robertmortgage

How To Best Save For A Down Payment On A House

Tue, 20 Jun 2023 10:14:14 GMT

How To Best Save For A Down Payment On A House

When buying a house, offering a big down payment can save you a lot of money in the long run. Here’s how to save for a down payment the smart way.

Even if you don’t plan to buy a house for several years, you’ve probably started thinking about how to save for a down payment. Unlike saving for retirement, where the funds you stash away likely won’t be accessed for many more years, a down payment is a large sum of money that you’ll need to access soon.

This means slowly setting aside small amounts and investing them in the stock market just won’t work.

In these seven steps, we’ll cover how to start saving for the biggest purchase you’ll likely every make, and how to do it in the smartest way possible.‍

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Step 1: Figure out how much you’ll need to save‍.

Before you begin saving a down payment for a house, you first have to know how much you’ll need to save. Plan to sit down with a mortgage lender who will let you know how much of a mortgage you can qualify for.

Generally speaking, your housing expenses should not exceed 28 percent of your stable monthly income. So if your income is $5,000, you can safely allocate $1,400 of that ($5,000 x .28) to your future house payment.

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‍ Step 2: Determine your timeframe‍.

The next step is to determine your timeframe. If you plan on purchasing a home in five years, you’ll have to be prepared to save $9,000 per year ($45,000 divided by five years). Naturally, the shorter your timeframe is, the higher your annual savings goal will be.‍

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Step 3: Find the best way to save for your down payment‍

As a rule, since the money that you are saving for the down payment on a house has a definite purpose, and needs to be reached within a specific timeframe, you should not save money in risk-type investment vehicles (stocks, real estate investment trusts, ests.) Instead, you should save your money in super-safe vehicles like a boring old savings account or a certificate of deposit.

Sure, you may be able to earn more money by investing your down payment account in higher risk vehicles, but there is also the very real risk that you will lose money in the process.

Remember, if you’re saving for a house, the worst-case scenario would not be missing out on returns, it would be losing some of the money you needed to buy your home.‍

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Step 4: Make room in your budget‍.

Since we’re talking about saving thousands of dollars per year, you have to clear some room in your budget to make sure that your savings goal is doable. That means you may have to earn additional income, cut back on expenses, or both.

But, making room in your budget can help you save the kind of money you’ll need for your down payment, and it will also prepare you for managing the type of tighter budget that homeownership requires. Embrace it for all it’s worth!

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‍Step 5: Set up an automated savings plan‍.

Unless you’re a saver by nature, and most of us aren’t really, you’ll need to automate the savings process. That will mean some sort of payroll savings plan. Just like your 401(k) plan, you should allocate a certain percentage or dollar amount of your regular pay to go directly into a savings account or money market account dedicated to accumulating the funds for your down payment.

Not only does this make the process automatic, but it also makes it invisible. Money moves from your paycheck to your dedicated savings account without you even seeing it happen. That will remove both the temptation and ability to spend the money on other purposes.‍

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Step 6: Bank those windfalls‍.

You can make the process of saving money for a down payment on a house easier—or even shorten the process—by banking periodic windfalls. These can include income-tax refunds, gifts received, bonuses or large commission checks, or even the sale of personal assets.

By depositing these funds into your down payment savings account, you fast-forward the process of saving money to buy your future home. Regularly depositing a few thousand dollars per year in windfalls can chop a couple of years off of your savings timeframe.‍

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Step 7: Build flexibility into your savings plan

‍Whatever the size of your down payment, it is important to build flexibility into your savings plan.

While you’re saving up money, there’ll be other demands on your finances. These can include major car repairs, replacement of a car, uncovered medical expenses, or even the temporary loss of a job. None of these will magically stop just because you have a goal of saving money for a down payment on a house. You’ll have to be ready when they happen.

Make sure that you have an emergency fund—before you even start saving for your down payment—and keep it well-stocked. And if you have predictable expenses, such as replacing your car, you’ll need to simultaneously prepare for that expense as well.‍

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Summary

‍Buying a home can be a long process that requires a good chunk of your savings but think of it all as preparation for homeownership. You’ll have all of those expenses after you buy your home too, but you’ll also have large expenses related to the home itself. So, think of this as a dry run to prepare both your finances and your psyche for the extra expenses that homeownership brings.

Robert Mahaffey

PRESIDENT

Staging Your Home Helps It Sell 73% Faster

Mon, 19 Jun 2023 13:02:42 GMT

Staging Your Home Helps It Sell 73% Faster

Staged homes sell 73% faster.

With current mortgage rates low and rent on the rise, the math has shifted for the nation’s renters. It’s more affordable to be first-time homebuyer than to rent in many U.S. cities.

For home sellers, this is excellent news — it’s easier to command high prices when the housing market expands. However, there’s another way to increase your home’s value as well.

Through a process known as “home staging”, sellers can invest a little bit of money into their sale and earn themselves a huge, huge return.

Furthermore, according to the Real Estate Staging Association, homes that are staged before going on the market sell 73% faster, on average, than their non-staged counterparts.

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What is home staging?

Many homeowners are familiar with the concept of home staging, thanks to reality television. Home staging is the art of preparing a home for sale.

Via home staging, you aim to improve the flow of your home, to eliminate clutter, and to make your home appear bigger and brighter.

A professional home stager is an expert in the art of preparing homes for sale.

And, because most buyers now begin their home searches online, having your home professional staged appropriately can be crucial toward that first step of attracting an interested buyer.

A non-staged home can present worse in photographs as compared to a staged one. Staged homes are often more likely to get a walk-through.

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How much does home staging cost?

There are two ways by which professional home stagers charge their clients. Some charge by the hour on a consultant basis; and others charge a flat rate for their time.

All will charge for “materials” required during the home staging process, which may include temporary furniture, artwork, and home accessories.

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Estimates are provided free-of-charge.

The median cost to stage a home is $675; and, depending on the size of the home and the extent of the work, fees can be lower or higher.

Don’t shrug this off. Home staging is an investment in the sale of your home. It’s not uncommon for a several hundred-dollar investments to yield a several thousand dollar returns.

Plus, if staging helps your home to present better online, it will be worth every penny you pay. You can’t sell your home, after all, if nobody comes to see it. This is true no matter what your home’s asking price.

Some home staging ideas yield big returns.

The concept behind staging a home for sale is to help present the property in its best light, figuratively and literally.

Even simple, inexpensive staging can result in big bumps to your sale price.

Painting: New paint can mask home odors while insanely brightening a room
Carpeting: New carpet — even low-grade carpet — can make a room look clean and inviting
Decluttering: Removing “junk” from rooms, closets, and cupboards add immediate appeal and give the illusion of more space

Summary

Remember: A home buyer will look at the “little things” in your home and, if those items are neglected, the buyer will wonder what else is in disrepair.

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SOURCE: Craig Berry themortgagereports.com

Robert Mahaffey

PRESIDENT

A Ton Of Business Your Mortgage Broker Could Be Referring You Today

Mon, 19 Jun 2023 13:02:07 GMT

A Ton Of Business Your Mortgage Broker Could Be Referring You Today

As a trust attorney, you are always looking for ways to increase your business. What most trust attorneys fail to realize is that having a trusted mortgage advisor in their pocket is one of the best referral partners they can have.

‍

A good mortgage broker is closing 5 to 10 transactions per month and each one of those transactions is an open door to discuss estate planning.

‍

The mortgage broker is seeing the property vesting, how financial assets are held, and the number of dependents each client has.

‍

Put this all together and you have the recipe for an estate planning opportunity.

‍

A mortgage transaction is one of the easiest ways for a lead to be generated and passed on to a trust attorney who understands the importance of protecting the assets that people work so hard to create.

‍

By partnering with a producing mortgage broker you could open the door to tens and possibly hundreds of qualified referrals.

Robert Mahaffey

PRESIDENT

A Quick Guide To Qualifying Your Client For A Mortgage Before You File

Mon, 19 Jun 2023 13:01:01 GMT

A Quick Guide To Qualifying Your Client For A Mortgage Before You File

One of the most heartbreaking moments for a homeowner is when they find out they cannot qualify for that perfect home. Often times the difference between qualifying and not qualifying comes down to a few thousand dollars in net income.

Simply asking your clients whether or not they plan on purchasing a home in this current tax year could give you the opportunity to discuss an alternative tax plan that considers their “qualifying” income as opposed to paying the least amount in taxes.

By partnering with a mortgage broker, you will have an expert that can quickly review a set of draft tax returns and calculate how large of a mortgage that client can qualify for.

After that review you can discuss different tax strategies to help that customer obtain the financing necessary to purchase their home.

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Contact me today and we can discuss the different strategies you can offer your clients before they make their move with real estate investing.

Robert Mahaffey

PRESIDENT

Bankers Are Stealing Your Clients With This Little Known Real Estate Trick

Mon, 19 Jun 2023 12:59:53 GMT

Bankers Are Stealing Your Clients With This Little Known Real Estate Trick

You could lose it all…

One Real Estate transaction could cost you your best client. Time and again, I hear the same story: “My client went out looking for a house and their Real Estate agent introduced them to a mortgage banker at…” (insert large institutional bank with financial planning services here). “Their mortgage guy told my client that he could drop their rate by .5% if he moved his portfolio over to his company.”

Big bank financial planners are using mortgage rates as the trojan horse to steal your clients. You need to take control of your clients real estate transactions so you can ward off these threats.

By partnering with an independent real estate team you can ensure that your portfolio is properly protected. We are all independent together and understand the importance of protecting our book of business and referrals.

Contact me today so we can set up an independent consultation and help put your mind at ease.

Robert Mahaffey

PRESIDENT

Self-Employed and Getting a Mortgage: What You Need to Know

Mon, 05 Jun 2023 11:23:19 GMT

Self-Employed and Getting a Mortgage: What You Need to Know

Millions of Americans have taken control of their careers as entrepreneurs and freelancers. Unfortunately, traditional mortgage rules can deliver an unpleasant dose of reality for aspiring homeowners who are self-employed when it comes time to buy a house.

If you are self-employed, either full time or part time, and have plans to purchase or refinance a home, there’s a lot you need to know to prepare for the potential challenges ahead.

Who is considered self-employed?

For mortgage lenders, the standard definition of self-employment is having 25% or more ownership in a company that you derive income from. This includes all types of businesses, from sole proprietorships to LLCs and corporations.

Independent contractors and freelance workers may be considered self-employed as well, even though you might not have ownership in the company that pays you. If you receive 1099s at the end of the year, chances are you are self-employed.

Why it’s harder to get a mortgage when you’re self-employed.

For traditional employees, lenders use the gross income reported on a W-2 tax form to evaluate you for a mortgage. For example, if you make a salary of $60,000 a year, your lender can use $5,000 per month to qualify you for a mortgage loan.

For self-employed workers, the calculations are much different. Lenders take into account your business expenses when determining your income.

Let’s look at that same $60,000, only this time if you earned it as your own employer. Before the lender can determine your qualifying income, they have to look at all the expenses you are deducting on your tax returns — including meals and entertainment, cellphones, internet service and mileage for your vehicle.

Assuming you have $20,000 per year in expenses for running your business, a mortgage lender will deduct the $20,000 from your $60,000 gross income, and the $40,000 that’s left is the income that can be used to qualify. That is your net income.

If you are self-employed, you would only have $3,333.33 per month of income that could be used to qualify for a new mortgage. That equals a much smaller house, or a larger down payment.

What lenders are looking for if you’re self-employed?

You can only prepare properly if you have an idea of what lenders look for when considering your application for a mortgage. Provide extra explanations upfront for any details about your business income that will keep them from guessing, and give them more evidence that you have the ability to repay the loan.

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Large increases or decreases in your income.

Lenders will usually average your net income over a two-year period to determine how much income to use to issue a loan. Any large increases or decreases can be causes for concern and result in the decline of your loan application.

The biggest red flag for most lenders is a 25% or more decline in self-employed income from the prior year. The explanation may be simple: You might have started up a new branch of your company and incurred a lot of expenses that won’t continue in future, or perhaps you changed the structure of your company from a sole proprietorship to a partnership.

The important thing is to provide an explanation, and preferably a letter from your CPA for any one-time tax losses you were taking. That way, the lender understands the company is in good financial shape and the losses were not due to hardship.

The same is true for large increases. Unless there is an explanation or documentation that the most recent year’s increase in income was due to something that will continue into the future, the lender will probably average the most recent year against a lower prior year to be conservative.

Keep in mind they are looking at the income and expenses for both you and your business. If your personal income has risen substantially in the past year, but there was also a significant drop in your company’s earnings, lenders will want to know what’s going on with the company.

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How long you’ve been self-employed.

If you’ve been self-employed for more than five years, there are programs that will allow you to get approved with just your most recent year’s tax returns. If you have one rough year, but have been in business for decades, an underwriter may be willing to make an exception if you can document prior year’s earnings and show that the current year’s earnings are back on track.

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Business funds for down payments on a home

Combining your business funds with your personal money can get tricky in mortgage lending. Lenders will want you to verify that using those funds won’t affect business operations or cash flow, and they may want your tax professional to write something to that effect.

If you can come up with your down payment without accessing the company’s asset accounts, lenders may waive the requirement for the business tax returns.

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Type of business you are in

If you work in a business or industry that has seen rough days lately, or one that appears to be in early growth stages, lenders may scrutinize more carefully the reasons for your drops or rises in income. They might require more documentation or reduce the amount of loan they are willing to qualify you for.

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Different types of loans for self-employed borrowers

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Conventional

Conventional loans are generally the most sought-after to get the best rates and terms. Fannie Mae and Freddie Mac are the two of the largest purchasers of mortgage in the U.S. mortgage market and dictate most of the terms. Generally, they take into account the last two years of personal and business tax returns.

Freddie Mac makes an important distinction for business owners who are qualifying with a company that’s been in existence at least five years. The requirement for tax returns can be reduced to only one year’s worth of personal and business returns if you can provide a letter from your CPA or certified tax professional confirming your company has been in existence at least five years.

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FHA

The FHA program requires the same two-year income history as Fannie Mae. However, since the credit score requirements are lower, self-employed borrowers may have more flexibility to get approved. Minimum credit scores can be as low as 580, versus the 620 required by Fannie Mae.

The requirement for business returns can be waived if your personal tax returns show your income has risen over the past two years, and none of the funds you’ll use at closing are coming from your business accounts.

VA

Self-employed military veterans will be required to provide the standard two years of tax returns, plus a year-to-date income verification.

The VA uses a “residual income” analysis, which looks at how much the veteran has every month after his total expenses including the new mortgage, are deducted from his net income. Depending on the size of the veteran’s family and the size of the house, self-employed military veterans may get the most flexibility in qualifying for a VA loan.

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USDA

The USDA loan program offers loans for lower-income borrowers in rural areas. You might be surprised, though, by what properties in your area qualify. The standard two-year tax return requirements apply to USDA loan and underwriting, and credit requirements are similar to FHA.

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Final considerations for the self-employed mortgage applicant

First impressions are everything, and that’s especially true if you are self-employed and applying for a mortgage. If you know that your business had big changes in income over the past year, you have two choices: You can roll the dice and hope the numbers come up in your favor; or you can be proactive and provide explanations from your CPA and documentation to support all those changes. Regardless, you’ll want to work with a loan officer who has some experience with self-employed borrowers.

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Source: Denny Ceizyk magnifymoney.com

Robert Mahaffey

PRESIDENT

How to Pay Off Student Loans Fast Using Your Home Equity

Mon, 05 Jun 2023 11:23:18 GMT

How to Pay Off Student Loans Fast Using Your Home Equity

When you’re struggling to pay for college or eager to repay student loan debt, tapping into home equity may seem like a great option. But, there are pros and cons to consider that you need to understand before you move forward.

The following information can help you understand everything you need to know about how to use home equity to pay off student debt – and whether doing so is a smart idea.

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How Can You Use Home Equity to Pay Off Student Debt or Pay for School?

Using home equity to pay off debt is a possibility only if you have equity in your home. You have equity if your home is worth more than you owe on it. If you have a $200,000 home and owe $180,000 on it, you have $20,000 in equity.‍

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You can tap into your home equity by:

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‍Taking a cash-out refinance loan

A cash-out refinance involves taking out a new mortgage for more than you currently owe. You’d use the loan proceeds to first pay off your existing mortgage loan and then use the extra cash you took out to pay for school or pay off student loan debt.‍

Taking out a home equity loan‍

Home equity loans allow you to access equity without changing your current mortgage. You’d borrow a fixed amount of money and could use the loan proceeds to pay off your student debt or pay for school.‍‍

‍Taking out a home equity line of credit‍.

Home equity lines of credit allow you to borrow up to a set amount of money, which is called your line of credit. You don’t have to borrow the whole amount at once, and as you pay back what you borrowed, you can borrow more. Again, you’d use the money available on your line of credit to cover school costs or repay existing student debt.
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Typically, lenders won’t allow you to borrow up to the full value of your home. Many lenders would prefer you keep your combined total mortgage debt at 80 percent of what your home is worth. So, if you had a $200,000 home, the maximum total balance on your mortgage and home equity loan or line of credit would be $160,000.

However, some home equity lenders allow you to borrow as much as 85 percent of the value of your home. But, you’d usually pay a higher interest rate and need good credit to qualify for this type of loan.

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‍Advantages of Using Home Equity to Pay for College or Pay Off Student Loans‍

Here are some definite advantages to taking out a home equity loan in order to pay for school or repay student loan debt:

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‍You may be eligible for a lower interest rate‍

Home mortgages and home equity loans are secured debt, so you can usually qualify for a lower rate than on student loans.

‍You may be able to repay your loan over a longer time

Home equity loans and mortgage loans could have repayment terms that span as long as 30 years. Most private student loans need to be repaid in five to 15 years, although there are a few lenders that allow a longer repayment timeline. Being able to pay your loan off over a longer time can result in lower monthly payments.

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‍You’ll have fewer payments to make

If you can tap into enough equity in your home to repay and consolidate multiple existing student loans, you won’t have as many creditors to deal with or as many monthly payments to make. This can simplify your life significantly, and reduce the chances you’ll forget a payment.

SOURCE: Dave Rathmanner freedomdebtrelief.com

Robert Mahaffey

PRESIDENT

How A Mortgage Broker Can Help You Tap Settlement Assets

Mon, 05 Jun 2023 11:23:15 GMT

How A Mortgage Broker Can Help You Tap Settlement Assets

One of the biggest challenges that a spouse can face is refinancing a property that he or she has been awarded in a divorce settlement.

The key to any refinance is qualifying for a mortgage. In many cases, the spouse attempting to qualify for that mortgage was not educated on the amount of income that would be necessary in order to qualify for that future refinance. This often leads to situations where the spouse is required to refinance but simply does not qualify.

This is where an upfront consultation with a mortgage broker can help. First, the mortgage broker can advise you of the target income needed to refinance the mortgage at that later date.

In addition, the mortgage broker can advise you on how much alimony, child support, and other income you may be receiving can be used for your qualification. In some cases, the mortgage broker will advise you to have settlement assets placed into a trust so those assets can be distributed out to you over a period of time at a consistent amount.

This trust concept can be used as income if the lender can demonstrate it will continue for 36 months after the refinance. This is just one example of a strategy a mortgage broker can bring to your client at the time of settlement.

Contact me today to discuss how a mortgage broker can benefit your client.

Robert Mahaffey

PRESIDENT

6 Factors That Determine Your Mortgage Interest Rate

Thu, 18 May 2023 15:01:14 GMT

6 Factors That Determine Your Mortgage Interest Rate

If you’re like most people, you want to get the lowest interest rate that you can find for your mortgage loan. But how is your interest rate determined? Knowing what factors determine your mortgage interest rate can help you better prepare for the homebuying process and for negotiating your mortgage loan.

Here are six key factors that affect your interest rate that you should know

1. Credit scores

Your credit score is one factor that can affect your interest rate. In general, consumers with higher credit scores receive lower interest rates than consumers with lower credit scores. Lenders use your credit scores to predict how reliable you’ll be in paying your loan. Credit scores are calculated based on the information in your credit report, which shows information about your credit history, including your loans, credit cards, and payment history.

Before you start mortgage shopping, your first step should be to check your credit, and review your credit reports for errors. If you find any errors, dispute them with the credit reporting company.

2. Home price and loan amount

Homebuyers can pay higher interest rates on loans that are particularly small or large. The amount you’ll need to borrow for your mortgage loan is the home price plus closing costs minus your down payment. Depending on your circumstances or mortgage loan type, your closing costs and mortgage insurance may be included in the amount of your mortgage loan, too.

If you’ve already started shopping for homes, you may have an idea of the price range of the home you hope to buy. If you’re just getting started, real estate websites can help you get a sense of typical prices in the neighborhoods you’re interested in.

3. Down payment

In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So, if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.

If you cannot make a down payment of 20 percent or more, lenders will usually require you to purchase mortgage insurance, sometimes known as private mortgage insurance (PMI). Mortgage insurance, which protects the lender in the event a borrower stops paying their loan, adds to the overall cost of your monthly mortgage loan payment.

As you explore potential interest rates, you may find that you could be offered a slightly lower interest rate with a down payment just under 20 percent, compared with one of 20 percent or higher. That’s because you’re paying mortgage insurance—which lowers the risk for your lender.

4. Loan term

The term, or duration, of your loan is how long you have to repay the loan. In general, shorter-term loans have lower interest rates and lower overall costs, but higher monthly payments. A lot depends on the specifics—exactly how much lower the amount you’ll pay in interest and how much higher the monthly payments could be depends on the length of the loans you're looking at as well as the interest rate.

5. Interest rate type

Interest rates come in two basic types: fixed and adjustable. Fixed interest rates don’t change over time. Adjustable rates may have an initial fixed period, after which they go up or down each period based on the market.

Your initial interest rate may be lower with an adjustable-rate loan than with a fixed rate loan, but that rate might increase significantly later on.

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6. Loan type

There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose. Talking to multiple lenders can help you better understand all of the options available to you.

Source: Nicole Shea - consumerfinance.gov

Robert Mahaffey

President

Which Season Is Best To Buy Your Home?

kmattingly@3rdstreetfinancial.com (Robert Mahaffey) — Thu, 18 May 2023 15:01:11 GMT

Robert Mahaffey

President

Which Season Is Best To Buy Your Home?

Do You Qualify For A VA Loan?

Thu, 18 May 2023 15:01:11 GMT

Do You Qualify For A VA Loan?

Usually, eligible VA Loan borrowers are on active duty with the regular military, Guard or Reserves, or have been honorably discharged from a branch of the military.

In most cases, the VA has your records on file. It can provide your Certificate of Eligibility (COE) to your lender almost instantly through it WebLGY system.

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If any one of the following is true, you may be eligible for a VA mortgage.

Served 181 days during peacetime (Active Duty)
Served 90 days during war time (Active Duty)
Served 6 years in the Reserves or National Guard
Your spouse was a service member who was killed in the line of duty.

There are other instances in which you may be eligible – the rules depend on when you served.

Re-using VA eligibility.

‍You can use your VA eligibility more than once. Normally, to re-use it, you sell your home, pay off your existing mortgage and restore your eligibility.

You can’t, however, have more than one VA loan at a time. If you pay off your VA mortgage without selling the property, you can restore your eligibility and get another VA mortgage. However, you only get to do this ONE time.

What if someone assumes your VA mortgage?‍

If you sell your home with a VA assumption, your eligibility can be restored only if the buyer is also an eligible veteran who is willing to substitute his or her eligibility for yours. Otherwise, your eligibility won’t be restored until your buyer pays off your VA loan.

What about partial eligibility?‍

If you used only part of your eligibility, and it cannot yet be restored, you can still use any leftover eligibility. You need to check with a lender to see if what’s left is enough for the loan you want, and if you need a down payment.

What if you get a divorce?‍

If property is awarded to your former spouse, your entitlement cannot be restored unless he or she refinances the property and/or repays the VA loan in full. Or your ex is a veteran who substitutes his or her entitlement.

Source: Gina Pogol zillow.com

Robert Mahaffey

President

Every Veteran Should Be Using This Mortgage Program

Thu, 18 May 2023 15:01:09 GMT

Robert Mahaffey

President

Every Veteran Should Be Using This Mortgage Program

robertmortgage

How To Best Save For A Down Payment On A House

How To Best Save For A Down Payment On A House

Robert Mahaffey

Staging Your Home Helps It Sell 73% Faster

Staging Your Home Helps It Sell 73% Faster

Staged homes sell 73% faster.

What is home staging?

How much does home staging cost?

Estimates are provided free-of-charge.

Summary

Robert Mahaffey

A Ton Of Business Your Mortgage Broker Could Be Referring You Today

A Ton Of Business Your Mortgage Broker Could Be Referring You Today

As a trust attorney, you are always looking for ways to increase your business. What most trust attorneys fail to realize is that having a trusted mortgage advisor in their pocket is one of the best referral partners they can have.

A good mortgage broker is closing 5 to 10 transactions per month and each one of those transactions is an open door to discuss estate planning.

The mortgage broker is seeing the property vesting, how financial assets are held, and the number of dependents each client has.

Put this all together and you have the recipe for an estate planning opportunity.

A mortgage transaction is one of the easiest ways for a lead to be generated and passed on to a trust attorney who understands the importance of protecting the assets that people work so hard to create.

By partnering with a producing mortgage broker you could open the door to tens and possibly hundreds of qualified referrals.

Robert Mahaffey

A Quick Guide To Qualifying Your Client For A Mortgage Before You File

A Quick Guide To Qualifying Your Client For A Mortgage Before You File

One of the most heartbreaking moments for a homeowner is when they find out they cannot qualify for that perfect home. Often times the difference between qualifying and not qualifying comes down to a few thousand dollars in net income.

Simply asking your clients whether or not they plan on purchasing a home in this current tax year could give you the opportunity to discuss an alternative tax plan that considers their “qualifying” income as opposed to paying the least amount in taxes.

By partnering with a mortgage broker, you will have an expert that can quickly review a set of draft tax returns and calculate how large of a mortgage that client can qualify for.

After that review you can discuss different tax strategies to help that customer obtain the financing necessary to purchase their home.

Contact me today and we can discuss the different strategies you can offer your clients before they make their move with real estate investing.

Robert Mahaffey

Bankers Are Stealing Your Clients With This Little Known Real Estate Trick

Bankers Are Stealing Your Clients With This Little Known Real Estate Trick

You could lose it all…

Big bank financial planners are using mortgage rates as the trojan horse to steal your clients. You need to take control of your clients real estate transactions so you can ward off these threats.

By partnering with an independent real estate team you can ensure that your portfolio is properly protected. We are all independent together and understand the importance of protecting our book of business and referrals.

Contact me today so we can set up an independent consultation and help put your mind at ease.

Robert Mahaffey

Self-Employed and Getting a Mortgage: What You Need to Know

Self-Employed and Getting a Mortgage: What You Need to Know

Millions of Americans have taken control of their careers as entrepreneurs and freelancers. Unfortunately, traditional mortgage rules can deliver an unpleasant dose of reality for aspiring homeowners who are self-employed when it comes time to buy a house.

If you are self-employed, either full time or part time, and have plans to purchase or refinance a home, there’s a lot you need to know to prepare for the potential challenges ahead.

Who is considered self-employed?

For mortgage lenders, the standard definition of self-employment is having 25% or more ownership in a company that you derive income from. This includes all types of businesses, from sole proprietorships to LLCs and corporations.

Independent contractors and freelance workers may be considered self-employed as well, even though you might not have ownership in the company that pays you. If you receive 1099s at the end of the year, chances are you are self-employed.

Why it’s harder to get a mortgage when you’re self-employed.

For traditional employees, lenders use the gross income reported on a W-2 tax form to evaluate you for a mortgage. For example, if you make a salary of $60,000 a year, your lender can use $5,000 per month to qualify you for a mortgage loan.

For self-employed workers, the calculations are much different. Lenders take into account your business expenses when determining your income.

Assuming you have $20,000 per year in expenses for running your business, a mortgage lender will deduct the $20,000 from your $60,000 gross income, and the $40,000 that’s left is the income that can be used to qualify. That is your net income.

If you are self-employed, you would only have $3,333.33 per month of income that could be used to qualify for a new mortgage. That equals a much smaller house, or a larger down payment.

What lenders are looking for if you’re self-employed?

Large increases or decreases in your income.

Lenders will usually average your net income over a two-year period to determine how much income to use to issue a loan. Any large increases or decreases can be causes for concern and result in the decline of your loan application.

The important thing is to provide an explanation, and preferably a letter from your CPA for any one-time tax losses you were taking. That way, the lender understands the company is in good financial shape and the losses were not due to hardship.

The same is true for large increases. Unless there is an explanation or documentation that the most recent year’s increase in income was due to something that will continue into the future, the lender will probably average the most recent year against a lower prior year to be conservative.

Keep in mind they are looking at the income and expenses for both you and your business. If your personal income has risen substantially in the past year, but there was also a significant drop in your company’s earnings, lenders will want to know what’s going on with the company.

How long you’ve been self-employed.

Business funds for down payments on a home

Combining your business funds with your personal money can get tricky in mortgage lending. Lenders will want you to verify that using those funds won’t affect business operations or cash flow, and they may want your tax professional to write something to that effect.

If you can come up with your down payment without accessing the company’s asset accounts, lenders may waive the requirement for the business tax returns.

Type of business you are in

Different types of loans for self-employed borrowers

Conventional

FHA

The FHA program requires the same two-year income history as Fannie Mae. However, since the credit score requirements are lower, self-employed borrowers may have more flexibility to get approved. Minimum credit scores can be as low as 580, versus the 620 required by Fannie Mae.

The requirement for business returns can be waived if your personal tax returns show your income has risen over the past two years, and none of the funds you’ll use at closing are coming from your business accounts.

VA

Self-employed military veterans will be required to provide the standard two years of tax returns, plus a year-to-date income verification.

USDA

The USDA loan program offers loans for lower-income borrowers in rural areas. You might be surprised, though, by what properties in your area qualify. The standard two-year tax return requirements apply to USDA loan and underwriting, and credit requirements are similar to FHA.

Final considerations for the self-employed mortgage applicant

Robert Mahaffey

How to Pay Off Student Loans Fast Using Your Home Equity

How to Pay Off Student Loans Fast Using Your Home Equity

When you’re struggling to pay for college or eager to repay student loan debt, tapping into home equity may seem like a great option. But, there are pros and cons to consider that you need to understand before you move forward.

The following information can help you understand everything you need to know about how to use home equity to pay off student debt – and whether doing so is a smart idea.

How Can You Use Home Equity to Pay Off Student Debt or Pay for School?

Using home equity to pay off debt is a possibility only if you have equity in your home. You have equity if your home is worth more than you owe on it. If you have a $200,000 home and owe $180,000 on it, you have $20,000 in equity.‍

You can tap into your home equity by:

‍Taking a cash-out refinance loan

A cash-out refinance involves taking out a new mortgage for more than you currently owe. You’d use the loan proceeds to first pay off your existing mortgage loan and then use the extra cash you took out to pay for school or pay off student loan debt.‍

﻿ Taking out a home equity loan‍

Taking out a home equity loan‍