Can I get a mortgage post COVID being self-employed?

Lending guidelines can change.  During COVID we have seen some significant changes in tightening and availability of credit like we saw in 2008.  Housing is strong, the stock market is holding its own, interest rates are at historic lows yet the pressures of unemployment in America, the coronavirus pandemic haunting us and homeowners filing for forbearnace all weigh in on mortgage lending guidelines.

Recently as of June 2020, we have new "Temporary" guidelines for self-employed mortgage applicants.  Due to the continued impact of the COVID pandemic on economic conditions and businesses throughout the country, lenders have additional temporary requirements when assessing income derived from self employment in order to determine if the Borrower’s income is stable and there is a reasonable expectation of continuance.

The new word in lending for self-employed individuals is STABLE.  Is the income stable?

Mortgages are still available however its harder for self employed applicants to get approved and show "stable" income depending upon the nature of their business and where they are in the country.

Due to the pandemic’s continuing impact on businesses throughout the country, lenders are now required to obtain the following additional documentation to support the decision:

• an audited year to date profit and loss statement reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date; or

• an unaudited year to date profit and loss statement signed by the borrower reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date, and two business depository account(s) statements no older than the latest two months represented on the year to date profit and loss statement.

• For example, the business depository account statements can be no older than Apr. and May for a year to date profit and loss statement dated through May 31, 2020.

• The underwriter must review the two most recent depository account statements to support and/or not conflict with the information presented in the current year to date profit and loss statement.

Otherwise, the underwriter must obtain additional statements or other documentation to support the information from the current year to date profit and loss statement.

NOTE:  The year to date profit and loss statement must be no older than 60 days old as of the note date consistent with current Age of Documentation requirements.

Underwriters must review the profit and loss statement, and business depository accounts if required, and other relevant factors to determine the extent to which a business has been impacted by COVID 19.

Calculating income for self employed is complicated at best for lenders and now these added requirements cause some uncertainty to ensure the applicant has stable income.

We are still underwrtitng and approving these loans daily, however I thought it was important for you to know whats going on if you're self employed applying for a home loan and the lender asks you for all sorts of extra items. Now you know why...

If we can help or you have income questions, please reach out.

Aundrea Beach-Greco
Mortgage Advisor, CMPS
NMLS 333739
702-326-7866
info@aundreabeach.com
www.AundreaBeach.com

Jumbo Loans During COVID-19 - They're Back!

First of all what the heck is the definition of a jumbo home loan?  That means if you plan to borrow more than $510,400 (as of today) to purchase your new home, then you are considered in the "jumbo" loan category. With home values increasing, you may find yourself in need of greater financing to make your homeownership dream come true. That’s where a jumbo loan comes in. Jumbo loans are loans that exceed the conforming loan limit. If your required loan amount is even $1 over your area’s conforming loan limit, it falls into jumbo loan (or a non-conforming loan) status.   Just keep in mind jumbo loans are issued by private lenders and are not backed by government-sponsored entities (GSE’s) like Fannie Mae or Freddie Mac— so, requirements may vary.   Jumbo loans are considered risky and require higher credit scores. Expect to have at least a 700 FICO score and a DTI (debt to income) ratio under 43% (but preferably closer to 38%).  If you are self-employed, you will have a few extra steps. 

During COVID-19, Mortgage credit was tightening. Lenders fear they’ll take in less money, whether it’s because of defaults on existing and future loans or mortgage forbearance programs that allow borrowers to delay payments for up to a year.  Some lenders are still increasing FICO score and down payment requirements. Some of the lenders offering low-documentation loans has all but dried up. Jumbo mortgages have also grown rarer.  Lenders are concerned ... with the severity and the duration of what is going on from the COVID-19 pandemic.  Credit still isn’t as tight as it was in the wake of the 2008 financial crisis. Back then, home prices had plunged, but many families were prevented from buying, losing out to investors who gobbled up the homes. 

What happens next depends on how quickly the economy rebounds. More than 30 million Americans have filed for unemployment benefits and over 8% of households have filed for forbearance relief.  

The road to recovery is still uncertain as we start emerging from COVID-19.  Jumbo financing remains available for qualified clients, but interst rates are higher and turn-times for underwriting approval are much slower.  Rates are higher because of extra risk, excess demand, too little capacity, and too few competitors (now that many of the "BIG" mortgage banks have pulled out of the Jumbo market).

Jumbo financing is much more difficult for refinancing. Many lenders are simply refusing to do jumbo refinances now and others are limiting refinances to only exceptionally strong borrowers.

We like to remind borrowers that the jumbo market will very likely spring back to life once the COVID-19 crisis ends.  And when it does, rates will likely plummet, enabling current jumbo borrowers to refinance into lower rates.  This is something jumbo buyers should keep in mind if they are concerned about current jumbo interest rates.

CONTACT YOUR LENDER BEFORE MAKING OFFERS!
We have a surprisingly large number of buyers still in the market.  Because lending guidelines and asset positions are changing every day, we encourage all agents and borrowers to contact their lender prior to making every offer to ensure the pre-approvals still stand.Reach out if we can help!Aundrea Beach-Greco
NMLS 333739
(702) 326-7866
info@aundreabeach.com
www.AundreaBeach.com