Sunday, July 31, 2016

Find out which mortgage is for you? Comparing Conventional, FHA and VA loans

Learn more on these 3 loan types before you go mortgage shopping.

1. Conventional loans

Who they're for: Conventional mortgages are ideal for borrowers with above average credit.

How they work: Conventional mortgages are "conforming" home loans under $417,000 loan limit. They follow fairly conservative guidelines for:
  • Borrower credit scores.
  • Minimum down payments as low as 3% down.
  • Debt-to-income ratios.

Debt-to-income ratio

Percentage of monthly income that is spent on debt payments, including mortgages, student loans, auto loans, minimum credit card payments and child support.
Cost: Closing costs, down payments, mortgage insurance and points can mean the borrower has to show up at closing with a sizable sum of money out of pocket and how to save money.
What's good: Conventional mortgages generally pose fewer hurdles than Federal Housing Administration or Veterans Affairs mortgages, which may take longer to process.
What's not as good: You'll need 620 credit score or higher to qualify for the best interest rates.

2. FHA loans

Who they're for: Federal Housing Administration mortgages have flexible lending standards to benefit:
  • People whose house payments will be a big chunk of take-home pay.
  • Borrowers with lower than average credit scores.
  • Homebuyers with small down payments and refinancers with little equity.

How they work: The Federal Housing Administration does not lend money. It insures mortgages.
The FHA allows borrowers to spend up to 56% of their income on monthly debt obligations, such as mortgage, credit cards, student loans and car loans. In contrast, conventional mortgage guidelines tend to cap debt-to-income ratios at around 45% and sometimes less.
For many FHA borrowers, the minimum down payment is 3.5%. Borrowers can qualify for FHA loans with credit scores of 580 and even lower.
Cost: Each FHA loan has 2 mortgage insurance premiums:
  • An upfront premium of 1.75% of the loan amount, paid at closing.
  • An annual premium that varies from a low of 0.45% to a high of 0.85%. This premium is rolled into the monthly mortgage payment for the life of the loan. See how the premiums vary by loan term and amount of equity.
What's good: FHA loans are often the only option for borrowers with high debt-to-income ratios and low credit scores.
What's not as good: FHA mortgage insurance premiums are for the life of the loan and to get rid of FHA mortgage premiums, you must refinance the loan.

3. VA loans

Who they're for: Most active-duty military and veterans qualify for Veterans Affairs mortgages. Many reservists and National Guard members are eligible. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply.
How they work: No down payment is required from qualified borrowers buying primary residences. The VA does not lend money but guarantees loans made by private lenders.
Cost: The VA charges an upfront VA funding fee, which can be rolled into the loan or paid by the seller. The funding fee varies from 1.25% to 3.3% of the loan amount.
The VA allows sellers to pay closing costs but doesn't require them to. So the buyer might need money for closing costs. Borrowers may also need money for the earnest-money deposit.
What's good: VA borrowers can qualify for 100% financing. Veterans do not have to be first-time buyers and may reuse their benefit.
What's not as good: There are limits on loan amounts. The limits vary by county.


Learn More...

Saturday, July 30, 2016

3% Down Conventional Mortgages

2 Options: Conventional 97 and HomeReady

The Conventional 97 is a low down payment mortgage program which allows first-time home buyers and repeat buyers to make down payments of just 3%. The Conventional 97 can be used for primary residences where the mortgage loan size does not exceed the national conforming loan limit of $417,000.

The "3% Down Mortgage" From Fannie Mae

For buyers looking for a low-down payment mortgage option that's not backed by the FHA, Fannie Mae has two options -- the HomeReady™ mortgage and the Conventional 97.
HomeReady™ is limited to certain low-income census tracts; and areas with high minority concentrations. By contrast, Conventional 97 is available for use everywhere.
The Conventional 97 program is meant to help home buyers who might other qualify for a loan but lack the resources -- or the desire -- to make a five percent down payment or more.

The 97% LTV Mortgage And Other Low-Down Payment And No-Down Payment Mortgage Options

With the introduction of the Conventional 97 home loan, the U.S. government is making it easier for potential buyers to become homeowners.
Fannie Mae and Freddie Mac join the FHA, VA, and USDA in offering low-downpayment loans to buyers nationwide.
The Conventional 97's aggressive terms have helped it to grab market share from the FHA loan, which is another low-down payment option available in today's market.
The FHA loan has its place, though.
FHA loans require down payments of 3.5% and home buyers with less-than-perfect credit may find FHA loans to be more cost-effective than the Conventional 97. Especially because FHA mortgage rates are lower than rates for a comparable conventional loan.
Borrowers with better-than-average credit scores, though, typically save by using the Conventional 97.
VA loans are another popular comparison product for the Conventional 97.
Available to veterans and active members of the military, VA loans allow for 100% financing and never require borrowers to pay mortgage insurance.
VA mortgage rates are lower than rates for a comparable conventional loan and VA loans are backed by the Department of Veterans Affairs.
USDA loans are a third comparison option.
USDA loans are guaranteed by the U.S. Department of Agriculture and, although they're sometimes called "Rural Housing Loans", USDA loans can be used in many suburban locations, too.
USDA loans offer very low rates and allow for 100% financing. They also require just a small mortgage insurance premium as compared to other low- and no-down payment loans.
Today's home buyer has plenty of financing options.

Conventional 97 Mortgage Eligibility FAQ

Is the Conventional 97 loan the same program as HomeReady™?

No, the Conventional 97 is available to everyone. HomeReady™ is only available in low-income census tracts, to low-income borrowers, in areas of high minority concentration, and in regions declared a disaster area.

Can first-time buyers use the Conventional 97 program to purchase a home?

Yes. The 97 percent program can be used by first-time buyers. It can also be used by repeat buyers.

What is the definition of a "first-time home buyer"?

A first-time home buyer is defined as a person who has not owned a home in the last three years. If you previously owned a home, but have not owned a home since three years ago, you are considered to be a "first-time home buyer".

Is the Conventional 97 the same as the MyCommunityMortgage® program?

No, MyCommunityMortgage® is a different program. That program is aimed at certain members of the community including teachers, police and firefighters; and which may offer more flexible underwriting standards than a traditional mortgage program.

Are down payments larger than 3% allowed with the 97% LTV program?

Yes, there is no limit to the size of your downpayment with the Conventional 97. With a downpayment of five percent or more, though, you will no longer be using the Conventional 97.

Is the low-down payment mortgage program via Fannie Mae and Freddie Mac better than a FHA loan?

There is no "best" low-down payment mortgage program. What's best for one home buyer may not be what's best for another. Each program is unique just like you and has its benefits.

What mortgage products are available via the Conventional 97 mortgage program?

The Conventional 97 mortgage program allows mortgage applicants to use the 30-year fixed rate mortgage only. 15-year and 20-year fixed rate mortgages are not available.

Can I use an adjustable-rate mortgage (ARM) with the Conventional 97?

No, the Conventional 97 allows mortgage applicants to use 30-year fixed rate mortgages only.

What is the loan limit on the 3% down program through Fannie Mae and Freddie Mac?

The 3% downpayment program is limited to loan sizes of $417,000 or less. Loans in high-cost areas are permitted, but loan sizes remain capped at local conforming loan limits.

What is the maximum number of units for a home under the 3% down payment program?

The 3 percent down payment program is for single unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes cannot be financed via the program.

Are vacation homes eligible under the Conventional 97?

No, the 3% downpayment program is for primary residences only. Vacation and second homes are not allowed.

Can Conventional 97 be used for investment properties?

No, the 3 percent down payment program is for primary homes only. Investment properties are not allowed.

Does the Conventional 97 mortgage program require home buyers to attend home-buyer counseling?

No, there is no home-buyer counseling requirement with the Conventional 97 mortgage program.

Is private mortgage insurance required with the Conventional 97?

Yes, mortgage applicants are required to pay private mortgage insurance (PMI) as part of the Conventional 97. Your lender will arrange for your mortgage insurance policy at the time of application.

Can I refinance a non-Fannie Mae loan with Fannie Mae under the 97% LTV program?

No, Fannie Mae requires loans refinanced under the 97% program to be Fannie Mae-backed.

How do I determine whether my loan is a Fannie Mae-backed loan?

To determine whether your loan is backed by Fannie Mae, you can ask your lender or use Fannie Mae's loan lookup tool.

Are cash-out refinances allowed with the 97% mortgage program?

No, the 97% mortgage program does not allow cash-out refinances. Borrowers may do a rate and term refinance or a "limited cash-out" refinance only.

Call us today 702-326-7866

Thursday, July 21, 2016

Buying and Financing a Home with Solar Panels

Solar panels can play a factor into a buyer’s ability to purchase a solar home in Southern Nevada.  Solar home sales can be financed with either a conventional, FHA (Federal Housing Administration), or VA (Dept of Veteran Affairs) mortgage.  
Conventional loans refer to mortgage loans that are underwritten by guidelines published by Fannie Mae or Freddie Mac, secondary mortgage lenders that securitize mortgages on the secondary market.  Conventional loans range from as little as 3% percent down and can be 15 or 30 year terms.  The maximum conventional loan as of the publishing of this article in Clark County is $417,000.
Both Fannie and Freddie require appraisers to use the “Residential and Green Energy Efficient Addendum” for appraisals on homes that have solar panels, assuming that the solar system is not leased.
Fannie did release a statement that they will not fund on a home if the home owner purchased solar panels under the PACE program (Property Assessed Clean Energy).  For Nevada homeowners, this does not apply since the PACE program is a California program.
Fannie and Freddie require long term leases to be included in the borrower’s debt to income ratios if the remainder of the term of the lease exceeds 10 months.
FHA home loans, or mortgages insured by the Department of Housing and Urban Development (HUD), offer a low down payment option for home buyers without the strict adherence to guidelines that conventional loans require.  FHA loans are often known for their more lenient credit guidelines and allowing the down payment to be gifted by family members or government/non-profit organizations.  The maximum FHA loan for the Clark County area is $287,500.
The main FHA mortgage guidelines that affect solar comes from FHA guidebook 4150.1 Rev 1, section 12-14 that states allows for mortgage amounts that exceed 20 percent of the maximum allowable FHA home loan for the area if the increase is used to pay for the installation of solar owned system on a home.
FHA does have specific loans geared towards energy efficiency, including solar electric systems on a home.  With an FHA Energy Efficient Mortgage (EEM), a home buyer can finance up to $10,000 in energy efficiency improvements into a home with as little as a 3.5% percent down payment.
FHA also offers Title I loans to home owners with little to no equity in their property to finance the cost of energy efficiency improvements.  While this is not generally used for purchase situations, Las Vegas home owners looking for solar may be able to qualify to purchase a solar system for their home instead of leasing a solar electric array.
FHA does require long term leases to be calculated into a borrower’s debt to income ratios if the remainder of the term of the lease exceeds 10 months.
VA home loans are guaranteed home mortgages for qualifying military veterans that require no money down.  By far, VA home loans are one of the best types of loans in today’s marketplace.  The maximum VA home loan with $0 down is $417,000 in the Clark County area.
VA Pamphlet 26-7 outlines the VA criteria for appraisal and qualifying issues with solar electric systems.  Appraisal guidelines for valuing solar systems are under Chapter 11, section 12.  Like other mortgage products, a solar system will only add value to a home if it is a fixture of the property and not leased property.
VA does have an energy efficient mortgage similar to FHA but most lenders in the Vegas area do not offer this product.
VA does require long term leases to be calculated into a borrower’s debt to income ratio and residual income ratio if the remainder of the term of the lease exceeds 10 months.

Tuesday, July 19, 2016

Solar Panel Leases, Selling Your Home and Home Loans

A number of homeowners have chosen to get solar on their homes in Southern Nevada, with the choice of leasing versus purchasing them.  Solar power is great and whether to buy or lease the panels depends on the needs of the individual.  However, if you plan on selling your home in the near future here are some things to consider about solar leases pertaining to the ability for the potential buyer to obtain financing on your home:
Lenders could require to request an exception because of the solar and there is the minimum documentation/debt calculation requirements.  Additional requirements may be required by the specific investor.

1. The solar company will place a lien on title most of the time.  This lien MUST be subordinated to the new financing obtained by the buyer to purchase the home.  
2. A copy of the lease documentation will need to be provided to the buyer's lender and must show that the lease is transferable.
3. The lease payments must be considered as debt when calculating the buyer's debt to income ratio (this may put the buyer over the allowable debt to income ratio for qualifying in some cases).
4. The appraisal must include comparables with solar panels (This can be a difficult task for the appraiser to find a home in the area that recently sold with panels. Some lenders will require more than one comp with similar features)

As you can see a solar lease on your home will require you and the buyer to jump through some extra hoops to obtain the necessary financing to complete your transaction.  When considering solar panels homeowners should consider how long they plan to stay in the home.  Of course circumstances change but if your planning on selling your home with solar leased panels, it could be a hinderance and limit your buyer pool.  FHA's solar lease requirements are far less clear but a letter from your solar company certifying that they meet all CFR 24-203.41 requirements will go a long way in helping your house sell with FHA financing if you have leased panels.

Contact us for more information.
Aundrea Beach-Greco
NMLS 333739
702-326-7866
info@aundreabeach.com 
www.iLendLasVegas.com

Saturday, July 16, 2016

Can I get a VA loan higher than $417,000 (Clark County, NV) loan limit?

Yes.  A common misconception with VA Loans is that you cannot borrow above the county limit with minimum down.  In the past this was true, but VA Loan changes have improved the picture.  VA loans and VA Jumbo Loans are available much higher than $417,000, the standard VA Loan Limit.
VA Loans at loan amounts above $417,000 are called VA Jumbo Loans, VA High Balance Loans, or VA Super Conforming Loans.  While many counties in the country are limited to the $417,000 amount, that isn’t the highest VA loan available for that particular county.  What changes is the amount of required down payment or home equity.   Each case is unique depending on your VA County Loan Limit and your Home’s purchase price or value for VA refinance.
In counties where the loan limit is lower than your purchase price or refinance loan amount, you may have to have equity (for a VA Jumbo refinance) or put a down payment (for a VA Jumbo Purchase).
So what is the benefit of using a VA loan in this scenario? – Lower down payments than conventional alternatives, fixed rates, no Mortgage Insurance, ability to combine a first and second mortgage, or get cash out up to 90% of your homes value.
Let’s say you live in a county where the VA loan limit is $417,000 (such as Fresno, Riverside or Los Angeles counties in California).   You want to purchase a home that is $450,000 with a little of down payment possible.   Assuming that you have full VA eligibility & fully restored VA Entitlement, we will allow a VA loan in this scenario up to $441,750, requiring just $8,250 down payment, or 1.83%.
The goal of the VA calculation is the reach a guarantee figure of 25% of the loan amount. This can be a combination of the Entitlement and a down payment.
Here is the math to figure this out:
1. Take your county loan limit (in this case $417,000) and multiply times 25% to reach your maximum entitlement and guaranty available ($417,000 x .25 = $104,250)
2. Take your purchase price and multiply times the minimum guaranty required. ($450,000 X .25 = $112,500)
** since this figure is higher than your maximum guaranty and entitlement from #1, we must now figure out how to handle the shortage.
3. Take #2, the Minimum required guaranty ($112,500) and subtract the available guaranty and entitlement for you ($104,250) and it yields us $8,250.
$8,250 represents the required down payment for purchasing a $450,000 property in a county with a VA loan limit of $417,000 for a Veteran or Active Duty Service Member with full Entitlement available. $8,250 is a 1.83% down payment. Now that is a huge benefit for our Veterans. This is far superior to the conventional loan alternatives or even FHA loans.
CMG Financial is a VA Direct Lender offering VA Loans such as VA purchase loans, VA Streamline Refinance, VA IRRRL, VA Refinance Loans, VA Jumbo purchase loans, VA Jumbo Refinance Loans, VA Jumbo Streamline Refinance loans, VA Jumbo IRRRL , VA Mortgages of all types.
We are a Direct Lender specializing in Government Loans. We also offer FHA Loans such as FHA Purchase loans, FHA Refinance, FHA Streamline Refinance, FHA 203K Streamline Rehab loans, FHA Jumbo, FHA Jumbo Purchase, FHA Jumbo Refinance, FHA Jumbo Streamline Refinance, FHA mortgages of all types. 
When your bank tells you that you need to put down 10% or even 20% for a conventional loan, call us direct and go with a VA loan instead. You will be glad you called. 
Aundrea Beach-Greco
NMLS 333739
702-326-7866  
www.iLendLasVegas.com

Friday, July 15, 2016

Is Your Self-Employed Income Enough to Buy a Home?

When applying for a mortgage, the lender will make sure the borrower can afford the new mortgage payment. This process is determined by comparing the borrower’s proposed housing payment and current monthly income.
But for some borrowers, monthly income isn’t exactly easy to calculate. For instance, when the borrower doesn’t get a pay stub.
Many freelancers, business owners and other independent workers are considered “self-employed”. Their income is determined by looking at things like profit-and-loss statements, 1099s and tax returns.
This article will show you how to calculate your self-employment income just like the lenders do so you know whether you can buy or refinance a property.
Two Year Minimum for Self-Employment
The first consideration is the two year self-employment requirement. A lender will make sure that you’ve been in business in a self-employed capacity for at least two years. How do you prove that? You can provide a copy of your business license to start, but lenders will also want to see two years’ most recent federal filed income taxes, signed and dated.
Lenders have another definition for a self-employed borrower: anyone who receives more than 25 percent of their income in non-salaried pay can be considered self-employed. This primarily includes those who work on commission or bonus.
The lender’s definition of self-employed excludes those who own less than 25 percent of a business. A common example might be a partnership or LLC where the individual owns, say, 10 percent of the company. In this instance, the borrower is not considered self-employed.

You Might Be Self-Employed If….

  • You own your own business
  • You are a partner with at least 25% ownership in a business
  • You receive more than 25% of your income in bonus or commission income
  • You are a contract worker, even if you work for only one company
  • You receive 1099 forms instead of W2s
  • The bulk of your income is dividends and interest
  • You are primarily a landlord
  • You receive royalties

Required Documentation for Self Employed Borrowers

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)
    • Schedule C, D, E, F
  • 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
  • CPA letter stating you are still running your self-employed business
  • Explanation letter 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.
If you are part of a business that has many owners, make sure all controlling parties agree that you can have access to business tax returns and can turn them over to a lender.
Self-employed Business Structures
There are many ways you may be self employed, and underwriters look at each structure differently. Here are some common business structures.
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 sole proprietorships are smaller companies.
Partnership: Two or more people own and control the business. Profits from the business are split between the owners.
Corporations: Stockholders own the business. Usually these are larger companies. A borrower who is 25% owner of a corporation is pretty rare to see on a mortgage application, but it happens. Getting the corporate tax returns can be difficult, since many parties may be involved in releasing them.
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.

IRS Tax Return Schedules for Self-employed Borrowers

Schedule C: Reports income or loss from a sole proprietorship.
Schedule D: Reports income from capital gains or losses. This type of income comes from sale of stock or real estate typically. Usually these are one-time events and can’t be counted toward ongoing income. However, day traders, property flippers and the like may be able to use schedule D income if they prove three years’ worth of consistent income.
Schedule E: Income and loss from leased and rented real estate is reported on this form. Borrowers who maintain a full time job while owning rental properties will have net income or loss from schedule E. The lender will add or subtracted this income from their employment income. Depreciation claimed on the schedule E can typically be added back to the borrower’s income.
Schedule F: This schedule is used for farming income.

Self-employed Tax Return Snafus

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. Here are some of the most common:
Expenses. A lender will consider what a business made in net profit, not gross profit. For instance, a pet shop owner pulled in $80,000 last year in revenue. Not bad, right? But the business also had to pay rent, supplies, utilities and insurance to the tune of $30,000 last year. So a lender will only consider $50,000 in profit as real income.
Sometimes, business owners write off too many expenses. A laptop here, business mileage there – pretty soon the entire profit of the business can be written off.  If your business makes $100,000 but you write off $90,000, guess how much the lender will say you made? Yep, $10,000 or just $833 per month. And you can’t qualify for much house with that.
Writing off legitimate business expenses is a wise move yet there are occasions where there are so many write-offs the business appears to make no money at all. If you plan to apply for a mortgage in the next 3-4 years, don’t go overboard on your write-offs.
Your Side Business. Many people work full time, yet have a side business, for which they file schedule C on their tax returns.
Note that if you plan not to disclose your side business for whatever reason, your lender will find out about it anyway. The lender will pull transcripts (called 4506 transcripts) directly from the IRS which will show income or loss from a schedule C business.
When you apply for the mortgage, be sure to tell your loan officer about your side business, and how much it made or lost during the last 2 years.
Many side business owners simply have a side business to write off expenses. If this is you, keep in mind that the lender will count your business loss against you.
For instance, if your tax returns show that you lost $12,000 in the prior year, your lender will reduce your qualifying current monthly income by $1,000.
Unlike positive business income, you don’t have to have the business for 2 years for it to count against you. If you just opened your side business, a loss for just one year will need to be considered.
If you closed your business after filing the previous year’s tax return, it’s possible for the underwriter to disregard the business loss. Write a letter saying how, why, and when you closed the business, and provide any documentation backing up the business closure.
Employee Expenses. Even if you’re not self-employed, you can claim non-reimbursed business expenses including mileage. You claim these on form 2106. These deductions are counted against your total W2 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 a two year period. They calculate your income by adding it up and dividing by 24 (months). For example, say year one the business income is $80,000 and year two $83,000. The income used for qualifying purposes is $80,000 + $83,000 = $163,000 then divided by 24 = $6,791 per month.
Declining Self-employed Income: But the lender also looks at something else when reviewing years one and two: consistency. The example above showed consistent income from year to year. What if the income looked more like this:
  • Year 1:  $80,000
  • Year 2:  $40,000
When you calculate a monthly income with these numbers, the amount is $5,000 per month. But a lender probably won’t approve this loan. Why? There is a serious decline in income and could indicate a failing business. Part of the income review process is determining the likelihood the income will continue and a business suffering from declining income can indicate the likelihood of continuance is in serious doubt.
However, there is no hard and fast rule regarding a specific decline in income, it’s up to the judgment of the underwriter approving the loan. A slight variance of say $80,000 to $70,000 might raise some questions but with a proper explanation the application will still be approved.
There may be a legitimate reason for the lower income. The business owner took some time off to take care of a new baby. This easy-to-document occurrence can show why the income took a slight dip. In this instance, the underwriter might ask for three year’s tax returns instead of just two.
Cash Flow. A lender will also look at bank statements to examine the cash flow of the business. Is there enough monthly income to service debt? Some businesses rely on daily purchases of their goods and services such as a café or retail store. Others rely on just a few transactions per year.
When reviewing income, a lender wants to make sure there are enough funds in an account to pay the bills.

Using Business Accounts for your Down Payment and Closing Costs

In some cases, you can use funds from your business accounts from your down payment.
Sometimes, though, the underwriter will ask you for a letter from your CPA saying that taking money from the business won’t jeopardize ongoing health of the business. Your CPA may or may not be willing to write this letter.
The underwriter wants to verify that your business won’t be short on cash and be forced to take out loans or shut its doors due to lack of funds. After all, your business is the source of your income, and if your income stream stops, you may default on your loan.
Any business funds used for closing costs or the down payment on a home should be excess money that the business will not need for the foreseeable future.
Calculating Self-employed Income is Complicated
If you’re self-employed, you may disagree with the final income the underwriter determines for you. This is a common feeling experienced by many self-employed individuals.
Self-employed income calculations can sometimes boil down to judgment calls by the underwriter, especially for borrowers who have multiple businesses or properties, or whose business ventures are a bit outside-the-box.
If there’s any doubt how much the underwriter will calculate in your case, give your tax returns to a mortgage professional for review. Also, most lenders offer an underwriter income review for more complicated tax returns, sometimes even before you officially apply for the mortgage.
This review gives everyone involved a starting point, since the underwriter comes up with qualifying income ahead of time.
The self-employed borrower does endure more scrutiny that the standard paystub/W2 employee. If you go into your loan application with the proper expectations, you’ll close your mortgage loan with very few surprises.
Call me I will be happy to assist you. 

Wednesday, July 13, 2016

How to Improve Your Credit Score

Your credit scores usually determine the price you pay for your money (your mortgages, your auto loans and leases, your credit cards, business loans, etc.). Perhaps the most significant part of your credit report is your credit score. Credit scores range from 350 to 850, with 850 being the best possible credit score that you could receive, and 350 being the worst possible credit score. There are five factors that determine your credit score:
Your Payment History: 35% impact on your credit score
Paying debt on time and in full has a positive impact. Late payments, judgments, charge-offs, collection accounts and bankruptcies have a negative impact. If you have had any bankruptcies within the last 7 years, it will seriously affect your ability to borrow or establish new credit accounts.  If you have had any judgments within the last several years, it is very important that you pay off the judgment and get a "satisfaction of judgment" from the court. Any unsatisfied or recent judgments will make a bad dent in your credit scores and adversely affect your ability to borrow. Usually, judgments and liens must be paid prior to the closing. Timely mortgage payments are weighted heavily by the scoring systems and are one of the most vital requirements that lenders look for when evaluating your credit history. Many times a single late mortgage payment within the last 12 months can hold up your file or spell the difference between the best interest rate and the next credit level. Your payment history on other debts (car payments, credit cards, etc.) is also given a lot of weight.
The credit scoring systems evaluate how many late payments you have had and whether they were 30, 60 or 90 days late, or whether they are currently in default, with default being the worst situation. Additionally the systems look at whether the late payments were consecutive. If you only have one or two minor late payments on your report with no other derogatory marks, your score will not be terribly affected, but you will have a tough time getting over the critical 700 level.  Here are four practical steps that you can implement to improve your credit score in the area of "Payments":
  • Make all your payments on time.
  • Past dues on any account will destroy your score - bring your delinquent accounts current immediately.
  • Pay your bills before they go to a collection agency.
  • Check your credit report for accuracy on a regular basis; and make sure that disputed bills are not negatively affecting your credit scores.
The Balance You Owe vs. Your Available Credit Lines: 30% impact on your credit score
Keeping your credit balances below 50% of your available limit is very important. Keeping your balances below 30% of your available credit is even better. For instance, if you owe $10,000, and you have $100,000 of credit available to you, you are only using 10% of your available credit line. On the other hand, if you owe $10,000 and you only have $10,000 available to you, you have "maxed out" your available credit and your credit scores will be very negatively impacted. Therefore, it is not how much you owe, but how much you owe compared to what you are able to borrow.
Here are three practical steps to improve your credit score in this area:
  • Don't close your credit accounts unless it is necessary to do so. It is better to have many open accounts with little or no balance than to have just one or two accounts regardless of the balance.
  • Don't concentrate large balances on just a few accounts. Pay outstanding debt down as close to zero as possible, and evenly distribute the remaining balance across all your open credit lines. The key is to keep the balances down below 30% or at the very least 50% of your available credit line(s).
  • Call your credit card companies and try to increase your available credit lines if they can do so without pulling a new credit report.
Your Credit History (how long your accounts have been opened): 15% impact on your score
The longer your accounts have been opened, the higher your score will be; newly opened accounts will bring your score down. Here are three practical steps for you to improve your score in this area:
  • Don't close your credit accounts. If you must, close the newest ones instead of the oldest ones. Your score will improve over time if you keep accounts open and use them every once in a while.
  • Think twice before jumping on that latest 0% credit card offer or opening a new card just to get a 10% discount at a department store.
  • If you don't have much of a credit history, and you are planning on taking out a mortgage in the future, it may be a good idea to establish a few open credit lines with little or no balance on them. Although newly opened accounts tend to lower your score initially, they will improve your score once they've been open for awhile, somewhat active and paid off with little or no balance.
Type of Credit that you have open: 10% impact on your credit score
A good mixture of auto loans and leases, credit cards and mortgages is always best. Too many credit cards is not a good thing, and having a mortgage does increase your score. Practical steps to improve your score in this area include: (1) Having 3-5 revolving credit cards open is optimal.; and, (2) Having a good mix of auto loans, credit cards and mortgages is better than having only credit cards.
Number of Recent Inquiries made by creditors: 10% impact on your score
Inquiries affect the score for one year from the time they're made. Your score isn't impacted when you check your own report. It's only affected if a potential creditor checks your credit. These include department stores, as well as credit card, auto finance and mortgage companies. Here are three steps you can take to improve your score in this area: (1) Multiple auto and mortgage inquiries are treated as only one inquiry if made within 45 days of each other. So, it's better to shop for a car or a mortgage over a two week time-frame, rather than to prolong it over a longer timeframe. (2) Don't apply for a lot of credit or open multiple credit cards at the same time; and, (3) If you're thinking of applying for a mortgage within the next 90 days, it would be good to wait until after your loan closes before you apply for any new credit.



Aundrea Beach-Greco
Aundrea Beach-Greco
NMLS Number: 333739 | CA-DBO 333739
CMG Financial | The Beach-Greco Team
Corporate NMLS Number: 1820
info@aundreabeach.com
http://www.ilendlasvegas.com
(702) 326-7866
8337 W. Sunset Road, Suite 300
Las Vegas, Nevada 89113
CMG Financial  |  The Beach-Greco Team   

Tuesday, July 12, 2016

Why Agents Don't Need to Give Out Three Business Cards

Some real estate agents believe that they must give out three different names when referring a mortgage lender.  This is not true.  Here's why:
No RESPA Violation
There was an old rule in the Real Estate Settlement Procedures Act (RESPA) that allowed real estate agents to earn a separate fee from the buyer if they help the buyer "evaluate financing options".  Most real estate agents didn't charge this extra fee to buyers and therefore had nothing to be concerned with in this area.  However, the agents who did charge this fee to the buyer were required to help the buyer evaluate financing options among many different lenders.  Otherwise, the extra fee would have been considered a referral fee.  Contrast that old rule with today's RESPA and Dodd-Frank requirements that require real estate agents to be licensed and regulated as mortgage loan originators in order to earn fees for helping buyers evaluate financing options.

In other words:
  1. The rule requiring you to refer the buyer to multiple lenders only applied in the past IF you were charging the buyer a fee to help him/her evaluate financing options.
  2. There is no such rule that exists in today's environment because you can't earn a fee for this type of activity unless you become a licensed loan officer yourself, and unless you perform substantive loan origination activities as defined by HUD.  Finally,
  3. Nothing in RESPA or any of the other mortgage or real estate regulations prohibits you from referring your clients exclusively to one lender.  You're simply not allowed to get paid a fee or something else of value for referring your clients to a mortgage lender.  In other words, no referral fees, no gift cards, and no other gifts or fees can be given to you in exchange for a referral.
This brings us to the second point:
No Legal Liability
There is no law or regulation that requires you to hand out three or more business cards in order to avoid legal liability.  You are legally responsible for your actions as a real estate agent, and the mortgage lender is legally responsible for his/her actions as a mortgage lender.  You don't have legal liability for what the lender does, and the lender doesn't have legal liability for what you do.  It's that simple.  The only way this would not be the case is if you were to conspire with the lender to do some illegal activity together (such as paying or receiving a referral fee).  Further, you can't REQUIRE a borrower to get financing through a specific lender.  However, you are certainly allowed to refer your preferred lender to the buyer for an approval (although the buyer can get his/her financing from any other source if they desire to do so).
Contact me for more information!



Aundrea Beach-Greco
Aundrea Beach-Greco
NMLS Number: 333739 | CA-DBO 333739
CMG Financial | The Beach-Greco Team
Corporate NMLS Number: 1820
info@aundreabeach.com
http://www.ilendlasvegas.com
(702) 326-7866
8337 W. Sunset Road, Suite 300
Las Vegas, Nevada 89113
CMG Financial  |  The Beach-Greco Team   

Thursday, July 07, 2016

The 90-Day Window for Cash Buyers: How it Works & Why it Matters

Congratulations on paying cash for your home!  I just wanted to make you aware that the IRS gives you a 90 day window to put a mortgage on your property and gain the tax benefits associated with the coveted “acquisition indebtedness” status.

What is “Acquisition Indebtedness” and Why Does it Matter to Me?

Any mortgage that is used to buy, build, or improve a primary or vacation home qualifies for “acquisition indebtedness” status. Any mortgage that is used for any other purpose is demoted to the “home equity indebtedness” status.
If you don’t put a mortgage on your primary or vacation property within 90 days of the purchase closing date, any mortgage you put on the property in the future that is not used specifically for home improvements will be demoted to “home equity indebtedness” status. This means that:
  • You will NOT be able to deduct ANY of the interest at all if you are subject to the Alternative Minimum Tax (AMT)
  • You will only be able to deduct the interest on up to $100,000 of the mortgage balance if you are not subject to the AMT
On the other hand, if you do put a mortgage on your primary or vacation property within 90 days and qualify for the special “acquisition indebtedness” status:
  • You can use the funds for any purpose you want (including investment, starting a college fund for the kids or grandkids, retirement needs, etc.)
  • You can deduct the interest on up to $1,000,000 of mortgage balance regardless of whether you are subject to AMT

Is There a Deadline to Qualify for the Tax Benefit?

Yes! You must put a mortgage on your primary or vacation property within 90 days of the purchase closing date in order to qualify for the special “acquisition indebtedness” status.

What if I Wait Until After 90 Days?

You will lose the special tax benefits associated with the “acquisition indebtedness” status. Any mortgage you put on your primary or vacation property in the future that is not used specifically for home improvements will be classified as “home equity indebtedness”.

Okay, So I Lose the Tax Benefit… But Why Would I Want a Mortgage On My Property in the First Place?

With interest rates being so low right now, you could use the funds for any number of reasons including:
  • Investment - can you and your financial advisor find a safe investment that yields more than the 2% or 3% after-tax cost of your mortgage?
  • College fund for your children or grandchildren - would you rather leave them a bunch of equity in a home or a legacy that makes an impact in their life?
  • Elder care needs - do you have enough set aside to care for yourself or your loved ones as you age?
  • Retirement needs – do you have enough set aside to provide income during retirement?
  • Vacation home or other property – how are you taking advantage of the clearance sale going on in the housing market right now?
Remember, if you decide to wait and use a mortgage to do any of these things in the future, you won’t be able to deduct the mortgage interest. It may be worthwhile to put a mortgage on the property now, and then put the funds aside until you know what you want to do with them. After you make a decision, you could then pay off or pay down the mortgage with any leftover funds that you don’t use.

Does the “90 Day Rule” Also Apply to Investment Properties?

No. Investment properties have different rules, deadlines and guidelines that must be followed.

What’s the Next Step?

I would recommend that we have a brief 20-30 minute conversation to evaluate your options and whether a mortgage might make sense for you right now. You could then take my recommendations to your CPA and get his or her opinion before making a decision. If you don’t have a CPA, I’d be happy to make an introduction for you. Contact me using the info below so we can get started!
PLEASE NOTE: THIS LETTER AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 936.



Aundrea Beach-Greco
Aundrea Beach-Greco
NMLS Number: 333739 | CA-DBO 333739
CMG Financial | The Beach-Greco Team
Corporate NMLS Number: 1820
info@aundreabeach.com
http://www.ilendlasvegas.com
(702) 326-7866
8337 W. Sunset Road, Suite 300
Las Vegas, Nevada 89113
CMG Financial  |  The Beach-Greco Team   

Wednesday, July 06, 2016

How to Get the Primary Residence Capital Gains Tax Exclusion

In order to understand capital gain, we first need to understand tax basis. Your tax basis is the cost of buying, building or improving a property. Assume you pay $200,000 for a property. You incur $5,000 in closing costs. Then you spend $45,000 in home improvements. In that case, your tax basis would be $250,000. That’s what it cost you to buy and improve the property.
Assume you later sell the property for $500,000. You incur $50,000 in sales commissions, transfer taxes and other sales expenses. You then subtract your $250,000 basis. Your capital gain would be $200,000.
Once you figure out your capital gain on a property, the next step is to calculate your taxes. In our example, if you earn a $200,000 profit, you would likely owe $30,000 in capital gains taxes because the capital gains tax rate is currently 15% for most taxpayers.
In 2013, there was an additional 3.8% net investment income tax that was added by the federal government to help pay for changes to Medicare. This means you would need to pay an additional $7,600 investment income tax in this scenario.  Your total taxes would be $37,600:
  • $30,000 capital gains tax (15% x $200,000); and,
  • $7,600 investment income tax (3.8% x $200,000)
The Primary Residence Exclusion
If the property is your primary residence, you have what’s called a principal residence exclusion. This means that a certain portion of the capital gain is excluded from tax. Married couples can exclude $500,000 of capital gain from tax.   Individuals or married couples filing a separate tax return can exclude $250,000 of gain from tax.  In the example above, the entire $200,000 would be excluded from tax if this was your primary home.  This means that you'd save $37,600 by using this exclusion (no capital gains tax and no 3.8% investment income tax)!


You Must Live in the Home for 2 Out of the Last 5 Years
In order to qualify for this exclusion, you must live in the home as your primary residence for two out of the last five years.
You Don't Have to Use the Proceeds to Buy Another Home
Back in the 1980s and 1990s, you were required to use the sales proceeds to purchase another home. That changed in 1997. Now, you can do anything you want with your sales proceeds.
You Can Use the Exclusion Once Every Two Years
If you have a large capital gain on your property, why don’t you consider selling it now, and pocketing the proceeds tax free? Then, you can purchase another home and do it all over again because there’s no limit on how many times you can get this  exclusion! You just have to wait 2 years in between each sale and make sure that you live in the property as your primary residence.
The Exclusion Only Applies to Primary Homes
This exclusion doesn't apply to vacation homes or investment properties. It only works if you live in a property for two full years out of the last five full years. Also, there are some limitations on the exclusion if you turn a rental property into a primary home.
Please Contact Me Using the Info Below For More Information!
PLEASE NOTE: THIS LETTER AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION. FOR MORE INFORMATION ON ANY OF THESE ITEMS, PLEASE REFERENCE IRS PUBLICATION 523.



Aundrea Beach-Greco
Aundrea Beach-Greco
NMLS Number: 333739 | CA-DBO 333739
CMG Financial | The Beach-Greco Team
Corporate NMLS Number: 1820
info@aundreabeach.com
http://www.ilendlasvegas.com
(702) 326-7866
8337 W. Sunset Road, Suite 300
Las Vegas, Nevada 89113
CMG Financial  |  The Beach-Greco Team