I sometimes have people ask me what the requirements are to count alimony or child support income towards qualifying for a mortgage.
First we need a copy of a divorce decree or separation agreement (if the divorce is not final) that explains all the terms of any alimony and child support, and any other financial arrangements that may have a positive or negative impact on your mortgage application.
In general, we have to review the payment history to determine if it’s been stable income for the borrower. We have to document no less than six months of the borrower’s most recent regular receipt of the full payment. Read the rest of this entry »
When you qualify for a mortgage loan, it may not be for the amount you want. Outstanding debts can affect how much you are able to borrow. But in some instances, you may be able to pay off the debt in order to qualify for a larger loan.
If you reduce the number of installment payments to 10 or fewer, the loan may not be included in your debt-to-income ratios. However, if the debt requires a large monthly payment, an underwriter may consider it a risk in your debt-to-income ratio. Read the rest of this entry »
What is a community property state?
In the U.S., nine states have tried to alleviate the pressure of divorce by passing community property laws.
In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, community property laws require divorcing couples to split assets acquired during a marriage equally. Marital property includes earnings, all property bought with those earnings, and all debts accrued during the marriage.
When getting a mortgage in a Community Property State, a spouse might not be on the new mortgage but their credit report will still be pulled and their debts will be added to the debt-to-income ratios of the mortgage borrower. However, this only applies to FHA & VA mortgages taken in the above states, not on Conventional loans. Read the rest of this entry »
If you have variable income that changes and fluctuates, the rules of assessing your income to qualify for a mortgage are different than if you had a fixed salary.
Some types of variable income would be: Read the rest of this entry »
With a VA loan, the United States Department of Veterans Affairs requires that the closing costs on a VA refinance be recouped in 36 months or less. If the recoupment period is over 36 months the loan will be rejected.
In other words, the refinance closing costs divided by the monthly savings has to be 36 or less, signifying the number of months in the recoupment period.
For example, if the closing costs on a VA refinance are $3,000 and the monthly savings on the refinance are $400 a month, the recoupment period is 7.5 months because $3,000 divided by $400 a month in savings = 7.5 (well within 36 months). Read the rest of this entry »
A Credit Score Simulator can help with “What If” scenarios to determine what you could potentially do to raise your credit score. It can also show you what could negatively impact your credit score. It is important to see how your credit choices might affect your credit score because your credit score will impact the underwriting of your loan, your interest rate quote, and even the cost of your mortgage insurance.
Some of the various things a Credit Score Simulator can measure to see how they will impact your credit score are: Read the rest of this entry »
Forbearance, only do it if you absolutely have to. Some people are taking a Forbearance on their mortgage as a way to take a break on their mortgage payment when they really do not need to.
But forbearance does not mean you can skip mortgage payments and never pay them back. You have to repay any missed or reduced payments in the future. So, if you’re able to keep up with your payments, keep making them.
Taking a forbearance will also impede your ability to refinance. Having a forbearance on your credit report means you cannot get a new mortgage. You would have to bring the loan current. Read the rest of this entry »
Newly revised mortgage guidelines for self-employed people due to the Covid-19 pandemic: There are temporary requirements for assessing income derived from self-employment. The additional due diligence is due to the disruption from the pandemic. Mortgage lenders now need to consider if and how a business has been impacted and the likelihood of income continuance.
There is additional income documentation required and you may need an audited Profit & Loss statement with supporting documentation for the Profit & Loss statement. The continuity and stability of income is what will be considered. Read the rest of this entry »
Forbearance – you should only do it if you absolutely have to. Some people are taking a forbearance on their mortgage as a way to take a break on their mortgage payment when they really do not need to.
Forbearance does not mean you can skip mortgage payments and never pay them back. You have to repay any missed or reduced payments in the future. So, if you’re able to keep up with your payments, keep making them.
Taking a forbearance will also impede your ability to refinance. Having a forbearance on your credit report means you cannot get a new mortgage. You have to bring the loan current to do so. Read the rest of this entry »
When you buy a new home, you need a mortgage to purchase it. And before you get a mortgage, you need to determine how much mortgage you qualify for. Different sources may qualify you for different mortgage amounts. And how much you qualify for does not necessarily equate to how much you can afford.
How much you can afford is based on your personal budget. When a mortgage lender tells you how much you can qualify for, that is the highest mortgage amount they’ll approve you for. But this may not be the mortgage size you end up closing on. Read the rest of this entry »