The time to refinance is now!
Bad news makes mortgage interest rates go down.
Lower than they have been for eight years today!
Call and let's get you into a 30 year fixed rate safe loan.
Don't wait until everyone is swamped.
2.75% 30 year fixed conforming loan
FICO middle 721 no points 2.79 APR
NO Cost you get appraisal back at closing,
if needed, about 40% of people don't need
a full new appraisal
(949) 784- 9699
Caroline Gerardo Barbeau
C G
NMLS 32498
Pinnacle Home Loans
Let's talk about what you need
Equal opportunity Lender.
This is not a commitment to lend.
Get ready to save on your monthly payment!
2/26/2020
2/24/2020
TRID survey
You need information on your own "shop" as to number of loans, total dollar amounts and a few details about your bank, mortgage company, credit union or private money to answer about three of the questions.
The survey takes ten minutes if you aren't long winded, as I was about my experience
of thirty years as a Mortgage Loan Officer and banker.
Things they forgot to ask:
1. What is the cost increase to the consumer?
2. Is it unfair that under-served communities who don't have a personal computer
have to wait longer for USPS mailing?
3. Cost increase as to adding employees, buy backs, secondary selling loans
to scratch and dent loan servicers/entities to hold.
4. Cost increase to Borrowers who lost rate locks, didn't close on time in 2015.
5. What can be done to service more minority and rural borrowers who are
inundated by fifty page long emails that they don't or cannot read?
6. Did the increased turn time harm Borrowers? (extra anxiety and time is money).
1919 M Street, NW, 5th Floor Washington, DC 20036 (800) 793-6222 |
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2/15/2020
Student Loan Crisis
Congressional Budget Study on Student Loans
Will they pass a bill to end Income Repayment?
Income Repayment Plans have allowed students to decrease their monthly payment; but like a Negative Amortization Loan before the Crash of 2008 the balances grow and become heavy. This type of loan was outlawed in 2009 for real estate as when trouble hit, and values decreased borrowers found themselves upside down.
Income repayment plans don't pay off the student loan debt in ten years as was planned,
in fact they often burden the student for twenty or more years.
Graduate student borrowers receive eight percent of the federal subsidy through
income driven repayment plans and the cost to taxpayers is rapidly rising.
Congress estimates we lose seventeen cents on every dollar on income repayment loans due
to longer servicing time and defaults vs thirteen cents through standard fixed rate plans
https://www.cbo.gov/system/files/2020-02/55968-CBO-IDRP.pdf
I have mixed feelings on the whole student loan mess. I view it from my personal
seat having saved a 529 plan, paid for my graduate degree, paid for my children's
undergraduate degrees, and worked three jobs. The money I saved was never enough.
In my youngest son's graduating year 2020 I took on parent loans as everything
costs so much. He wasn't able to get all the Engineering classes in a row (U C system
tends to have less than enough professors for upper division classes). It took an extra year.
I also look at the problem from as a person who graduated with a MFA from a renown,
expensive, private school. I struggled to make a living and came to the realization
I must switch careers in order to support my family.
As a tax payer I feel burdened paying forty percent of my W-2 income to give those who
come after a free graduate education. When my home was upside down I stuck it out and paid the
monthly payment. I don't feel that a graduate degree in Arts, Liberal Arts and Humanities
should be free. It's not that I don't experience the value of poetry, painting, and music -
I am a creative person. I am not certain the academic racket is worth twenty years of
payments and the careers aren't there to support the payoff.
What are we to do?
There are millions of people in America who went to a for profit institution - you know
the ones that advertised on the radio and recruited at High Schools (many
now closed) with the sales pitch that grants and loans would get them a high paying
job. Grants are wonderful. The problem is the school never spelled out what the monthly
payment would be and what the consequences would be of this burden. Also that a degree
from these For Profit schools had no value in the marketplace and cost double or triple what
an accredited university costs ($52000 - $65000 a year for a degree that is good as toilet
paper. See study here : http://www.ntanet.org/NTJ/65/1/ntj-v65n01p153-79-for-profit-higher-education.pdf
Higher education should not be life long pack on your back. I want Congress to allow
individuals to include their Federal student loans in a bankruptcy and wipe them out.
This puts the burden to demonstrate need on the courts and ends the long term pain.
If someone has a heavy weight that keeps them from climbing, this is a good recourse.
What solutions do you have?
2/02/2020
Self-Employed Close a Mortgage Loan
SELF EMPLOYED BUYING REAL ESTATE?
Don't be left in the cold
Various Types of self-employed businesses:
Okay you read the whole thing. PLEASE REMEMBER TO WASH YOUR HANDS OFTEN for the count of 30 in hot water with soap and after every time you touched public spaces. This virus is awful.
Don't be left in the cold
Self Employed Income Can Buy a Home
You have been
self-employed for a long time, or you have a sideline gig business, or you are just
opening a new income stream; but you don’t think you can buy a home or refinance.
You have a marvelous CPA who uncovers every possible write-off and although
your gross income is high, the net number is what traditional lenders use.
For some
borrowers trying to buy a home, monthly income isn’t exactly easy to calculate.
For instance, when the borrower doesn’t get a pay stub and W-2.
Freelance
workers, business owners, commissioned employees, those with large percentage of
bonus income, and other independent consultants are considered “self-employed”.
Their income is determined by looking at things like profit-and-loss statements,
1099s and the past two years Federal tax returns. Lenders do not use state
filings, so don’t provide the extra paperwork.
You don’t need
to know how to calculate your self-employment income. I suggest you send me all
your IRS returns for the past two years and we analyze, discuss, and review
before I even pull your credit report. I need the 1120 Corporate returns, K-1,
partnership returns, and your personal federal returns to dig out depreciation,
interest paid for business loans, and any additional income to the bottom-line
net number. I will add up the income and average it over 24 months, 36 months
and past 12 months. I can also look at the gross income and propose we do a
bank statement loan based on gross in a certain time period and divide that
income in half. Later in this article I will discuss the ins and outs of the
many bank statement loan programs.
The first spread
sheet of numbers I create is the recent past two years self-employment
requirement. We work together to show you have a website, or location or
advertising established to show there is a legitimate business in operation. I
may ask for a business license. I will check with the Secretary of State to see
if your Corporation or LLC is in good standing and open for the past two years.
Mortgage lenders
use the definition for a self-employed borrower as anyone who receives more
than 25 percent of their income in non-salaried pay is reviewed as a
self-employed person. This primarily includes those who work on commission or
bonus. It also includes persons who own rental properties.
The lender’s definition of self-employed excludes those who
own less than 25 percent of a business. A common example might be a
partners where an investor or junior person who does not have controlling
interest in business operations.
If you are
self-employed, you will have to hand over more documentation than a salaried
borrower would. Here are a few extra items you’ll need to provide:
§ 2 years’
personal tax returns with all schedules
§ 1099s
§ W2s from your
self-employed business (if you pay yourself a salary)
§ All pages of
the Federal personal returns for the past two years
§ 2 years
business tax returns with all schedules
§ K-1s
§ 1120 (Corporate
Tax Returns)
§ 1120S
(Partnerships and S Corps)
§ Year to date
profit and loss statement showing current income is on track with previous
years I suggest you email me all the income documents at the same time you call your CPA to prepare the year to date profit or loss. It's the numbers on the returns that hold the most weight. Showing a huge profit on the P and L varying form the returns, well, isn't going to be that useful. But don't show larger than normal loss.
§ Explanation to me if you receive most of your income at a specific time of year. In this
case, it can look like your profit and loss statement is on track for lower
income than in previous years. I will help you write this letter.
Various Types of self-employed businesses:
Sole Proprietorship: One person owns and
controls the business. Income is reported on schedule C of your personal tax
return. An example would be the single owner of a landscaping company.
Generally a sole proprietorship is a smaller company.
Partnership: Two or more people own and
control the business. Profits from the business are split between the owners.
Corporations: Stockholders own the
business. These are large companies. A borrower who is 25% owner of a
corporation is unusual to see on a mortgage application.
S Corporations: This is a corporation with
a limited amount of stockholders. If you are owner of an S Corp, you’ll need to
supply your 1120S tax return.
You may have
the world’s greatest accountant; but he/she did not help you with getting a loan,
he/she helped you to not pay much in income taxes.
There are
several things that can trip up a self-employed borrower when applying for a
home loan and providing tax returns to the lender. The fact is most
self-employed persons do not show much net profit. Since the net number is what
is used, for the past ten years since the crash it has been difficult for
business owners to purchase a home or refinance to lower interest rates.
If you work
full time and have a side business, do not plan on deceiving your lender into
not seeing the losses. Typically, you schedule C on tax returns. Lenders
require you to sign a 4506T upfront when you apply. This form is verified with
the IRS to check your income verses what you stated, the w-2 forms, and any
verification of employment. A week or so into the transaction when the 4506T
transcript returns with losses showing, now you have set up suspicion of what
else you may be hiding, and the loss is discounted from your income. It is
always best to consider your loan officer like your priest.
Mortgage
lenders, banks, investors and the secondary market are heavily regulated. They
must be ready to prove that every loan they close is a qualified mortgage. Perhaps
you have not applied for a home loan in more than ten years, today everything
is checked more than twice. If you recently opened shop for your side business,
a loss for just one year is considered.
If you closed
your business after filing the previous year’s tax return, your loan officer
guides you towards the proof needed to show the business officially closed.
Employee Expenses In the past you could claim
non-reimbursed business expenses including mileage. These show on form 2106 in
2017 or 2018. These deductions are counted against your total W-2 income. An
example of employee business expenses are tools and supplies not provided by
the company, non-reimbursed mileage to work-related meetings, and cell phone
charges if you use your personal cell phone for work.
Two-Year Self-employed Average Income: When a lender
reviews business income, they look at not just the most recent year, but the
past two year filed with IRS period. They calculate your income by adding it up
and dividing by 24 (months).
Your loan
officer should be experienced enough to tell you if your excuse for the income
decline will be acceptable and is believable or you can prove to be true on
paper. Remember your file is not viewed by only one person. Most loans are sold
on the secondary market and the investor has to believe and accept your written
letter, and they don’t know you and can’t speak with you.
Cash Flow Analysis Lenders review with a magnifying
glass your bank statements to examine the cash flow of the business. Are there
non-sufficient funds charges? Is the net at month end enough to purchase goods
needed?
You may want to
use funds from your business accounts from your down payment. Sometimes, the
underwriter asks for a letter from your CPA saying that taking money from the
business won’t harm ongoing health of the business and you have one hundred
percent access to the funds. This may seem silly, as you can write a check as
you please; but necessary for the file and for others who may review the file
after you close.
Fannie Mae and
Freddie Mac have spread sheets which calculate income for self-employed
individuals based on each line item income or loss. Lenders may use their own
method of figuring your monthly income. Some lenders have stricter guidelines
called “overlays” which make the way they come up with your monthly income very
different from one bank or mortgage company or end buyer of the promissory note
and loan.
If your
business is new (one year filed return or no filed returns) often you start operating
at a loss. Lenders will weigh the loss against other current income you may
have, this is why you need an experienced loan officer who gathers all the
facts and comes up with an individual plan for your needs.
The
self-employed borrower does endure more scrutiny that the standard pay-stub and W-2
employee.
There are
fortunately other income options to use as verified income for home loans.
These other
categories of products are not sold to Fannie Mae, Freddie Mac or our
government. They are often bought by hedge funds, pools of private investors
and more. Bank statements can be used to extrapolate income. I will ask you for
24 months banks statements. We need one account. Let me repeat, we don’t take a
couple different accounts and compile. I can use 24 months or 12 months or the
last one month and half of the deposits less transfers from other owned accounts
or one-time deposits are used then cut in half as the total income.
Bank statement
loans use the deposits, your FICO lowest middle score, liquid assets, property
type, property use, and property loan to value to determine the interest rate.
Thirty- year, fifteen year, seven, and five-year loans are available. In
general, I am going to convince you for the longest term (the thirty year if
available) because in the future you may not have net income to refinance to a more
conventional loan. The difference in interest rate between a “full
documentation loan with income taxes” and a bank statement loan may be 1-2
percent higher. This is not a hard money loan.
Hard money
loans are priced a much higher jump from 6.95 to fourteen percent depending on
the total number of risks. Lower FICO, property that may take longer to sell,
layers of risk determine the interest rate. To choose a hard money loan you as
a borrower must have an exit strategy. Usually the best plan is to sell in the
short range as plans to increase income or wait for sunshine rarely unfold in the
short term.
IF you are
purchasing an investment property there now are loans that only review the
subject income and rents.
Fortunately,
there are now options for self-employed borrowers. Let’s work together to see what
is available. Please call me at (949) 784-9699
C G Barbeau NMLS 324982
I’ve been
helping buyers close on their dream property for thirty years. There are
solutions even if the bank turned you down. Equal opportunity Lender.
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