Adjustable rate mortgages have got a really bad rap the past few years because of many of the problems in the current U.S. mortgage and real estate market. Some of this is deserved and some of it is not. The primary culprits were the 2 and 3 year fixed subprime adjustable. There were a number of problems with these loans:
- They were made to unqualified borrowers who often didn’t need to document income
- After the 2 to 3 year period ended these ARM’s had no caps on how high they could adjust
- The margin in these are products were extremely high (I will explain margin below
- These loans were made at a time right before the real estate market started to fall
So therefore the media generally made all ARM loans scapegoats because of these 2-3 year fixed subprime ARM’s. However, there were many 5 year and 7 year fixed prime ARM’s made during the same period, that have now adjusted to rates of 3% and 4% well below today’s 30 year fixed. Those borrowers are enjoying very low payments.
This article is to introduce you to FHA 5 year fixed ARM’s. This is a possible alternative to look at if you think you may be selling you house within 5-7 years after you buy. Here are some benefits:
- FHA 5 year fixed ARM’s are generally 1% below 30 year fixed rate loans (so if today’s 30 year fixed FHA is say 4.75%, the 5 year fixed ARM is 3.75%)
- The FHA 5 year ARM is capped where after year 5 the rate on the loan can only adjust a maximum of 1%. So let’s say you got a 4% 5 year fixed FHA loan today, in year 6 the maximum the rate could go up would be 5%. In year 7 6%. And so on and so forth.
- The lifetime cap on a FHA 5 year fixed ARM loan is 5. Therefore if you were to get a 4% FHA 5 year fixed today, the max the loan could go to would be 9%. And the very worst case it would take until year 11 to get there.
- The margin on the FHA 5 year fixed ARM is 2.25 above the 1 year t-bill index. This is a low margin. The subprime ARM’s made before 2008 many times had margins of 6 and more.
Let me quickly explain a margin. In year 6 after the 5 year fixed period of a FHA ARM ends, the loan will adjust to the current 1 year t-bill index + 2.25. Right now the 1 year t-bill is 1.021. So if your loan was adjusting today, your rate for year 6 would be 1.021 + 2.25 =3.27%. The 1 year t-bill index can rise and fall over time.
So if you think you may only keep you home for 7-8 years, the 5 year fixed FHA ARM may be something to consider. The rate is substantially lower than the 30 year fixed rate and can allow you to enjoy lower payments during your period of ownership.
Remember, if you buy a house by April 30th 2010 (and close by June 30th 2010) you may be eligible for an $8,000 tax credit. Here some highlights to remember about FHA loans:
- Only 3.5% down required and those funds can be gifted from a relative
- Low 30 year fixed interest rates
- You don’t need perfect credit to apply for an FHA loan and be approved
- The seller can credit you 6% for FHA closing costs
- FHA has the most flexible qualifying guidelines of any loan available today
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
For those not familiar with a short sale, it’s a common practice today when home owners need to sell their property but the mortgage loan on the property is higher than the price they can get from the person buying their house. In this case the current bank that has the loan on the property you’re trying to sell has to take less than their owned. This is called a short sale.
It is much more common in today’s real estate market as property values have come down substantially in many markets across the U.S. Falling property values often force those who need to sell to pursue short sales.
Once you have a short sale on your credit record, many lenders will not approve you for a new mortgage loan until two years after the short sale occurred. But there is a source that I work with that will still approve you for a new VA mortgage loan (or FHA) immediately after you short sale your current home.
In many short sales, home owners have mortgage late payments leading up to the short sale. Some owners start missing payments in order to get their lender to consider a short sale. The source that I have generally wants you to not have any late payments leading up to the short sale. We will have to get you approved through the automated underwriting engine in order to get you approved for a new VA loan after your shorts sale, and in most cases you can’t have late mortgage payments and get through the automated underwriting engine.
In any event, if you are thinking about attempting a short sale on your current residence, please consult a tax professional and attorney first. Make sure you understand all the financial and legal ramifications if there are any. But this article is to let you know it still may be possible to immediately get approved for a new VA loan after a short sale of your house.
Some highlights of VA loans today:
- VA loans go up to 100% financing
- Sellers can pay all your closing costs on a purchase
- Maximum VA loans can get all the up to above $700,000 in many areas of the nation where jumbo VA loans are possible
- VA loan streamline refinance are easy to drop your interest rate to today’s low rates
- You don’t need great credit to apply for a VA loan, so if you think you have bad credit you still may be able to get a VA loan
- VA loan interest rates at record lows and being held down by the government to stimulate the economy, this won’t continue forever
- California VA Loans 100% to $737,000+ in many counties
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a conventional to VA refinance loan or VA purchase loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and VA specialist)
858-922-7899
VA loans are currently the most liberal loans out there in terms of providing borrowers cash-out on refinances all the way up to 100% of the property’s value. Also remember, if you are eligible for a VA loans, you can refinance your conventional loan into a VA loan. Perhaps you have an adjustable rate loan or a high rate fixed loan that you acquired a while back, well you can refinance that into a low rate 30 year fixed VA loan and possibly get cash back if you need it.
For VA cash out refinance or a conventional to VA loan refinance we will need the following items to process your loan:
- Full property appraisal
- Credit report
- Income documentation
30 year fixed interest rates are STILL at near historical lows. It is a great time to have the security of a VA 30 year fixed rate loan if you are currently in another type of loan. Additionally, if you need cash out to pay bills, renovate your property, or whatever, this is a great time to do that as you can get the cash out at record low VA 30 year fixed rates.
Some highlights of VA loans today:
- VA loans go up to 100% financing
- Sellers can pay all your closing costs on a purchase
- Maximum VA loans can get all the up to above $700,000 in many areas of the nation where jumbo VA loans are possible
- VA loan streamline refinance are easy to drop your interest rate to today’s low rates
- You don’t need great credit to apply for a VA loan, so if you think you have bad credit you still may be able to get a VA loan
- VA loan interest rates at record lows and being held down by the government to stimulate the economy, this won’t continue forever
- California VA Loans 100% to $737,000+ in many counties
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a conventional to VA refinance loan or VA purchase loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and VA specialist)
858-922-7899
It’s amazing that you can buy a 3 or 4 unit property with an FHA loan with 3.5% down if you occupy the property as your primary residence and the property meets certain requirements. Buying a 3-4 unit property can be a great way for a home buyer to get started in real estate using an FHA loan. Many times after collecting the rents from the other units that you rent out, your totally housing payment would be less than rent and less than if you bought a condo or a single-family-home. Eventually you could move out of the 3-4 unit property and then keep it as an investment property, and eventually pay off the mortgage and have the cash flow income and equity build as an excellent investment for life.
In order to put the minimum 3.5% down using an FHA loan to buy a 3-4 unit property there are some special requirements you have to meet:
1. 85% of the current gross market rents for all 3 or 4 units must be equal or greater than the mortgage + property taxes + home insurance (PITI). If rents are less than equal to PITI, then you will have to increase your down payment until equal or greater.
2. You have to have three months of PITI in cash reserves after your close on the purchase.
So let’s saying you are buying a 4 unit property for $400,000 and the market rent for each unit is $1,000. The total gross income would be $4,000. You multiply $4,000 X 85% to get $3,400/mo. And then let’s say the PITI with 3.5% down on a $400,000 4 unit property with an FHA loan is $2,648. So in this case it would work and you would only have to put 3.5% down to purchase the 4 unit property.
So the FHA loan is a great way to get started to purchase. Remember you buy by April 30th 2010 (and close by June 30th 2010) you may be eligible for an $8,000 tax credit. Here some highlights to remember about FHA loans:
- Only 3.5% down required and those funds can be gifted from a relative
- Low 30 year fixed interest rates
- You don’t need perfect credit to apply for an FHA loan and be approved
- The seller can credit you 6% for FHA closing costs
- FHA has the most flexible qualifying guidelines of any loan available today
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
Here is a quick overview of how your income will be analyzed when you apply and are qualified for a VA Loan:
Wage earners
2 year history required of income
Commission income
As the VA lender we will average your last two years of federal tax returns to count commission income. Make sure you check your 2106 unreimbursed business expenses as these will be deducted from your qualifying income.
Alimony and child support
This can be counted in your income for qualification. Generally it must be continuing for the next three years and you’ll need 12 months of canceled checks or bank deposits showing receipt of this income. A nice thing is we can use 1.25% of this income because it is not taxed.
Disability, social security, public assistance
This income can all be counted. We just need a copy of your award letter. We can multiply this by 1.25% as well because it is not taxed.
Retirement income
This of course can be used. We just need a copy of your award letter.
Seasonal jobs/unemployment
This may be counted and averaged over 24 months if unemployment is considered normal for the field borrower is in.
Self-employed VA borrowers
Generally you must be self-employed for 2 years. Your net business income will be averaged over 24 months. VA lenders will not go off your gross income; they will go off your NET income after deductions. There are some deductions that can be added back to your income such as depreciation.
Some highlights of VA loans today:
- VA loans allow 100% financing
- Sellers can credit you for all your closing costs
- Maximum VA loans can get all the up to above $700,000 in many areas of the nation where jumbo VA loans are possible
- VA loan streamline refinance are easy to today’s low rates
- You don’t need perfect credit with a VA loan, so if you think you have bad credit you may be able to get a VA loan
- VA loan interest rates at record lows and being held down by the government to stimulate the economy
- California VA Loans 100% to $737,000+ in many counties
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a VA refinance loan or VA purchase loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and VA specialist)
858-922-7899
FHA has gone back and forth for months on implementing new guidelines for lenders that are making FHA loans on condos and townhomes. These rules have very powerful implications for the entire U.S. condo market, as FHA is becoming the #1 source of financing for home buyers in the U.S.
The latest rules from FHA are temporary for through the next year as a response to the current housing situation in the U.S. Here is a summary of some of the changes they have made. These changes will help more condo projects qualify for FHA loans:
1. Condo “spot approvals” are still available through February 2010
This is a very important extension. Condo projects that are not already on the FHA approved condo list need to either get on the list or get a “spot approval” for the single unit a borrower is trying to buy. This extension allows FHA buyers to get a condo they want to buy approved even if not on the FHA approved condo list. Getting the project on the FHA approved condo list is a more involved process than just getting a “spot approval” Please call or email if you have questions about spot approvals.
2. FHA will now allow 50% of all the condo units to have FHA loans on them, in some cases 100%
Previously FHA was only allowing 30% of all units to have FHA loans.
3. New condo developments only 50% of *pre-sold* condo need to be owner-occupied or intended to be owner occupied
FHA still has a rule where 50% or more of the units have to be owner occupied. With new condo developments where the entire projects have not sold out yet, only 50% of the units sold so far have to be owner occupied or intended to be owner occupied.
4. REO/Bank Owned properties that are vacant or tenant-occupied are not counted in the owner-occupancy figures
This is important because as stated above, the #1 rule the prevents FHA from financing condo units is that less than 50% of the condo units in a project are owner occupied. This exception will not count REO/bank owned units in these figures and will thus help condo projects with a lot of bank owned properties pass the occupancy % test.
So there you have it, so very recent changes from FHA regarding condo loans. These changes will help more buyers get into condo’s using FHA loans. There is a lot more to FHA condo approvals as they can be very complicated.
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
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There are some debt obligations that are often overlooked when you apply for a VA loan. When I say debt obligations, I’m speaking of only the month payments that will be counted as debt in your qualifying ratios for VA loan. More common items counted as debt are car payments, credit cards and student loans. But below is a list of less common items to think about when you apply for a VA loan:
Child support
If you pay child support, this debt must be counted as a debt in your qualifying ratios. Of course on the flip side if you receive child support it can be used as income.
Deferred student loans
If you have student loans that are deferred, make sure they are deferred for at least 12 months from the date you will be closing on your new VA loan or they will have to be counted as debt.
Installment debts with less than 10 months to go towards completion NOT counted
If you have a loan or car payment that you will have paid off in less than 10 months, generally it will NOT have to be counted as debt.
Loans against 401k or retirement or loans secured by deposited funds NOT counted
If you have a loan against your 401k retirement you may be using for closing costs or something else, this does NOT have to be counted as debt when you qualify for a VA loan.
Loan pay advances (primarily seen on LES statements of active military) must be counted as debt
These items will be counted as debt.
So those are some uncommon items that you may not have thought of that are either counted or not counted as debt in qualifying. Remember, it is only items that appear on your credit that are counted when you qualify for a VA loan. Items like phone bills, insurance, utilities, etc… are not counted.
So think about using your VA loan eligibility to take advantage of the $8,000 home buyer tax credit available until April 30th 2010 and the current low interest rates.
Some highlights of VA loans today:
- VA loans are 100% financing
- Sellers can also pay all your closing costs
- Maximum VA loans can get way up above $700,000 in many areas of the nation where jumbo VA loans are possible
- VA loan streamline refinance are easy to today’s low rates
- You don’t need perfect credit with a VA loan, so if you think you have bad credit you may be able to get a VA loan
- VA loan interest rates at record lows and being held down by the government to stimulate the economy
- California VA Loans 100% to $737,000+ in many counties
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a VA refinance loan or VA purchase loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and VA specialist)
858-922-7899
This post is a review of how your income and current employment will be evaluated in the FHA loan approval process.
Latest two years of employment verified
FHA likes to see two years of stable employment. There are many exceptions however for gaps in employment. For example, if you are just graduating from college or professional training, you do not need two years of employment as long as you can document that you were in school previously and you are now employed in your profession of study. And there are many, many exceptions. Please inquire about your situation.
Overtime and bonus income
To count this you must have received this income for 24 months and we will average this income over the last 24 months. There must be evidence it will continue.
Part-time employment
Must have a two year history
Commission income
You must have a two year history and we will average this income over the last 24 months. Your last two years federal tax returns all pages are required to calculate this income.
Unreimbursed business expenses (2106)
These expenses will be subtracted from you qualifying income.
Alimony and child support income
You can count this income towards qualification if it will continue for three or more years and you will need to provide the divorce decree and 12 months evidence of receipt of funds. This income can be multiplied by 1.25 since it is not taxed.
Government assistance
This can be counted as income if you can document it will continue for three more years.
Self-employed or 1099 independent contractors
You will need to supply you last two years tax returns all pages and schedules and your NET business income will be what is used as you qualifying income. There are a lot of details regarding self-employed income, please call or email me with questions.
So that is a brief review of some items that will be needed and how your income and job history will be evaluated when applying for a FHA loan.
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions about your employment history or income, or any other questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
| 203k FHA loan |
| apply for a FHA loan |
| bad credit FHA loan |
| FHA 203k loans |
| FHA approved lenders |
| fha closing costs |
| fha government loan |
| fha home improvement loan |
VA still offers a great way for borrowers who have VA loans to drop the interest rate on their home loan without much hassle. This is called the VA IRRRL Loan, also known as the VA Streamline refinance.
There have been some changes to this loan in many states because of falling home values. Traditionally, the VA streamline refinance loan has not required the borrower to have an appraisal or credit report. However in most states, a VA borrower needs to have an appraisal and a minimum credit score. Keep in mind, the lender is only going to look at your credit scores, your debt obligations will not have to be counted in qualification. And in many cases, the lender will not do a full appraisal; they will do an in house appraisal desk review. And you can also go up to 100% of the appraised value of your home with your streamline refinance.
One fantastic thing that remains the same about the VA streamline is the VA borrower does not need to supply any information about their current employment and they do not need to supply any documentation regarding their job or income. And there are no qualifying debt-to-income ratios. This cuts down significantly on the paperwork required and time in processing the loan. Additionally, if you’ve moved out of your house with a VA loan on it and rented it, you can still enjoy the great terms and rates of a VA loan with a streamline refinance. This is a remarkable benefit, as it is very difficult to get financing on investment property these days (other than VA streamline refinances).
Here is a summary of the excellent benefits of the VA streamline refinance:
- NO job or income documentation required
- Can go up to 100% of home value on new loan
- Can roll all closing costs into the new loan
- You can do a streamline refinance on a home that you no longer occupy
- Take advantage of today’s record low 30 year fixed interest rates and lower your payment for the next 30 years!
Remember, to complete a VA streamline refinance you have to have a VA loan on the property. However VA eligible borrowers can also refinance from a non VA loan to a VA loan and go all the way to 100% of the property value with a standard VA refinance loan.
So take advantage of today’s record low interest rates that are being held artificially low by the Government to stimulate the economy. It will not last forever as many economists believe rates will rise once the U.S. Government curtails its program of buying billions in mortgage backed securities to keep rates down.
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a VA refinance loan or VA purchase loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and VA specialist)
858-922-7899
What many people don’t realize is that you don’t have to be a U.S. citizen to apply for an FHA Loan and be approved. The following resident aliens are eligible for FHA Loans:
- Permanent Resident Alien – you will only have to document your permanent residency (front and back copy of card) and provide a copy of your social security card.
- Non-Permanent Resident Alien – you will only need to provide copy of valid social security card evidence you are able to work in the United States
So if you are working in the United Stated legally, you can take advantage of the wonderful FHA financing program to buy a home. Here are some highlights of the FHA Loan:
- Minimum down payment is 3.5% and that 3.5% can be a gift from a relative
- Non occupying co-borrowers allowed to asset in qualification
- You don’t need perfect credit, so if you think you have bad credit you may still be eligible for a FHA Loan
- 50 year low 30 year fixed interest rates
- FHA 203k Loan provides money to fix up the house you buy
- 3.5% down on owner-occupied duplex, triplex and fourplex
- Condo’s and manufactured homes OK
- FHA is NOT just for first time home buyers! You can own other homes.
Give me a call at 858-922-7899 or email at homeloan8@gmail.com if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899