Day: February 5, 2014

Mortgage Guidelines Have Changed Again

Amy Slotnick, Fairway Independent Mortgage

Yesterday I went to a Lunch and Learn hosted by Amy Slotnick (she is amazingly accurate, thorough and professional and her rates are always competitive) from Fairway Independent Mortgage to learn a little about new lending guidelines.  For the most part most of the new rules will ultimately prevent another mortgage meltdown.  There will be more loans with less money down but documentation will be key.  The biggest change/challenge will affect the self-employed 1099 borrower.  Here a few excerpts I came away with.

Mortgage  Minutiae
Assets – Savings accounts, checking accounts, retirement funds, investment accounts…

We are required to analyze bank statements to determine that the consumer actually is able to make the down payment represented in their offer. Even this simple task is complicated by regulations and today’s more complicated consumer profiles and lifestyles.

Here is a list of items that we look for and at when evaluating down payment ability, overall financial management and reserve funds:

·        We must have all pages associated with an asset statement even if blank, if the statement says page 1 of 10, and then we must have page 10 in the file.

·        Whose account is it? Must have the name/s of the account holders, address and account numbers printed on the statements. Often statements printed from the web will not have these required details.

·        Whose account is it? IF the account is in the name of a spouse or partner who is not going to be on the mortgage application we will need to address that issue and determine what additional documentation will be required.

·        Large Deposits. It is required that we identify the source of all large deposits outside of a normal deposit pattern. Lenders have varying policies as to what constitutes a large deposit, for the sake of safety; assume a large deposit is one of $1000.00 or more.

·        If assets are not currently liquid such as a stock portfolio or retirement account, we may have to verify that the subject account can be liquidated.

·        In most cases, the buyer has to verify that they have 5% of the down payment in their own funds dedicated to the transaction prior to considering any alternative sources for down payment monies such as gift funds.

·        Gift funds must be from a family member

·        Self Employed borrowers using funds in business accounts will have to document that the use of those funds will not negatively impact the business.

·        Second mortgages from an employer, institution or community lending program come with addition guidelines that will need to be discussed when applying for a mortgage.

·        Documentation of remaining funds after the closing (reserve funds) is required on many programs, that amount can vary from 2 months of payments remaining up to 12 months depending on loan program and borrower profile. We are only permitted to use a percentage of the balance in non-liquid accounts such as stocks or retirement and we must verify that the account can be liquidated if needed.

Phew! Any questions? Feel free to call or email me anytime!

Tomorrow I will be writing about the pre-approval process.