Can Co-Signers be brought in the loan process?

Can Co-Signers be brought in the loan process?

 

What if I have “co-signer” on the loan with me? I get this question quite frequently and with good reason. Applying for and obtaining mortgage financing can be difficult in the current lending and regulatory environment. Coupled with the fact that property values and prices here in the Vail Valley are perhaps greater than those of many metropolitan areas, it is a natural question for buyers of all walks to ask whether or not they can bring a “co-signer” in on the loan application to help with qualification.

Doing so can be a tricky scenario, but the answer is yes it can absolutely be done. I have successfully structured transactions where the primary borrower(s) was assisted in qualifying and closing the loan by a parent, brother, sister and so on. To be expected, there is specific criteria that must be followed when bringing in a co-signer to the loan.

“Non-occupant co-borrower” is the technical term for this type of co-signer. First and foremost the non-occupant co-borrower needs to be aware that helping the interested party qualify for the loan is not as simple or as easy as just signing a few documents at closing. The assisting person is completely responsible for the mortgage and the debt just as the primary borrower is. Furthermore, the assisting party must go through the same mortgage qualification process as the primary borrower.

This means that they have to provide all of the numerous and necessary documents for qualification. By this I am referring full income, employment, and asset documentation and a full credit check. If the real intention of the assisting party is just to help with the necessary down payments for the transaction, this can be accomplished by simply gifting the primary borrower the funds needed. In doing so, all parties must acknowledge that the funds are a true gift without repayment terms. When simply gifting money to the primary borrower, an interested party does not have to go through the full loan qualification process.

But in many cases, the primary borrower needs help from the non-occupant co-borrower in the form of additional income in order to qualify for the loan. If this is the case, then we are back at the scenario of having to go through the full application and documentation process. If the non-occupant co-borrower is agreeable to all of that, then the good news is that the transaction can be structured in such a manner.

While the primary borrower must still have some sort of verifiable income and employment, the co-signer can carry most of the weight when it comes to qualification from an income or a debt to income ratio stand point. Every scenario is a little bit different depending on the loan program, loan size and amount of down payment. Nonetheless, I have successfully closed loans where the income from the primary borrower was not even enough to cover the debt of the proposed mortgage, and the income from the interested party was brought in to qualify for and close the loan.

Please do not misinterpret the point of this column. By no means am I implying that someone trying to buy a home that they can’t afford should ask someone to cosign with them and ultimately put all parties involved in a dangerous scenario. I am saying that in the current environment, income and employment are highly scrutinized by banks and lenders and there may by many scenarios where brining ion a non-occupant co-borrows income may be completely advisable and without risk. For example, a roommate’s income may not be used for qualification purposes. Or salary, bonus, commission or tips type income without a solid two year history may not be used for qualification either. Borrowers with ample assets and a lack of income may have a hard time qualifying as may borrowers who are self-employed borrower and write off a lot of income in business expenses.

In such cases where the primary borrower may have ample income that is just not able to be sued for qualification, the non-occupant co borrower’s income may help all parties make a wise and prudent real estate investment. As with any mortgage financing, a mortgage professional should be consulted prior to going down this course.

 

William A DesPortes

Central Rockies Mortgage Corp

970-845-7000 Ext 103

970-845-7006 Fax

970-390-1041 Cell

william@dsmortgage.org

MLO # 100010490 / NMLS ID# 270421

www.desportesmortgage.com

Is the sky falling? Or not?

          When friends, borrowers and colleagues ask me about what the mortgage industry will hold in store for 2014, my initial answer is twofold. I do not believe that the sky is falling or the bottom is dropping out of the industry; there are many positive aspects within the industry. However, there are new regulations and new lending guidelines that will take place and that will be implemented in 2014.

                Impacts of these changes and new regulations are not really known at this point. Their full effects will have to be analyzed as they begin to impact actual loan scenarios. To illustrate this point, in 2013 the Consumer Financial Protection Bureau (CFPB) mandated that a new rule called the Qualified Mortgage will go into effect beginning in 2014. This rule applies more to the way in which I structure my business; exact details of the rule are the topic for another column. Sufficient to say, the industry from lenders to loan originators to borrowers will be impacted to one degree or another. Furthermore, Fannie Mae and Freddie Mac have released new and more stringent lending guidelines in regards to income qualification or debt to income ratio requirements which will certainly have impact on mortgage lending. Recently, the Fed scaled back its bond purchase program known as Quantitative easing 3. Further pull back of this program will force rates higher at some point.  Again, I don’t think the sky is falling, but can’t say how such changes and regulations will impact the industry until they all start to unfold.

                Instead of focusing of things that are out of my control so to speak, I prefer to look at the positives within the in industry and things that I can put a finger on and act upon. An emergence of portfolio lenders and portfolio lending type products that are not necessarily affected or impacted by such rules and regulations are continuing to emerge in the market place. This is a very positive aspect.

                Portfolio lending options are loan products offered by niche type banks or even publically traded banks lending their own money. The mortgage debt is not automatically sold on the secondary markets to Fannie Mae or Freddie Mac which allows for more flexibility and freedom within the loan product’s guidelines. Having portfolio lenders and portfolio loan products available to finance both local and national real estate is vital to the health of both markets.

                For example, jumbo loans are available with only 10% down payment. Loan amounts over $625,500 in Eagle County with only 10% down payment required are truly an anomaly and only a product being offered by a lender wanting to take advantage of such a niche for the right borrower. Such a product allows the borrower to keep money invested in financial markets or other real estate. This product is not right for every borrower but it is good to at least have the option.  There are limitations on place with the program and a mortgage insurance premium will be paid in lieu of a 20% down payment.   

                Condominium hotels presented insurmountable challenges in the lending world for a long time. Financing options for “condo-hotels” were scarce if not almost non-existent for a few recent years. Slowly more banks and lenders have become familiar and comfortable with condominium projects that operate with many hotel-like amenities and rental operations within the projects. Nuances and terms of the programs differ from lender to lender, but the projects can be financed now without too much difficulty which is positive for places like the Vail Valley with many such properties. 

                Buyers who currently have ten or more properties financed can now finance the purchase of a primary residence. Self employed borrowers may now only be required to show income based off of one not two years of their self employed tax returns. I can point of further examples that illustrate the sky is not falling. Changes will be implemented and will take place in 2014, but a seasoned, educated and savvy loan officer will know how to handle them all.  

 

William A DesPortes

Central Rockies Mortgage Corp

970-845-7000 Ext 103

970-845-7006 Fax

970-390-1041 Cell

william@dsmortgage.org

MLO # 100010490 / NMLS ID# 270421

www.desportesmortgage.com

What will 2012 hold for the mortgage industry?

Inevitably at this time of the year I am asked what my expectations are for the upcoming year in for the mortgage industry. My gut or initial reaction is that 2012 will remain a historically opportune time to refinance a mortgage and or buy new real estate. I temper this excitement because the industry is changing so quickly and in so many different ways that it is nearly impossible to make accurate predictions. However, I do think there are signs as to what the future may hold for the mortgage industry, interest rates, loan programs and underwriting criteria.

Long term interest rates, including mortgage interest rates, are mainly dependent upon external or open market variables. Short term rates on the other hand are not. Short term interest rates, such as the Federal Funds rate and the prime lending rate are controlled directly by the Federal Reserve Board. Technically speaking the federal funds rate is the rate at which banks lend each other money on an overnight basis to keep in accordance with overnight depository reserve requirements. The current federal funds rate of interest is .25%.

The better known prime lending rate is derived by adding 3% to the Federal Funds Rate. “Prime” is the rate upon which many home equity lines of credit, car loans and student loans are based. Rates set by the government such as these do factor in to mortgage interest rates in subtle ways and mainly with adjustable rate or shorter term mortgage.  With the current economic status and core inflationary rates still being somewhat in check, the Federal Reserve Board and its chairman Ben Bernanke have made it pretty evident that there should not be any adjustments to the federal funds rate for most of 2012.

This in theory should assist in keeping most mortgage rates at their current low levels. Of perhaps more importance is that the rates set and controlled by the government determine the rate of adjustment for adjustable rate mortgages. Thus, those mortgages that are adjusting in 2012 should be pleasantly surprised with a low level of adjustment. As far as where interest rates are headed, I believe such indications for short term rates coupled with global uncertainties, should help keep rates low for at least the large part of 2012.

In regards to loan programs coming forth in 2012, new HARP (home affordable refinance program) loan programs are set to be released in their entirety from Fannie Mae and Freddie Mac in March of 2012. The loan programs promise to unveil opportunities for more borrowers to refinance their existing loans in to lower interest rates and more affordable overhead. Mention of such loan programs were first made in the fall of 2011, and updates to the programs have been slowly trickling out to borrowers with final details yet to be revealed. Unfortunately I think getting approved for these new loan programs will be more difficult than advertised, but only time will tell here.

Past these known and established government lending programs, I think there will continue to emerge portfolio types of loan programs from various sources which is absolutely encouraging. Loan programs and options are out there and available, but navigating through the process remains a specialized and often difficult process from both Government and portfolio type sources. For example: condominium financing is available; foreign national borrowers are buying real estate with mortgage financing, and more jumbo loan options are emerging with low rates and various loan programs.

I do believe 2012 will remain a once in a life time opportunity to buy real estate and or secure historically low mortgage interest rates. But in the midst of much economic and political uncertainty, successfully closing such transactions continues to require guidance from seasoned, experienced and educated mortgage professionals.

 

William A DesPortes

Central Rockies Mortgage Corp

970-845-7000 Ext 103 Ph

970-845-7006 Fax

williamd@centralrockies.com

MLO # 100010490 / NMLS ID# 720421

www.desportesmortgage.com

The Pre-qualification Process…

I see the hesitation in potential home buyers’ eyes and sense the anxiety in their voices (or even emails), when I speak with them about getting pre-qualified for a mortgage loan. With interest rates at mind boggling low levels and home prices at a point not seen in over a decade, many home buyers are starting to inquire about borrowing mortgage money. At which point, the anxiety level often tends to rise. However, this need not be the case. Going through the initial prequalification process can be quicker, easier and less intrusive than most potential borrowers think.

With that being said, I will be the first to stress that buying a home is a complex process with many variables involved. Furthermore, I will also continually reiterate that the mortgage process is quite complex and requires the guidance of a seasoned loan officer. Those nuances, intricacies and complexities will come out as the process unfolds, but they need not be overwhelming if the process is taken step by step. The first step is getting prequalified. By speaking with a lender and getting prequalified, the borrower will have a better understanding of what the estimated overhead they are likely to incur on a monthly basis will be and how much they can potentially borrow.

The prequalification portion of the process does not require as much as most borrowers might think. A quick synopsis of income / employment, credits / debts and assets can provide enough information to begin the discussion of prequalification. Exact numbers on the necessary information is not necessarily required. Ball park figures of annual earnings and the sources of those earnings are enough to calculate a general idea how much of a mortgage a borrower can qualify for. An analysis of estimated assets or monies in the bank can quickly be done to determine how much money a borrower can put down on a purchase.

Once those two factors are reviewed, credit and or debts are the next piece of the puzzle. Credits and debts are often the unknown variable. The amount of outstanding monthly debt obligations, along with a credit rating or credit score, impact borrowing potential significantly.

If a borrower can accurately account for all monthly debt obligations and the status of their debts, this can be sufficient enough to continue with the prequalification process. By status, I mean it is important to note if there are accounts in collection or outstanding judgments, liens etc. Even if a borrower can accurately account for this information, obtaining a current credit report is the next prudent move. A current and updated credit report will give an exact figure of other existing debts and the credit or FICO rating. Credit reports will cost roughly twenty five dollars and can be obtained by the loan officer or borrower.

Pre-qualification, or pre-qualifying for a loan, is meant to be a quick snap shot of a borrowers income, assets and debts in order to produce general numbers of how much a borrower may qualify for and what the overhead will likely be. A quick conversation and analysis such as this is a good starting point for many potential buyers.

Preapproval for a loan is a different analysis. In order to become preapproved for a loan, documentation to support income and assets as well a lender pulled credit report are required, making this process much more in depth. Simply beginning the process with a prequalification conversation is simpler than most borrowers anticipate. Nonetheless, it does take a seasoned mortgage professional to interpret and calculate the necessary information.

William A DesPortes

Central Rockies Mortgage Corp

970-926-9393 Ph

1-888-926-9399 EFax

970-390-1041 Cell

william@dsmortgage.org

MLO # 100010490 / NMLS ID# 720421

www.desportesmortgage.com

Loan Options for Self Employeed Borrowers…

Have you been self employed for less than two years? If so, and if you have tried to apply for mortgage financing during this time, you have quickly discovered lack of a two year history of self-employment is the kiss of death. Most banks and lenders require a solid two year history of self-employment earnings, generally verified with two years of tax returns as supporting evidence, before they will even begin discussing mortgage financing with the borrower.  I say “most” because financing options for such borrowers are beginning to emerge.

As I continually communicate to borrowers, friends, family and colleagues, I tend to judge the overall health of the mortgage industry and the economy as a whole (to a certain to degree) on the existence or re-emergence of portfolio types of lenders. Portfolio lenders or portfolio lending options can mean a variety of things. Essentially a portfolio lending product is one that is not based upon Fannie Mae or Freddie Mac underwriting guidelines nor ultimate funding.

Publically traded banks may offer their own portfolio mortgage products which are not based upon guidelines and or requirements that their more traditional mortgages are subject to. Local banks in any given community may have similar offerings as they tend to have a more intimate lending relationship with the community they service. Or venture capital type of lenders may unroll portfolio types of lending products to brokers or independent sales representatives from their company. In all such instances the entity is lending its own money based upon its own perceived risk tolerances with its own lending criteria.

Portfolio lending products indicate that banks or lending companies or firms have successfully earned or raised capital and feel comfortable extending it for alternate financing options.  A mortgage for borrowers who are shy of two years self-employment is an example of the re-emergence of such lending, and I interpret this lending option as a positive sign.

Even though the loan program does now exist, I will firmly disclose that the borrower must present a strong case as to why they should be able to borrow the money, with a lack of employment history. Each scenario would be analyzed on a case by case situation. The longer amount of time a borrower has in the given industry, the better the case.  This is not to imply that a lack of income reported can be tweaked to qualify for the loan. Compensation factors such as strong credit, low debt and ample assets in reserve would help build a strong case.

Nonetheless, the fact that there are lending sources available that will analyze a scenario in such a manner is encouraging. If you have been self-employed for more than two years and have applied for and or received mortgage financing lately, you can attest to the fact that is the process was probably not the easiest. Portfolio lending options are not easy financing options by any stretch of the imagination and require the guidance of a seasoned mortgage professional.

William A DesPortes

Central Rockies Mortgage Corp

970-845-7000 Ph

970-845-7006 Fax

970-390-1041 Cell

william@dsmortgage.org

MLO # 100010490 / NMLS ID# 720421

www.desportesmortgage.com

Ramifications of “Short Sales’ are becoming clearer…

No doubt about it, the real estate market has under gone monumental changes over the past few years. Changes that the mortgage industry has experienced during this period of time are almost unfathomable. Words and terms such as short sale, deed-in-lieu, foreclosure or loan modification are common place within the industries,  and with property owners and in the media. What’s not as well known to these groups are exactly what the ramifications of such actions and terms are. As more and more borrowers are structuring sales of their homes as “short sales,” it is becoming clearer that the consequences are long lasting.

                According to Fannie Mae (www.fanniemae.com):  “A pre-foreclosure sale or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed.” In layman’s terms, the homeowner is selling their property for less than what they owe on the mortgage note with the bank’s acceptance. Such a transaction requires a lot of communication and negotiation with the bank or lender that owns the note, and I am not an expert in how to go about structuring such a transaction. However, as short sales of properties become more common place, I am becoming more of an expert on what the long lasting ramifications of a short sale transaction are.

                It is not uncommon for the homeowner to incur significant tax consequences or liabilities on the amount of the loss or difference in the sale. Impacts on the borrower’s credit history or rating could be severe, resulting in difficulties for the homeowner if they try and obtain credit in the future. Of perhaps more significance is the mandatory waiting period before the homeowner is able to apply for future mortgage financing.

                While each short sale scenario with every lender or investor is a little different, borrowers who have sold a property through a short sale are looking at a minimum of two years before they are able to apply for any sort of mortgage financing. Right now, two years would really be a best case scenario. Fannie Mae will back or purchase mortgage loans for borrowers who have been thro ugh the short sale process within the last two years assuming there is at least 20% down payment or equity on the property. Other investors have more stringent timelines than Fannie Mae.

                Reading between those lines, a homeowner or borrower who has sold a property in such a manner cannot refinance or purchase any sort of property with a traditional type of mortgage for at least two years.  Yes, that goes for a primary residence as well as an investment property. Such guidelines can be particularly difficult in communities such as the Vail Valley where investors may own rental properties. Such circumstances should be factored in to the scenario before the decision to proceed with a short sale is made.

                As mentioned, I am not an expert on short sales transactions. Nonetheless, having seen and analyzed borrowers’ scenarios that have been through the process, I am becoming more familiar with the ramifications. In my opinion, borrowers contemplating such a transaction should seek legal, accounting, mortgage and real estate counsel before making the decision to finally go through with the process.

William A DesPortes

Central Rockies Mortgage Corp

970-845-7000 Ext 103 Ph

970-845-7006 Fax

williamd@centralrockies.com

MLO # 100010490 / NMLS ID# 720421

www.desportesmortgage.com

Twenty year fixed rate mortgages may offer a refinance solution…

It seems as if we are in the midst of the third or fourth coming of decreased mortgage
interest rates. Interest rates reached what we all thought were unprecedented
lows during periods in 2009, 2010 and even the beginning of 2011. During
periods of this time, interest rates on 30 year fixed rate mortgages dropped to
the mid 4% range. Factors contributing the low interest rates are numerous over
the three year period.

As has been well documented, the Fed’s purchasing of $1.25 trillion of mortgage backed
securities was the reason for rates being so low in 2009 and in to 2010. After
the Fed’s purchasing program ended, turmoil within many foreign economies
caused global investors to seek the safe haven of US bonds as their primary
investment vehicles which kept rates low in 2010. Reasons for low interest
rates go far beyond those bullet points.

Currently it seems as if a downgrade in the US credit rating by the S&P has caused rampant uncertainties on numerous economic fronts.  I will be the first to admit that I thought such a downgrade would send interest rate through the roof. However, the opposite it is true, and investors are still buying US mortgage backed securities in abundance which has driven interest rates even lower for the time being. This recent drop
has left many borrowers wondering if there is an option or reason for them to
take advantage of the recent decreases in rates.
There are many variables that must be evaluated on a case by case scenario when
trying to determine if a borrower should potentially refinance their mortgage
twice within a short time frame. A transaction or refinance from a 30 year
fixed rate mortgage to a 20 year fixed rate mortgage has been the answer for
numerous borrowers recently.
Many borrowers who refinanced their mortgages during 2009, 2010 and 2011 have
secured a rate of around 4.75% on the 30 year fixed rate loans. Assuming a loan
amount of $400,000, the monthly mortgage payment is $2086.83. Interest paid
over the thirty year term at the given rate is $351,170. Current interest rates
for a 20 year fixed rate mortgage are at about 3.75%. Assuming a loan amount of
$400,000, the monthly payment for the 20 year fixed rate mortgage at 3.75%
would actually increase by about $285 to $2371 per month.  However, the
interest paid over the term of the loan would decrease by $182,000.
Clearly a monthly payment increase of $255 per month is not to be taken
lightly, but neither is $182,000 of saved interest over the life of the loan.
Refinancing in to a 20 year fixed is just one of the many angles and options
that exist today. If that scenario does not work for you, perhaps there is
another one that has not yet been considered.
Now more so than ever, mortgage financing is a highly complicated and involved
process. There are many variables at play influencing the rate and term of
loans. There are many variables at play past the rate and term that factor in
to whether or not the deal can be completed at all. If you haven’t evaluated
your current mortgage financing scenario since your last refinance, now is the
time to do so with the guidance of a seasoned professional.

 

William A DesPortes

DesPortes Mortgage Group

NMLS ID: 373609

970-926-9393 Ph

1-888-926-9399 EFax

970-390-1041 Cell

william@dsmortgage.org

MLO # 100010490 / NMLS ID# 720421

The End of QE2…

The end of Quantitative Easing Two…
QE2, or the second round of quantitative easing, ended on June 30, 2011. As a mortgage loan officer and an investor in the US stock market I believe the ending of the program presents a number of uncertainties moving forward.
From November 2010 until June 30, 2011 the US Federal Reserve allocated $600 billion to the purchases of US treasuries. An additional $250 to $300 billion of profits from the Fed’s mortgage backed securities purchasing program were also tagged for reinvestment in US treasuries and bonds. This allocation of dollars and spending defined QE2. As you might decipher, QE2 followed QE1 which ended in April of 2010. Now that the program and spending have come to an end, where equities, commodities and interest rates go moving forward is quite precarious.
During this period, the US Fed purchased 85% of available US treasuries (www.bloomberg.com). Such an influence of buying power in fixed rate investments from the Fed helped keep interest rates across the board low. Due to low rates of return on treasuries and bonds, investors looked elsewhere for better margins on their investments which led them to US stocks and commodities such as gold. Naturally the renewed purchasing of stocks and commodities during the time period of QE2 helped their values improve.
By looking at interest rates, stock indices and commodity prices over this eight month period, the program could easily be defined as a success. Stock markets improved significantly with the Dow Jones Industrial average up nearly 1000 points to about 12,500. US mortgage rates decreased and the 30 year fixed rate mortgage slipped to the mid 4% range, and gold increased over $100 per ounce to around $1520 per ounce.
While there may be speculation of another round of quantitative easing, this is not definite at this point and would be highly controversial. Where that leaves the US economy, and both stock and bond markets, going forward is indeed uncertain. The fact of the matter is that the biggest purchaser in US treasuries for the last eight months is now officially no longer in the business which will effect both stocks and bonds.
Other sources must be completely relied upon to make up for the loss of treasury purchases from the Fed. Traditionally, those “other sources” have been entities such as pension funds, municipalities, insurance companies and foreign countries. Where does that money or purchasing power come? Does the US now have to pay a premium or a high rate to attract the investors? Those are the $600 billion questions right now. Some hope or offer the opinion that those investors who have shied away from US treasuries, in favor if riskier investments such as stocks and commodities, may once again look to buy fixed rate investments such as treasuries and mortgage backed securities.
I don’t know the answer to be honest, but I don’t think it is going to be a smooth or easy process. I can tell you that mortgage rates, stocks and commodities have all quite volatile and skittish since the program ended a few short days ago. If I sound as if I am beating a dead horse, I am. Mortgage rates will not be at these historically low levels for much longer.

William A DesPortes
DesPortes Mortgage Group
NMLS ID: 373609
970-926-9393 Ph
1-888-926-9399 EFax
970-390-1041 Cell
william@dsmortgage.org
MLO # 100010490 / NMLS ID# 720421

Which option would you choose?

Which option would you choose…

If I could give you, as qualified home buyer, two options, which would you choose? Option number one would be buying a home right now at current market prices and
current interest rates. Option number two would be taking a 5% reduction to the
sales price, but with a point increase to the interest rate. Which would you
choose as the more financially advantages option?
Defining those numbers may help analyze the scenario. In order to define or set
“current market conditions” or the first option, let’s assume a sales price of
$400,000, a 10% down payment, a loan amount of $360,000 with a standard 30 year
fixed rate mortgage at 4.75%. Defining the second option, five percent off the
of the sales price would reduce that figure to $380,000, making the loan amount
$342,000 (still assuming  a 10% down payment) with an increased interest
rate to 5.75%. Which would you choose?

Examining the numbers a little closer may help in the decision. With the first
option, the monthly payment at 4.75% is $1887, and interest paid over the
entire thirty years is $316,054. Interest paid in the first five years alone
adds up to $82,069. Assuming a 5% reduction in the sales price and a 1%
increase to the rate, the monthly payment at 5.75% is $1995. Interest paid over
the entire thirty years is $376,494 with $94,995 paid in the first five years.

My point is simply that increased interest rates cost a borrower much more
interest than is often realized as illustrated by the numbers above. Even with a
reduction in the sales price and loan amount, a one percent increase to the
rate would increase the interest paid on the loan by roughly $60,000 over the
life of the loan and by about $13,000 in the first five years alone.

I don’t know if home prices will fall another 5%. Given foreclosures and short
sale types of transactions, I suppose such a reduction could be a possibility.
I do know that interest rates will rise. It is my belief that we will begin to
see rate increases sooner than later. Inflationary numbers are starting to rise
on the wholesale and consumer level as evidence in the May reports for both
measurements. As inflation rises so too will interest rates. Fannie Mae and
Freddie Mac have dubious futures and are under much scrutiny. Given that these
two government enterprises (along with Ginnie Mae) account for roughly 90% of
mortgage backed security purchases in the current market, a change in their
funding, operations or existence would surely cause a rise in rates as well.

I could go on and on with reasons why I think rates will rise soon. But the
simple mathematics of increased rates are not debatable; it will cost more to
borrow mortgage money in the near future. Furthermore, a borrower’s buying
power is decreased with rate increases which could make even a 5% reduction in
sales prices a mute point. Current interest rates and home prices are truly a
once in a life time opportunity.

William A DesPortes

DesPortes Mortgage Group

NMLS ID: 373609

970-926-9393 Ph

1-888-926-9399 EFax

970-390-1041 Cell

william@dsmortgage.org

MLO # 100010490 / NMLS ID# 720421

A Roommate’s rent can help you qualify for a Mortgage…

Over the last three or more years, mortgage lending guidelines and conditions have been
pretty strict, making mortgage financing difficult to obtain for many folks.
While this is not necessarily a bad thing, it is encouraging to finally see
some guidelines loosening and some loan programs that were eliminated from the
market place once again being made available.

For example, there is a loan program called the Fannie Mae My Community Mortgage that is once again available. This is of importance to places like the Vail Valley
because the loan program allows borrowers to use income from a roommate as
verifiable income for qualification. Current lending guidelines for qualifying
income are fairly strict, and while there are stipulations with using border
income for qualification, it is encouraging to know that the option does again
exist.
Stipulations for using border or rental income as a means of qualifying for a
loan are as follows: the individual (roommate) must have lived with the
borrower and paid rent for the last 12 months, the rent / income can not exceed
30% of the borrower’s total gross income and proper documentation to verify the
relationship such as a copy of the roommates drivers license, utility bills,
bank statements or cancelled checks will be required.
Each borrower and transaction still do remain subject to the standard variables
and criteria of a mortgage such as credit score and content, down payments and
cash reserves, employment and income, property type and so on. With this being
the case, it can only be determined how this will help borrowers on a case by
case scenario. Nonetheless, the ability to use a non-traditional source of
income as this certainly creates opportunity for potential borrowers.
With this loan program, properties can be purchased with as little as 3% down
payment and refinanced with as little as 5% equity assuming conforming loan
amounts less than or equal to $417,000. Mortgage Insurance is still required
with less than 20% equity on a purchase or refinance, and a borrower’s income
level must be below the area median income level which is determined county by
county. Factors such as these are evidence that both the Federal Government and
mortgage lenders recognize the dire importance of getting the real estate
market vibrant and back on its feet in order to help the national and global
economies.
While there have been significant changes and corrections within the mortgage
industry over the past three years, advantageous and promising aspects with
mortgage lending such as the Fannie Mae My Community Mortgage program are
starting to resurface. Given the fact that property values are in a period of
stagnant growth, now may be the time examine buying property. Even with the
advantageous terms outlines in his column, the process is quite complex now and
requires guidance from a trusted, educated and experience mortgage
professional.

William A DesPortes

DesPortes Mortgage Group

NMLS ID: 373609

970-926-9393 Ph

1-888-926-9399 EFax

970-390-1041 Cell

william@dsmortgage.org

MLO # 100010490 / NMLS ID# 720421