Category: The Mortgage Industry

FHA Loan Loan Limits to Increase in 2017

Happy Couple in Front of their Home

As 2017 begins, many people are making resolutions to get in shape, quit bad habits or finally achieve their most longed-for goals. One such goal may be to own a home. Year after year, millions of Americans hope to make the American Dream of owning property a reality, by becoming homeowners.

Well, this goal may be even easier to achieve, thanks to the FHA’s plan to increase its loan limits for 2017. With higher loan limits, buyers in areas where real estate prices are on the rise may still be able to take advantage of low money down financing through FHA mortgage programs.

Why the Increase?

As home values continue to grow, prices for residential real estate have increased. This trend has helped influence the decision-makers at the FHA to adjust the current loan limits, so they remain in line with today’s market and continue to make homeownership more affordable. Continue reading FHA Loan Loan Limits to Increase in 2017

Mortgage refinance increase as rates affected by Brexit

More US homeowners are choosing to refinance, thanks to lower interest rates amid the Brexit vote. According to Mortgage News Daily, the Mortgage Bankers Association (MBA) Refinance Index fell back by 1 percent for the week ending July 15; however, the refinance share of mortgage applications continued to increase, rising 64.2 percent from 64.0 percent the week prior. Continue reading Mortgage refinance increase as rates affected by Brexit

Fed to maintain interest rates, citing improvements in labor market and confidence in U.S. economy

The U.S. Federal Reserve announced Wednesday that it would leave interest rates unchanged and expressed confidence in the nation’s economy.

According to its policy decision statement, released at 2 pm ET on Wednesday after a two-day meeting, the U.S. central bank’s policy-setting committee said the labor market has continued to improve, despite a recent slowdown in the economy overall.

The Fed said, “it currently expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen,” which could suggest the possibility of rates rising in June.

The Fed maintained its overnight lending rate for banks at a target range of between 0.25 and 0.5 percent since it lifted the benchmark interest rate for the first time in ten years from near zero in December 2015. Since then, the Fed has been more cautious, even though the U.S. economy has regained strength. A recent staff report from the International Business Times (IBT) said this is due to concerns that slowing down in China “would depress global growth sparked steep stock price declines and tighter financial market conditions early in the year.”

Stocks didn’t see much change after the announcement, and markets have actually improved since the last rate decision in March. The S&P 500 has risen more than 14 percent since mid-February, according to the IBT report.

Furthermore, a Reuters poll of more than 80 economists showed that expectations for two rate increases in 2016, with the possibility of more increases in June. Therefore, if potential home buyers are on the fence about locking in a mortgage rate, now may be the best time to do so.

Don’t Qualify for a QM Mortgage? There are Options

By Brett Mosello March 31, 2015  4:31 p.m. EST

Qualified mortgages (QMs) are a relatively new loan product designed to be safer and more understandable than many mortgages that were written leading up to the housing collapse. The basis of these mortgages is that they are well documented and lenders must assess an individual’s ability to repay the loan over the lifetime rather than just qualify for it up front. They do this by carefully examining a borrower’s assets and debts to make a risk determination. This model works well for traditional workers with steady paychecks. However, self-employed individuals, entrepreneurs and small business owners often don’t qualify because they cannot document the consistent income required by QMs. However, there are many other ways that these individuals can still get affordable financing to purchase a home.

Seek Out Flexible Lenders

Part of the issue is that self employed individuals are allowed to write off more tax deductions, which lowers their income on their tax return. However, that income is what lenders look at when determining how much money they make. While some lenders won’t budge on these numbers, others will. Find a lender who will allow you to add back in items like depreciated assets, which can raise your federal income back up. It may take a few phone calls and research to find a lender who is knowledgeable about how to do this.

Stated Income Loans

While stated income loans aren’t as easy to come by as in previous years, they are still available. With this option, lenders will verify that you have income sources, but not necessarily the amount from each one. Instead, the borrower can state how much income they have. Be prepared to provide the names and contact information for clients, as the lender will contact them. Additionally, you must submit an IRS Form 4506 or 8821, which gives the lender access to your prior tax returns.

Opt for an Unconventional Loan

There is another loan option that is a perfect fit for small business owners and entrepreneurs. It’s called the alternative income verification loan. This loan is similar to no-doc loans but it requires more proof of income and is safer for the borrower. Instead of basing loan qualification on two years of tax returns, lenders base it on 12 months of business and personal bank statements. The borrower must also submit a profit and loss statement to the lender. The lender then analyses this information to determine how much actual cash flow the individual has. While this loan option typically has a percentage rate 1 percent higher than others, it’s a viable solution for non-traditional workers. These loans are currently only offered by niche lenders, so again it will take researching a few companies before you find one who is familiar with them.

Just because you can’t get a QM mortgage does not mean that you can’t purchase a home. The best solution for entrepreneurs and small business owners is to start the process early and plan to put more time and research into finding the right lender. If you need help getting through the process, contact the qualified mortgage brokers at Luxury Mortgage for help.