gathering up your financial identity and giving it to your mortgage guy. You find out there are a couple of things to work on, and it’s probably going to be about 6 months until it’s time to start looking for a home.

You spend the next six months getting your finances squared away, and following your loan officer’s guidance to a T.

  • Paying down your credit cards.
  • Making no large (unverifiable) deposits into your bank account.
  • Get a couple small collections deleted from your credit report.
  • Now you’re ready.

Your Realtor finds you a sick deal, and you make an offer. You negotiate a price that is a win/win for everyone as long as the seller is willing to do a few repairs that the inspector noted. You give your earnest money deposit. It’s game on. Appraisal is ordered. Thirty-ish days later you bring a crisp cashier’s check to closing for the rest of the funds needed. This was pretty much all of your savings, but you saved for this exact moment! To own your home! Now you have the keys, and you feel like you can sit at the big kids table at Thanksgiving this year.

It all started with a little channel surfing mixed with a dose of inspiration.

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Get more for your money.

dollar-499481_640In Brighton, MI and most of Michigan (if not all) you get more bang for your buck by owning your home instead of renting. Let’s look at a quick example. Here is an actual “for rent” listing on Craigslist right now:

$750 / 2br – 775ft22 BR Condo (Brighton)

Great Location. Beautiful updated 2 BR Condo in Hidden Harbour Condominiums opposite Meijer store in downtown Brighton. Central A/C, appliances, washer dryer in the building. No pets please. Water, hot water, trash pick up, Snow removal included in the rent. Available Dec. 1, 2014. Walk to shopping and near x-ways.

Here is an example “for sale” listing on Craigslist right now:

$59900 / 2br – 950ft2TOWNHOUSE for Sale in Brighton

2 Bedroom, 1.5 bath END unit offers extra windows and light, along with added outdoor living space. New Pergo flooring in kitchen and dining areas, also includes newer stove and frig. Newer windows throughout. Large Master Bedroom (16 x 12), and 2nd bedroom (11.5 x 10) both have mirrored closet doors, ceiling fans and lots of light. Finished basement with new glass block windows has built-in storage areas, along with a large separate laundry room. Neutral colors throughout home. Back door leads to private covered patio area, surrounded by green space & trees. Outside area is large enough to entertain and garden.

Running rough numbers on the second one, it looks like $596 including principal/interest/taxes/insurance/mortgage insurance/homeowners association dues

So for 125 more square feet of living space, you pay $154 less per month.

I pulled that up with a few mouse clicks, there are never-ending examples of this.

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Ability to make a house a home.

Take the above for rent listing for example. “No pets please.” It didn’t say no dogs over 30 lbs. It didn’t say no pit bulls. It didn’t say no snakes. Itpuppy-345334_640 said NO PETS.

Why are there so many restrictions on renting? Well, consider this for a moment. If you owned a home, and rented it out, would you want to give the tenant (renter) the ability to do whatever they wish with the property? No? Why? Because you never know how bad they will trash the home. Resulting in you (the owner) having to renovate the property once the tenant moves out. Who knows how much that will cost? Who knows how bad their 1-year-old boxer tear up the carpet? Well ultimately the owner will have to deal with it. So it’s in the owners best interest to be selective on what will be considered when renting out their property.

When you own your home… you decide. You decide on upgrades, pets, colors, etc. You get to make it yours.

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Tax deduction.

The tax deduction that you get from paying mortgage interest is in many cases the largest tax deduction for many homeowners. Unlike credit card and car loan interest that you pay, the mortgage interest that you pay is tax-deductible. Even wealthy borrowers who could pay off their calculator-158109_640mortgage 3 times over with their assets keep their mortgage because of the tax deduction that it brings.

This is a huge benefit for people who look to consolidate some credit card debt because not only does their overall monthly budget improve, but the interest that they pay results in a larger tax deduction. As I mentioned in the first advantage at the beginning, it’s not wise to use your home like an ATM, and take cash out multiple times just to buy stuff. But if you look at it from a common sense standpoint, many times consolidating debt into your mortgage makes good financial sense. If you find yourself refinancing every couple of years in order to consolidate your credit card debt, there is an issue. Might want to chop those cards up so that you don’t find yourself in the same position over and over.

This might be a helpful resource to answer some questions surrounding your possible tax deduction.

What do you think?

Across the United States it is more cost-effective to own than rent in suburban areas. Do you agree? Leave a comment below and tell share your thoughts.

Adam Lesner | Brighton, MI | Mortgage Loan Officer – NMLS 198818

So Your EX Destroyed Your Credit…

Portfolio Loan

Post-Divorce Mortgage

I have seen it countless times. An otherwise “A grade” borrower is left with no mortgage options because their ex-spouse was extremely irresponsible with their finances while going through divorce. Resulting many times in no other option than having to file for bankruptcy, and even foreclose on their home.

For these types of situations there is hope!

FHA, VA, and conventional guidelines are set in stone. As brutal as it sounds, they don’t really care about the sob story. If you had a nasty divorce which resulted in a bankruptcy, short-sale, or foreclosure you’re pretty much between a rock and a hard place if you have any desire to be a homeowner in the next couple years.

So what can you do? You have been a homeowner since you graduated college 15 years ago. Are you really going to be forced to live with family, or rent? NO. Believe it or not, there are lenders out there that take a common sense approach to mortgage loans for people with bad creditlending. Lenders that will look at your situation from a common sense standpoint, and make every effort to understand exactly what led to the circumstances that you’re in. Lenders that will take into consideration that you fell on hard times, but are now back on your feet. These are the lenders that offer in-house portfolio lending. Lending designed to bring common sense back into the home financing world. Where you don’t have to fit inside the little black and white boxes of the strict government guidelines.

Imagine that?  Being treated like a human being instead of a statistic. What a refreshing concept?

So where do you start? The best thing to do is seek out a small-to-mid-size lender, bank, or credit union which offers portfolio loan financing. Find out what their requirements are for these unique loans. Find out what you can do to prepare as best you can. There are still going to be requirements to meet because they want to make sure you ARE back on your feet, and confirm that you do have the ability to repay the loan.

thumb-422147_640Some things to prepare yourself for when getting a portfolio loan:

  1. You’ll probably be required to put at least 10% down.
  2. Points may be required to cover the level of risk they are taking.
  3. Typically there is no mortgage insurance requirement 🙂
  4. You need to have a verifiable income.

 

Other situations when a portfolio loan may be your best option: unique property you’re looking to buy, self-employed less than two years, bad credit because of an isolated incident like a work injury, etc.



You thought you didn’t have a chance in the world to buy a home, but don’t give up. If you’re back on your feet, and you have at least 10% for down payment, home-ownership may be more within reach than you thought.

portfolio mortgage lenders

 

I invite you to reach out to me directly to see if a portfolio loan is the right fit for you.

At the very least I should be able to point you in the right direction.

 

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Self-Employed Less Than Two Years Mortgage Solution

Update: 3/6/17

No conforming product currently allows for 1 year tax returns as self-employed if self-employed less than 2 years. On a vary rare basis, some lenders will allow for less than 2 years self-employment. 

It is unclear currently on if 2 year tax returns averaged will be acceptable. 

I will keep this updated as new information comes in. The updated guideline is below. -Adam Lesner

For self-employed Borrowers, the number of years of required tax returns will be based on the number of years the business has been in existence:

  • For businesses operating for five or more (5+) years, one (1) year of business and personal returns will be required.
  • For businesses operating for less than five (5) years, two (2) years of business and personal returns will be required.
The solution may be a portfolio loan if you have extensive experience in same line of work prior to going self-employed and have at least 1 full year as self-employed.

Is it possible to buy a home if you are a “private contractor” or have been self-employed less than 2 years?

The answer is yes it’s possible, but each situation is unique.

Before we dive into how it’s possible, let’s get on the same page of what the root issue is. Being self-employed less than two years makes it difficult for the lender to make a determination of what your actual income is because there is limited history. Since there is limited history, it’s just as difficult to determine the likelihood of that income to continue in the future.

“Okay, but Adam, I can show you my bank statements with deposits of $10,000/week.”

Right, I get it. You make good money. You have cash money sitting in your bank as a result of your business being profitable. The problem: the lender can’t see how much you had to spend in order to get that kind of return unless you have a profit and loss statement prepared, and show proof of how you’re reporting those expenses to Uncle Sam.  So many, maybe even 80% of the business owners that provide tax returns for me to look at, claim substantial write-offs which offset their income in a way that nearly puts them at a break-even point. The solution: get a bank statement mortgage. There are a few different options when it comes to using bank statements as proof of income. Ask me if I can help with your unique situation by using you bank statements as proof of income.

The good news…

person-110303_1280is that there are lenders out there that will take a look at self-employed borrowers, or even 1099 private contractors from a common sense standpoint. Standard loans backed by Fannie Mae, Freddie Mac, FHA, etc. are not going to be the way to go if you’re self-employed less than two years. The guidelines are strict, and the opportunity to be looked at from a common sense standpoint are extremely limited. Your best bet is to find a lender that offers portfolio financing. This is where they lend their own money, and keep your loan in-house. Keeping your loan in-house means it will not be sold on the secondary market, which means it will not have to meet the strict guidelines of conventional and FHA mortgages. You’ll find portfolio lending with the smaller lenders or credit unions in your local areas. They are the companies that are organically grown within the community, and they tend to have more of an attachment to the area.

2 examples that might make sense to get approved for home financing for less than two years self-employed borrowers:

  1. You have been an IT professional for 5 years. Last year you went from being a W-2 employee to a 1099 employee (private contractor). You’re still working for the same company, but now you are on an annual contract instead of an annual salary. You provide a profit and loss statement showing your income is consistent with how you claimed your tax returns last year. Bam! It makes sense right? Well, most lenders won’t talk to you unless you have 2 years tax returns.
  2. You have been in business for yourself for 5 years running a printer supply store. Last year you had to change the name of your company because of a shady partner that you had to break ties with. You still operate on the same premises. The only thing that changed is the name of your company. Some loan officers will say “Yeah, let’s do this,” just to find out a week before closing that their underwriter isn’t going to approve the loan because there is not a two year history of that business. But, come on, it’s common sense. You’re only going to be looked at from a common sense standpoint in a case like this if you’re working with a lender that offers portfolio loans.

An example that probably won’t fly:

  • You have been a plumber for 10 years. You decide to quit your job and open a pizza parlor. You decide 6 months into it that you want to buy your dream home on the lake. Sorry, it’s going to be impossible to make a determination of what your income is in that short period of time.

How do tax returns impact your mortgage approval? Here is my latest post on that.

 

 


Self-Employed Less Than 2 Years and Buying a House | (Update in video description below)


When seeking a portfolio loan, keep these things in mind…check-37583_1280

These are loans that are funded in-house with your particular lender, taking risks the vast majority of lenders aren’t willing to take. You may be required to put 10% down or more. You may only be able to do this type of loan on a primary residence. Your rate might not be the same as what conventional rates are. You may get a chance to be told “Yup, you’re approved”, when everyone else is saying “no”!

I invite you to reach out to me.

portfolio mortgage lendersGet your questions answered. You will not be talking with an intern, or someone who just got their mortgage license. You’ll be talking with me directly.

We can’t help everyone, but we do make every effort to take a common sense approach to get self-employed borrowers approved if it makes sense.

pre approved home loan