Mortgage Broker

Funding America, not your ordinary mortgage broker, provides many types of conforming mortgages.

Together, FNMA and FHLMC, are responsible for the vast majority of all mortgages created. Some studies suggest as many as 90% of all mortgages are underwritten to their criteria. On this page, we point out many of the benefits of originating your loan with FNMA or FHLMC.

Traditionally, most people think of a 30-year fixed rate as a conventional mortgage. But conventional mortgages also include adjustable, balloon, buy-down, growing equity and other mortgage types. Despite evolving technology and nearly instant mortgage approvals, determining how much you can borrow remains as much an art as a science. The creativity and knowledge your lender uses will impact your borrowing potential. By following a few simple rules and procedures, it is possible to develop on your own a good sense of what you can reasonably expect to borrow.

Key Benefits of Conforming Loans

• Standardized underwriting makes it easier to shop for the best deal
• Approvals in minutes minimize headache and hassle
• Competition tends to make conventional mortgages evenly priced

Loan to Value
While there are many types of mortgages, one consistent theme is loan to value (LTV). This ratio helps lenders measure the relative risk in making your loan. Higher LTV's are riskier and therefore more difficult to get. Traditionally, 80% LTV is the loan a lender will make without mortgage insurance (issued to protect the lender if you default). Borrowing more than 80% LTV usually means you must meet multiple underwriting criteria. Higher LTV's can slow your approval and make the loan process a bit more cumbersome.

Debt to Income
Since all lenders / mortgage brokers are interested in your ability to pay back their loan, they often look for a stable two year history of income. Income can be obtained from many sources and from as many borrowers as required to qualify for the loan.

You will want to collect pay history for the past 30 days and tax information for the past two years. If you are up for a raise or promotion make sure to document this. Standard income classifications include base salary, overtime, bonus, commissions, dividend and interest, and rental income.

Additional income such as alimony or child support can be used (need to extend three years into the future) but you cannot be required to disclose this income unless you want to include it. The specific things mortgage brokers look at when calculating income goes beyond the scope of what we are trying to accomplish here. The bottom line: be prepared to document your income and the mortgage process will proceed rapidly. Most mortgage brokers require these documents.

Debts affecting your ability to borrow include long-term credit obligations (usually 10-12 months into the future) and your housing expense with taxes and insurance. Lenders are interested in only what is your minimum payment and not what you normally pay. By far, the easiest thing to do is request a copy of your credit report so that you can see what the lender sees. It is reported by reliable sources that as many as one in every three credit reports contains serious mistakes so make sure that the reported liabilities are yours and that the information is accurate and timely. Most lenders will require you pay off outstanding judgments or liens you may have. Finally, alimony or child support you pay must be reported despite income from these sources is optional. Lenders / mortgage brokers need to know what you are obligated to pay!

Proposed housing expense for a particular property is best estimated by your real estate professional or mortgage broker consultant. Giving you a standard for taxes and insurance would do more harm than good. Just remember that when you are qualified for a $600 payment, this means that you must include all taxes, insurance, homeowners' fees or private mortgage insurance in the payment.

Traditional wisdom says that 28% of your gross monthly income can be used for housing expense and an additional 8% of your gross monthly income can be used for recurring debt. This means that your total payments should not exceed 36% of your gross monthly income.

Cash to Close
While debts and income are challenging, determining the amount of cash required to close is downright frustrating. To make things less complicated, we have divided cash requirements into the following:

• Down Payment - Cash that you want to put into the property (typically at least 3-5%)
• Closing Costs - Costs that typically the seller can pay for (maximum of 3-6%) Pre-paid Expenses - Items that the seller cannot pay for (typically items like taxes and interest)
• Reserves - Money you need to show but not actually use to close (usually 1-2 months of the mortgage broker payment)

Ten Steps to a Safe, Speedy Mortgage Approval

• Check your credit report - Inaccuracy can scuttle a good loan, so deal with credit problems early
• Shop around - Avoid having too many credit reports pulled as this impacts your credit score Get a handle on paperwork - Understand what your lender wants and get it together quickly
• Floating or locking - Anyone can quote a rate; locking is only as good as your lender's reputation
• If refinancing - Talk to your current lender about modifications (a way to reduce rate but minimize costs)
• Understand the market - Make sure that all loan terms are competitive and in writing
• Know how long you will stay - Decide whether to lower your interest rate by increased costs
• Avoid high application fees - Lots of good pre-approved programs out there with little or no upfront costs
• Keep a diary of who said what - You probably won't use an attorney, so substitute common sense
• Review paperwork carefully and sign it only after making sure everything important to you is on paper

Sample Loan Documentation

• Complete sales contract including all addendums
• A receipt for your deposit (copy of the cancelled deposit check works best)
• Pay stubs for the last 30 days and W2's for the past two years
• If self-employed, two years of complete tax returns and interim financials
• Asset statements for the past three months (cash, investments and don't forget whole life policies)
• Account numbers, balances and monthly payments for all debts
• If renting, cancelled checks for the past year or name and phone of institutional landlord
• If divorced, final divorce and property settlement. Some mortgage brokers prefer this document
• Gift letter if you are using a gift of cash or equity to close
• Listing agreement or sales contract, if selling property

Please fill out the home mortgage worksheet or contact Funding America directly for a complete home mortgage application.

No Income Loans

Types of No-Income Verification
Some programs offer no-income verification, stated income and no-ratio loans. When using these programs, you merely provide an estimate of your income to calculate the ratio with. Lenders use these terms according to their guidelines so that at times they appear to be interchangeable (but they really aren't). Here's how we look at them:

No-Income Verification
Also called NIV by most mortgage brokers, it is a generic term that suggests no requirement to verify income. Employment history is examined to validate your stated income against industry standards. You may be asked to sign a IRS-8821 or 4506 so the lender can obtain copies of your tax returns after you close (there is a potential for fraud if these figures do not match).
Mortgage brokers that practice this type of sub prime lending are suffering in todays sub prime market.

Stated Income
Lender usually accepts whatever income you state without asking for the IRS verification forms. This minimizes your liability because no effort can be made to verify what is stated versus what you reported to IRS.

No-Ratio
Unlike the others, no-ratio loans do not state income and therefore no D/I ratio is calculated. No-ratio loans usually have more conservative LTV guidelines than programs that state income. The only factors the underwriter can really consider are how you pay your bills and the value of the home.

How Creative can We be?

Creative financing means different things to different people. For some borrowers, it means taking 100% or more of your home's equity. For others, it means cashing out equity in your home with no seasoning (if you got a great deal on a home you might actually be able to put money in your pocket immediately after buying it). It also means being able to get a loan without verifying income or verifying it with mortgage broker statements instead of tax returns. And since that's only the beginning, you probably see why we think of it as creative financing!

Key Benefits

• Overcomes deficiencies in personal credit profiles
• Allows for extreme underwriting flexibility based on high equity in property
• Does not necessarily require income documentation as most other loans do
• More flexible financing options allow more than 100% financing

Loan to Value and Cash to Close

Many people still tend to think of 80% loan to value (LTV) as the magic number for conventional financing (although 95-97% is easily available with mortgage insurance). Conventionally, you are qualified for the maximum LTV by simply being approved. Creative financing is different. Mortgage brokers will offer you a particular LTV depending upon your credit profile. The stronger you are, the higher LTV you can get. LTV can range from 65% or less to 90% or more.

Most traditional loan programs require that you source and season your down payment. This means that you must show where your money came from and how you got it. Some creative financing programs do not source funds, meaning that you can get your cash to close from anywhere. Conventional and agency loans are much more demanding; they want to know where every dollar comes from. Another consideration is that with creative financing, your LTV is usually determined by how much the lender puts into the deal. If a seller holds a mortgage, it could reduce your traditional down payment by as much as 50% or more! This is called PRIVATE Mortgage.

For any questions, you can contact us here.

1.347.294.4200