When things drop there is usually trouble, like bombs, glassware, or your income. However, sometimes it is good when things drop, like interest rates, gas prices or your golf score. Speaking of dropping income, it is important to know that if you have any sort of variable income and it drops, it will hurt you in qualifying for a mortgage. What is
Blog Category: underwriting rules
The Treasury Department last week altered its financial support of Fannie Mae and Freddie Mac. The revised terms are that the guarantees of how much the Feds will back them are going down, but officials say the amounts they are still guaranteeing will be plenty. More importantly, there will now be no dividend that Fannie Mae and Freddie Mac has to pay. The new terms are that whenever there are profits they will simply be swept over to the Feds; and losses will still be covered by we the people.
Prior to this change, since there have been no profits for the most part in the last four years since this takeover of Fannie and Freddie began, Fannie and Freddie have had to borrow money from the Treasury (i.e. we taxpayers) to make their dividend payment. Now the requirement
There is a new Fannie Mae underwriting rule related to large deposits. There has always been a Fannie Mae rule that made underwriters ask about a large deposit that was clearly not a paycheck deposit, and that is understandable. If someone has a $30,000 deposit on their bank statement, and their paycheck is $4,250 each pay period, then I can see asking where the $30,000 came from. And usually, the answer is that it is a gift, or a transfer from another account, and all we have to do is have the client document that with the proper documents. Documenting a large deposit is known in the industry as getting a “source of funds.” But recently, it has gotten more interesting.
I lost a client recently, mostly because she was a price shopper, and would not answer my questions. And then I heard from her again, mostly because she was a price shopper, and would not answer my questions! Confused? I was too. It has to do with currencies, underwriting rules, foreign countries and more. Sounds mysterious. I’ll explain.
Many people are not aware of a rule that has altered, made more expensive, or stopped people’s refinance attempts. This rule states that on a Conforming Loan (loans up to $417,000) or Conforming-Jumbo loans (loans from $417,001 to $729,750) if you are refinancing and paying off any 2nd trust (HELOC: Home Equity Line of Credit, or HELOAN: Home Equity Loan) that the transaction must be deemed a ‘cash out refinance’ as opposed to a ‘no cash out refinance’. This is important for several reasons.
If you are looking to buy a new house, and want to keep your current home as a rental property, on a Conventional loan you need to show the lender who is making the loan on your new home some things that you would not if you were selling your current home instead of renting it. You need to show 6 months “cash reserves” after the down payment and closing costs on the new house, and you need a 70% loan-to-value (LTV) on your current home, as evidenced by an appraisal. Fannie Mae and Freddie Mac have this significant equity requirement they force banks to follow because they are trying to avoid people who aim to do a strategic default, now or in the future. Many people in the post 2008 collapse