Archive for July, 2017

Is qualifying for a mortgage difficult if you’re self-employed?

July 28th, 2017

emplpoyee or self-employed booksHow do you qualify a person for a mortgage when they’re self-employed? Are there simple rules for self-employed borrowers to follow that make the process less difficult? And the answer is—the rules are the same, yet different! Self-employed borrowers may have more paperwork, but the overall goal is the same – determine the income that can be used to qualify.

Self-employed borrowers are individuals that have a 25% or greater ownership interest in a business, or borrowers that earn income reported on a 1099 form rather than a W2. The income is reported on the individual’s federal tax return under schedule C, or may flow from other corporate filings to schedule E.   Self-employed borrowers need to manage their own withholdings for payroll taxes and also manage their own daily expenses. The tax return documentation that will be requested from them will start with the personal return, but may be a combination of personal and business/corporate. When the returns are well detailed and all schedules are provided, arriving at usable income is not a hard task. Read the rest of this entry »

Documentation during the loan process can be arduous…but it is necessary

July 21st, 2017

white flagThe question of the day is, “Why do we ask for so much paperwork during the mortgage pre-approval process, what happens to all of it and why do we need more before closing? If I am underwriting pre-approved, why is that not enough?” Yes, it is true, we ask for lots and lots of things. The depth of paperwork is directly tied to how you earn your income, where all the assets for closing are held, and what your overall credit profile looks like. Self-employed folks require more documentation than someone who works an hourly position or is a salaried employee. Even though the mortgage pre-approval process can all be done online, paperless these days, it is still time consuming.

Our mortgage process provides an underwriting pre-approval right up front. To that approval, we add the appraisal and title work to complete the file. Doing all of this upfront puts another set of eyes on the file so that any additional documentation the underwriter needs can be acquired and added. Now, even though you think we are all done, we really are not. Again, based upon the length of time a file is in process, updates will be needed to extend the approval date to match your closing date. These updates are necessary for underwriting…not just because we want to pick on you! We must prove that you are still working, still have your assets, and have not allowed your credit to fall off the cliff. Read the rest of this entry »

It is time to declare your independence from your landlord!

July 14th, 2017

money housing house home loan wealth investment mortgage - stock imageThe month of July is Independence month.  As a nation, we have celebrated the 4th of July.  In the Midwest, we celebrate our independence from winter.  For anyone out there still renting rather than owning a home,

Over the years we have all seen prices go up on nearly everything we purchase or consume.  If you are an investor in the stock market, you want to take advantage of buying low and watch your investment grow over time.  If you are an investor in real estate you try to buy and or sell at the right time in order to maximize profits.  If you are a real estate investor who buys and holds for rental, you look at maximizing your investment through the collection of rents.  There has been research done that provides information on the current rental market in the area and what a home could rent for (it is amazing to me how much rent can cost).  For example, a 4-bedroom home in a suburb can fetch $600 to $650 per bedroom in the market.  This means a $300,000 4-bedroom home purchased or built for investment could return as much as $2600 per month in rental income.  This is great as an investment strategy for the landlord, but anyone that can afford this rental payment should not use renting as a long-term strategy.  It’s time for you to buy.

There are a variety of programs to help buyers get into the market without a lot of money out of pocket.  In our 11-county metro area first time or move up buyers have access to Minnesota Housing Finance Agency programs with down payment assistance.  That $300,000 home could be purchased as a primary residence using an FHA MHFA loan with down payment assistance, some seller paid closing costs and only a $1,000 minimum investment required.  This example would save an estimated $478 a month over the estimated rental payment of $2,600 per month for this 4-bedroom home example.  Imagine what your budget would look like with an additional $478 every month. That alone should be proof that the longer you wait the more it will cost you.

Buying a home should be part of your overall financial strategy.  Owning a home helps you build equity in an asset that you actually own.  It provides a safe and secure environment for you and your family.  Homeownership contributes to building stronger communities.   And, homeownership has always been part of our American Dream.  Time to get out there and join the dreamers!

Randy Cullen NMLS #32612

Buyers need to be prepared for the hot market here in the Twin Cities! – by Randy Cullen

July 7th, 2017

thermometerBaby, it is HOT outside! The warm temperatures have finally returned to make it feel like summer time. The heat is on, and the Twin Cities housing market is feeling it too. Inventories of existing homes have dropped to nearly a two month supply (6 months is a normal market gauge), and prices are being driven up due to the low number of listings. High demand with low supply drives the price. Existing homes sell quickly if they are staged well and priced correctly. Sellers are enjoying multiple offers and increased prices with the bidding wars that inflate the value. Buyers need to be pre-approved and prepared to be nimble, as competition is fierce.

When prices are on the rise everyone needs to be considerate of the appraised value. Appraisers are tasked with finding comparable sales in the surrounding area to support the price the willing buyer and seller have agreed to. Not an easy task when prices are climbing faster than the accumulation of closed sales to support the increase in value. It is a reality of our market that sale prices are outpacing values, and that creates heartburn for all parties. Canceling the contract and putting the house back on the market will not necessarily solve the problem. Renegotiating contracts is not on anyone’s list of favorite things, but it can become necessary if the buyer does not have the cash to cover the shortage between appraised value and contract price. Getting the price more in line with the value quickly solves the problem. Removing seller paid closing costs that the market cannot support may also help. Read the rest of this entry »