Michael Santos

MLB Residential Lending

Getting Your Mortgage Application Approved As A Self-Employed, First-Time Homebuyer

by

Getting Your Mortgage Application Approved As A Self-Employed, First-Time HomebuyerA significant number of people are self-employed, which means they might be relying on this income to apply for a mortgage. It is true that people who are self-employed may face additional challenges when trying to get approved for a home loan when compared to someone with traditional W2 income, these are obstacles that can be overcome. With the right qualifications and documentation, even first-time homebuyers who are self-employed should be able to qualify for the home loan they need.

Lenders Assess Someone’s Ability To Repay The Loan

First, lenders are trying to make sure the person will repay the loan. Lenders believe that someone with W2 income has a stable job and a guaranteed salary, which means they are more likely to repay the loan; however, someone who is self-employed has other ways of demonstrating that he or she can repay the loan. Self-employed individuals can use tax returns, payroll receipts, and records from financial institutions that serve as documentation of the applicant’s income or assets. This means standard W2 forms and pay stubs might no longer be necessary.

Navigating Eligibility Requirements

Next, self-employed individuals need to meet the eligibility requirements. This includes two years of self-employment, a reliable income, a strong credit score with a clean credit report, cash for a down payment, and a low debt to income ratio. It is possible for a first-time homebuyer to get a loan for less than five percent down; however, closing costs can be significant. Realistically, first-time homebuyers should plan on spending close to five percent of the home’s value to get approved for a first-time home loan.

Understanding Mortgage Options

Finally, self-employed first-time homebuyers should be aware that there are multiple loan options available. For example, there are FHA and VA loans for those who qualify. USDA loans and jumbo loans might also be an option. There are bank statement mortgages and conventional options available as well. Self-employed individuals might have to visit several of these programs to see which ones work the best. The programs vary in terms of their down payment, minimum credit score, and credit history requirements. It is prudent to work with a professional loan officer who has experience helping self-employed, first-time homebuyers get approved.

Is An Escrow Account Right For You?

by

Is An Escrow Account Right For You?When someone is looking at purchasing a home, they usually focus on the purchase price of the home and the potential monthly payment. At the same time, there are other costs that need to be included as well. This includes home insurance and real estate taxes.

As a result, many homeowners find themselves asking if they should use an escrow account or not. What do homeowners need to think about and how can they make the right decision?

What Is An Escrow Account?

First, it is important to define an escrow account. An escrow account is an account that contains money for items such as insurance and taxes. That way, homeowners are not blindsided by a major bill at the end of the year. Some people may be required by the lender to have an escrow account, but those who are putting 20 percent down may have an option to use an escrow account or to handle this on their own. With an escrow account, the money that is required for real estate taxes and homeowners’ insurance is broken up into 12 months. That way, homeowners can pay a little bit every month instead of paying it all at once, when the money might get tight. When should homeowners use an escrow account?

Savings Habits And Risks

First, some homeowners would rather handle real estate taxes and home insurance on their own because they want to be in control of their finances. While this is fine, some lenders might see this as an increased risk. If they view that homeowner as a risk, then they could use this as an excuse to raise the rate on the loan. Homeowners need to make sure they do not have to pay more for the loan simply because they are not using an escrow account.

Next, homeowners also need to think about their individual saving habits. Because home insurance and real estate taxes are often paid as one lump sum, this could be a lot of money leaving the account at once. If homeowners do not have appropriate saving habits, they might not set this money aside when the payment is due. If they fall behind on their real estate taxes, they could place themselves at risk of losing the home.

A Home Improvement Loan: How To Get One

by

A Home Improvement Loan: How To Get OneWith more people spending time at home than ever before, many people are wondering how they can go about changing the way the home is laid out. This can be an expensive project, which is why many people are interested in getting a home improvement loan.

With many people buying outdated houses, there are numerous projects that many homeowners want to finish; however, this process is not the same as applying for a mortgage. There are home equity lines of credit, cash-out refinance opportunities, and financing through the contracting company. How is the process of applying for a home improvement loan different, and what do homeowners need to know?

Gather The Right Information Before Tapping Into Home Equity

One of the most common ways homeowners complete projects is to tap into the equity in the home. Therefore, no matter what option someone chooses, they need to make sure they gather the right information. All homeowners must make sure they have a great credit score before pursuing this option. Homeowners have the right to check their credit score once per year free of charge. They also need to have documents that verify their income, as lenders will want to take a look at someone’s debt to income ratio. Other forms of debt include car payments, credit card debt, and student loans.

Compare The Cost Of The Loan Options

Next, homeowners need to take a look at the cost of each loan. There are home equity loans, home equity lines of credit (HELOCs), and cash-out refinances. The interest rates on these loans can vary depending on the market, and many of them will have closing costs as well. Homeowners need to take a look at the costs and the interest rate to figure out which option works best for them. Some of these loans have adjustable rates on them, which can make them risky, and some of these loans have limits that are dependent on the amount of equity in the home.

Fixer Upper Loans Are Available

Those who have purchased a home in dire need of repairs might qualify for a rehabilitation loan, which is a Federal Housing Administration (FHA) 203(k) rehabilitation loan. This provides funds for renovations and repairs that are necessary to restore a home. Consider all options available before deciding.

What To Know About Shopping For Mortgage Rates

by

What To Know About Shopping For Mortgage RatesApplying for a home loan can be an exciting process; however, this is a major financial decision. Therefore, potential homeowners need to make sure they understand how to shop for the best mortgage rate possible. A mortgage is usually a long-term loan, allowing potential homeowners to purchase a home using small monthly payments. Fortunately, there are a variety of tools available that can make the process easier. What do potential homeowners need to know when shopping for mortgage rates? 

Do Get A Pre-Approval Letter

First, all potential homeowners need to get a pre-approval letter before they start the home-buying process. Because the market is competitive, buyers need to get a pre-approval letter to show they can secure financing for a home they want to purchase. Sellers want to know the deal is going to go through if they make an agreement with someone. The pre-approval letter will allow someone applying for a home loan to compete with other offers, including cash ones. 

Do Not Go The Easy Route

One of the biggest mistakes people make when taking out a home loan is going with their existing bank. It is possible their current bank may provide competitive rates; however, applicants should not choose their existing bank solely because this is the easiest option. Instead of going with the easiest option, get the best possible rate from a lender. 

Do Work With A Professional

Applying for a mortgage is a complicated process, so potential homeowners need to work with a professional who can guide the way. A trained, licensed professional can help applicants go through this process, explaining why they need certain documents. Then, a professional loan officer can advocate on behalf of the applicant, increasing their chances of earning approval from the lender. 

Do Not Overlook Other Potential Expenses

Many homeowners overlook other potential expenses that come with owning a home. For example, homeowners also need to budget for real estate taxes and homeowners’ insurance. Even though this is wrapped into the monthly payment, this is not included in the mortgage. This can blindside homeowners who are not prepared. Homeowners also need to think about potential maintenance expenses. This is important when homeowners are trying to budget accordingly. 

 

What To Know About IRS Installment Agreements And Home Loans

by

What To Know About IRS Installment Agreements And Home LoansWhen applying for financing, lenders want to make sure the client is going to pay back the balance of the loan. Therefore, they will look into pre-existing debt including credit card debt, student loans, car payments, and back taxes. Sometimes, applicants have IRS installment agreements. This is an agreement consumers make with the IRS to pay taxes over an extended timeframe. How might this impact someone’s ability to apply for home financing? 

IRS Installment Agreements Count Against The Debt To Income Ratio

The IRS is going to calculate someone’s debt to income ratio when figuring out whether an applicant can apply for a home loan. Therefore, lenders will view IRS installment agreements as another form of debt along with medical debt, car loans, and student loans. As long as there is not too much debt, applicants should still be able to qualify for a home loan even if they have an installment agreement with the IRS. Even though having an IRS installment agreement may reduce the size of a loan someone may qualify for, applicants can still qualify for a home loan.

Lenders Will Look At Payment Histories

Lenders will take a look at how long the IRS installment agreement has been in place. Some mortgage programs may ask for proof of timely payment history. They know that if applicants have paid their installments on time, they should pay their mortgage on time as well. Some home lenders may require a payment history of up to 12 months. It is critical to discuss all financing options with the lender when looking for a home loan. 

Applicants Must Have Proper Documentation

To qualify for a home loan with an IRS installment agreement, applicants must produce proper documentation. Lenders will ask for a copy of the agreement. Then, they will verify the payment history of this debt. Keep in mind that federal tax debt holds first priority. This means that the lender will want to protect their own interests, asking the IRS installment agreement to give up their first position in favor of the mortgage. Typically, this is not an issue; however, this is something applicants need to discuss with the loan officer. That way, they can place their application in the best position possible to be successful. 

 

How To Find The Right Home Insurance Coverage For You And Your Family

by

How To Find The Right Home Insurance Coverage For You And Your FamilyThose who are taking out a loan for a home will probably be required by the lender to purchase home insurance. Even those who don’t need a loan will still need to make sure that they protect their property accordingly with a comprehensive home insurance policy. This is important for making sure homeowners have the money to replace their belongings and repair their property in the event of a disaster. At the same time, homeowners do not want to spend more than they must for a home insurance policy.

How can homeowners find the right home insurance policy to protect themselves?

Think About The Disasters In The Area

First, homeowners need to make sure the home insurance policy protects them against the right risks. If homeowners live in an area that is prone to floods or earthquakes, they need to find a policy that will protect them against these risks. If homeowners live in an area that gets a lot of hurricanes, they should make sure their home insurance policy protects them against hurricane damages. Not all policies include these as standard coverage, so homeowners should make sure they do not have to purchase a rider.

Make Sure There Is Money To Rebuild Your Home

Remember that the cost to rebuild a home could be more or less than the original purchase price. Lenders will want to make sure that all homeowners have a policy that gives them enough money to rebuild. Otherwise, the lender might not finance the mortgage. The local construction costs and the square footage of the structure will all play a role in the cost to rebuild. It might be prudent to work with a real estate agent to estimate this cost. The type of exterior, the style of the house, the number of bedrooms and bathrooms, and other properties on the premises will all play a role in the cost to rebuild a home.

Other Factors To Consider

Homeowners also need to think about whether their home is up to code. When the home is rebuilt, it needs to match new codes, which could increase the price. Homeowners also need to make sure their home insurance policy will cover valuable belongings in the home as well, such as furniture and electronics.