Kate's Blog

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

July 28th, 2017
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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
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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
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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
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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 »

It’s finally summer time, and the lakes are calling for you…answer the call. – by Randy Cullen

June 30th, 2017
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cabin

Can I buy a second home, on a lake, and renovate it? The answer is, yes you can! Our construction financing product allows you to buy and renovate so the lake home of your dreams can be a reality.

Any residential mortgage we place on a home will require that the property can be occupied for all four seasons. This means it must be common for the area, be accessible, and will be fully functional as a year round home. That seasonal cabin that you’ve had your eye on could be purchased and renovated to take it from a three season to a four season home.

Seasonal properties, if they are structurally sound, can be made into functional all season homes for those weekend retreats and vacation getaways. The normal seasonal property is not equipped to be lived in during the winter months. It may lack insulation, an adequate central heating source, or fully functioning plumbing. All of these can be remedied with a construction renovation loan.

When you are writing a purchase agreement to buy the property, remember to leave time in the purchase contract to get a licensed contractor out to the cabin. You will need to address the list of items required to take the seasonal aspect away, and add all your wish list items to the project as well. This is the perfect time to put our low mortgage interest rates to work for you. Read the rest of this entry »

Credit scores are important when it comes to construction loans.

June 23rd, 2017
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Credit Score

Can I get a construction loan if I have credit challenges? This is a valid question, and one I get several times during the month. Credit scores are extremely important when it comes to construction or construction renovation loan programs. Each of the products or programs we offer can differ in the credit scores that are acceptable.

To begin with, we only use company approved credit reporting vendors. These vendors are also approved with the agencies’ automated underwriting products that we use. The vendors go direct to the credit repositories that keep the data and merge it into a report with scores. The three repositories are Equifax, Transunion, and Experian. These reports merge directly into our system and the automated underwriting systems we use. The report will contain credit scores, a list of any inquiries for new credit within the most recent time period, a list of any public records that might exist, and the history of individual credit accounts used to create the score. The scores take into account the number of accounts shown, length of credit history for each account, report of timely payments made, and the ratio of balance of revolving accounts to the credit limit granted for each. These are very detailed reports.

When three credit scores are present (in most cases) our automated underwriting system uses the middle of the three scores for its credit decision. Here are some of the basic rules as they relate to construction and renovation products: Read the rest of this entry »

Storm season is upon us – know what to do if your home sustains damage!

June 16th, 2017
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hail damageLast Sunday morning severe weather hit the twin cities.  Many of the northern suburbs suffered severe wind and hail damage.  Both of my daughters and their families that live in Blaine were affected with broken windows, roof, gutter and siding damage. Anyone that is dealing with this knows it is not easy to recover from.

Your first step after storm damage is to contact your insurance company to determine your coverage and filing requirements. Take photos or video of any damage. If you are doing any cleanup prior to the adjuster showing up, it is a great idea to document everything.

If you need to make minor repairs to limit any further damage (as in water damage) do so, but otherwise do not make any permanent repairs until you have approval from your insurance company.

Get multiple estimates and beware of high-pressure sales tactics. Ask friends or family for recommendations. It is always good to get a referral from someone you know and trust.

Ask contractors/vendors for proof of liability and workers compensation insurance. Make sure they are licensed to do work in your state. There will be contractors from outside the area that will come into the area looking for work – Please be careful!

You need to have a written contract from anyone you hire. Be sure to read all paperwork very carefully before you sign. The contract should detail the work to be done, the materials that will be used, and a price breakdown for labor and materials. Don’t pay cash for a job, and don’t pay up front.

Also, don’t file a claim for something you don’t intend to fix. This is a big one for us in the mortgage business. If you hold a mortgage, your mortgage company has a vested interest in having the property restored. Many times your mortgage company will need to sign off on the check coming from your insurance company.  Read the rest of this entry »

Let us help guide your construction ideas to a successful outcome!

June 9th, 2017
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barn

Will I be able to use construction financing to build a barnlike structure with living quarters?” This is a question that came up this past week. New construction financing and construction renovation financing do have their limits. This week I would like to discuss what works, and what does not work, for residential new construction and construction renovation financing.

Our program works for conforming residential properties. These are generally owner occupied, but we do have clients who build or renovate a property that will be retained and rented. We look at the highest and best use for the property, which needs to be residential in nature even if it is outside of a metro area in a more rural setting. When the appraisal is done on the new build or renovation project, the appraiser will look for comparable properties around the area. The property needs to be compatible, or common, for the surrounding area or market in which it is located.  So, if someone is looking to buy acreage and wants to build a new home, that is great! If that new home will be a barnlike structure with horses on the main level and living quarters on the second floor, that will be outside the scope of our conforming loan products.  Read the rest of this entry »

It’s National Homeownership Month!

June 2nd, 2017
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homeownership month

June is National Homeownership Month. It began in 1995 as a Presidential Initiative to support and expand home ownership opportunities for Americans. After all, owning a home is the American dream and a way to build wealth that can be passed on to future generations.

Here in Minnesota, the Minnesota Homeownership Center and many members of the Homeownership Advisors Network are offering free or reduced prices on first time home buyer training, commonly know as HomeStretch™ which is done in a classroom setting, or Framework which is the online version. You can sign up for a class by visiting hocmn.org (home ownership center Minnesota), or click the link to register for the online training https://hocmn.frameworkhomeownership.org/Default.aspx .

June Homeownership Month puts the spotlight on how homeownership positively correlates to the building of strong, vibrant communities. Data from The State of Homeownership report published by the Minnesota Homeownership Center shows that:

  • Homeownership Remains a Family’s Greatest Asset. On average, more than one-third of total household wealth is tied to homeownership. Among Black and Hispanic households who own, homeownership still makes up nearly two-thirds of total wealth.
  • Benefits of Homeownership Extend to Civic Engagement, Health, Education, and More. For example, homeowners are 25 percent more likely than renters to participate in civic and neighborhood groups.
  • Homeowners who receive housing counseling before they purchase are less likely to fall behind. According to a recent study by NeighborWorks America, prepared homebuyers are roughly 33% less likely to become seriously delinquent on mortgage payments over the first two years of owning a home, compared to those who didn’t receive counseling.

With the free or reduced homebuyer education being offered this month, now is the time for those first-time buyers who may still be on the fence about transitioning from renter to homeowner to make the move! We are here to help make the American Dream of homeownership a reality!  – Randy Cullen, NMLS #326128

Celebrate our heroes this Memorial Day!

May 26th, 2017
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Memorial day celebrate our heroes message

Our offices will be closed on Monday May 29, 2017 in observance of the Holiday

Fairway Independent Mortgage Corporation

Bloomington, Waterville and Plymouth

952-853-0222