August 10th, 2022 ten percent off sale
August 10th, 2022

Are Housing Values Dropping Now?

Potential homebuyers who contact me for a mortgage are now frequently asking if they should wait to buy a home.  The implication is that people are now worried that housing values are going to fall, so why buy now? Isn’t it smarter to wait? Maybe, maybe not. It is understandable why everybody is asking the question, “are housing values dropping now?”

Markets are very local. Don’t assume that real estate is going to fall across the board in every community, in every town, in every city across the U.S. Read More

Categories: Appraisal, Home Buying Process, housing values, interest rates, Lifestyle, mortgage, Realtors , , , ,

July 10th, 2022 dollar 1362243 1920
July 10th, 2022

Cash Reserves Requirements For Jumbo Loans – UPDATE

Jumbo loans, also called Non-Conforming loans, are loans that do not conform to the Conforming loan limits. Conforming loan limits can be found by clicking here. If you have a loan amount that is higher than the Conforming loan limits, then you have a Jumbo loan. Jumbo loans require that a mortgage borrower has cash reserves. The Jumbo loan cash reserves requirement is different from Conforming loans, in that Conforming loans many times do not require cash reserves at all.

Cash reserves is a certain amount that a lender may require that the borrower has left over after they pay their down payment and closing costs at closing, in reserve.

Different lenders have different requirements for cash reserves for their Jumbo loans. There are requirements for the amount of cash reserves, and there are requirements for the types of cash reserves.

Amount of cash reserves (the below is illustrative as it may vary from lender to lender):

6 months of the PITI (principal, interest, taxes, and insurance) are required in general.

4 months PITI if you are retaining your current primary residence

4 months PITI for each rental property you own

4 months PITI for a second home/vacation home that you own

Cash reserves are based on all recurring housing expenses for the subject property and in some cases for other property owned by the borrower. Cash reserves are also cumulative, so if you are buying a new home and have a rental property, per the above, you may need 10 months of cash reserves. Housing expenses, also known as principal, interest, taxes, insurance, and assessments (PITIA), include but are not limited to:

  • Principal and Interest (as used in the qualifying payment amount)
  • Insurances (hazard, flood, and/or mortgage)
  • Real Estate Taxes
  • Ground rent/leasehold
  • Special Assessments
  • Homeowners’ association fees
  • Monthly co-op fees
  • Any home equity loan or HELOC payment, if applicable

Types of cash reserves:

  • Cash accounts (checking account, savings account, money market accounts, CD’s)
  • Mutual Funds
  • Stocks
  • Gift money is usually not allowed to count towards cash reserves
  • Retirement accounts may or may not be allowed to count towards cash reserves

I have seen lenders go back and forth over the years on allowing retirement accounts, such as 401(k), 403(b), IRA, and TSP; to be used as cash reserves.

When a mortgage lender is considering retirement accounts as cash reserves, they are not suggesting that you must liquidate or borrow against the retirement account to generate cash. Lenders are only considering the balance of the retirement account without having to liquidate any of it or borrow against any of it.

Retirement accounts are not very liquid, and hence they shouldn’t be considered cash, which is why at some points in time I’ve seen lenders not allow retirement accounts to count towards cash reserves requirements.

But currently, as of the date of this blog, we have many lenders we work with that allow retirement accounts to be used as cash reserves. This is an important development because it now allows borrowers to only need to have their down payment and closing costs liquid, but not the cash reserves.

Mortgage guidelines can change frequently, please schedule a call or email me with questions on your specific situation.

Categories: Loan Process, Loan Types, mortgage, Underwriting Rules , , ,

June 14th, 2022 money g53fe80fe4 1920
June 14th, 2022

VA Cash-Out Refinance To 100% Loan-To-Value

A VA cash-out refinance can be used for many reasons. There are a few important things to know about cash-out refinancing to 100% loan-to-value (LTV) when using your VA eligibility.

On a VA cash-out refinance to a 100% LTV the 100% must include the VA funding fee. Read More

Categories: housing values, Loan Process, Refinance, Underwriting Rules, VA Mortgage , ,

May 30th, 2022 image gabf42fccd 1280
May 30th, 2022

e-closings The Reality

There has been a lot of talk about e-closings recently, which allows someone to close on a mortgage remotely from the comfort of their own home or office, without physically going to a title company office. However, knowing the details is important. You need to determine if this is an option that is available to you, and if it is a good idea for you.

As of the writing of this blog, e-closings are not available in all 50 states. You need to determine if your state has passed legislation to allow them. Then you need to find a mortgage lender and a title company that have the knowledge and technology needed to participate in e-closings.

You may also hear an e-closing referred to as a digital closing, electronic closing, remote closing, and other variations.

There are also different types of e-closings such as: Read More

Categories: Home Buying Process, Loan Process, mortgage , , , , ,

May 11th, 2022 unfinished house
May 11th, 2022

Escrows For Weather Related Home Completion Items

Lenders are sometimes asked by a mortgage borrower to allow an escrow account to be created for some items to be completed. Repairs cannot be addressed by putting money in escrow. Repairs are usually required to be completed prior to closing. However, lenders may allow an escrow account to be created for items unable to be completed due to weather. Weather related delays are most common in new construction homes.

In my 3.5 decades in the mortgage business, I don’t recall a lender I have worked for ever allowing repair escrows. That is because they are typically messy, and many times end up not being resolved in a timely fashion. There are contractor problems and other situations where the cost exceeds the escrow account reserve. Weather related escrows are a different story, but repair related escrows may be impossible to get approved by a lender. Read More

Categories: Appraisal, Loan Process, mortgage, Underwriting Rules , , ,

April 26th, 2022 money and housing
April 26th, 2022

Historical Real Estate Values

I often have conversations with potential homebuyers in speaking with them about their mortgage financing, where they ask me about whether I think Real Estate is due for a correction. Let’s face it, Real Estate has been going up in value at a striking pace in the last few years. It’s a realistic question to ask if some of that increase is due for a correction to some degree.

Of course, I don’t have the answers. But we can have a discussion to give homebuyers a frame of reference. Read More

Categories: Home Buying Process, housing values , , ,

April 12th, 2022 water and beach
April 12th, 2022

Tidewater Notices on VA Loans

If you have never even heard of a Tidewater Notice, you are probably wondering what is a tidewater?! I know the first time I heard the term I was confused. My first thought was, “the property isn’t waterfront, what are they talking about tidewater for?

The Tidewater process by the Department of Veterans Affairs (VA) gives borrowers a way to try to combat a low appraisal valuation before it is even official. Before finalizing the appraisal report, VA appraisers can notify the lender that it looks like the home’s value will come in below the purchase price. This is known as invoking the Tidewater Initiative, or Tidewater for short. Read More

Categories: Appraisal, Underwriting Rules, VA Mortgage , , , ,

March 22nd, 2022 septic truck
March 22nd, 2022

Are Well And Septic Inspections Needed To Get A Mortgage?

Well and septic inspections may indeed be required to get mortgage approval. But it depends on the type of mortgage you are seeking.

A conventional mortgage through Fannie Mae or Freddie Mac typically do not require  well and septic inspections. I say “typically” not required because there may be an instance where they are required. Read More

Categories: Home Buying Process, Loan Process, mortgage, Underwriting Rules , , , ,

March 9th, 2022 car loan
March 9th, 2022

How Much Mortgage Does My Car Loan Cost Me?

When a mortgage lender analyzes your finances to qualify you for a mortgage, they’re looking at all of your debt along with the new proposed mortgage payment. The other debts that they consider outside of your new mortgage payment are debts like minimum credit card payments, car loans, student loans, and any losses from other rental property. They do not look at debts like utility bill payments, car insurance or cell phone bills.

A mortgage lender will approve your loan allowing you to spend a certain percentage of your gross monthly income on your new mortgage payment and your debts.

Let’s see how much more mortgage you could qualify for if you did not have a car loan. Then you can see if paying off a car loan off  leaves you with the cash needed to  make a down payment and pay the closing costs to purchase a new property. Read More

Categories: Home Buying Process, Loan Process, mortgage, Underwriting Rules , , ,

February 24th, 2022 building disaster
February 24th, 2022

New Condo Mortgage Guidelines After The Florida Condo Disaster

There have been several announcements regarding condominium deferred maintenance recently.  As a mortgage lender, we must pay attention to announcements regarding  changes in underwriting guidelines from both governmental mortgage agencies that write off all of mortgage guidelines, Fannie Mae and Freddie Mac. We also have to pay attention to guideline changes announced by the various banks that we sell loans to.

Ever since the horrific disaster in Surfside Florida on June 24th 2021 (when the building collapsed due to deferred maintenance), the government agencies and the banks we sell mortgages to have started to incorporate questions related to condominium maintenance into the condo questionnaire. Read More

Categories: Condo, Underwriting Rules , , , ,