Category Archives: Mortgage Information

Next Housing Bubble? – Payments on Equity Lines Soon to Rise

Posted on November 12, 2013 | Leave a comment

Might the real estate market be heading for a new — and as yet little publicized — financial storm? Maybe.

Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.

That’s because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory “resets” requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.

But the difference between the interest-only and reset payments on these credit lines can be substantial: $500 to $600 or more per month in some cases. If borrowers cannot afford or choose not to make the fully amortizing payments that reduce the principal debt, the bank that owns the note can demand full payment and foreclose on the house if there is sufficient equity.

Disclaimer: for information and entertainment purposes only

Learning from Mortgage Rejection – Call to Action

Posted on October 29, 2013 | Leave a comment

Rejected borrowers should find out exactly why their loan application was denied, then try to remedy or work around the problem. Lenders are required to detail the cause for denial in a formal rejection letter.

In reviewing the letter, borrowers should keep in mind that the larger banks often have overlays, or tighter requirements, than the minimum qualification standards set by Fannie Mae and the Federal Housing Administration, said John Prom, the Manhattan branch manager for the Real Estate Mortgage Network. For example, the bank’s credit score cutoff might be higher than F.H.A.’s.

A borrower rejected by a big bank might be approved elsewhere. Mr. Prom recommends taking your application paperwork to an experienced loan officer for a second opinion. “Last year I picked up a couple of deals because some of the larger banks wouldn’t do 20 percent down on a two-family,” he said. “They wanted 25 percent down. We were able to do it for 20 percent.”

Disclaimer: for information and entertainment purposes only

Part-Time Pay May Not Count When Seeking A Mortgage

Posted on October 13, 2013 | Leave a comment

It’s an issue that hasn’t gotten much attention but should be a red alert for first-time buyers and others who supplement their incomes with part-time work: Though part-time earnings are playing an increasingly important role in the post-recession American economy, the income you earn part time may not count when you buy a house.

Isn’t income always income? If you make $42,000 from your regular full-time job and $18,000 more by working part time at a second job, isn’t your gross income $60,000?

The IRS would tell you it is. But mortgage lenders may disregard the $18,000 unless you can document that you’ve been receiving the extra money steadily for two years and the pay is likely to continue.

There might be some wiggle room on this depending on your specific circumstances, but under rules established by the dominant players in the home loan market — Fannie Mae, Freddie Mac and the Federal Housing Administration — part-time income generally isn’t “qualifying income” for mortgage purposes until it has been flowing for a couple of years.

Category Archives: Mortgage Information

Next Housing Bubble? – Payments on Equity Lines Soon to Rise

Learning from Mortgage Rejection – Call to Action

Part-Time Pay May Not Count When Seeking A Mortgage

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