Posts Tagged ‘Home’

Using an Online Mortgage Loan Calculator?.”How Much Home Can I afford?”

Many sites offer a variety of mortgage loan calculators for use by web surfers and visitors.  There are monthly payment calculators, rent versus buy calculators, refinance calculators and on and on.  I am taking aim in this series of articles to help you to use these calculators in a more effective way. Today we are going to examine the most widely used calculator, How Much Home Can I Afford Mortgage Calculator.  More specifically, we are going to break down how to accurately estimate the qualifying income the mortgage company will consider when you apply so that you can enter that into a mortgage calculator. 

The design of this Calculator is to allow you to put in some basic income figures and have the calculator determine what payment your income will support and determine what loan amount that translates to and, by adding a down payment to that figure ….how much home you can afford.

The pathway to answers using this calculator is full of many pot holes. Let us start with the first – income determination.  In my two decades of loan origination I have found that there is often a huge difference in what a potential borrower thinks they make versus what an underwriter is going to allow for qualifying.  These differences are largest among the self employed crowd predictably. 

If you are self employed and file a schedule C: 

Your qualifying income is going to be determined by taking your verified schedule C gross income and subtracting all expenses (not including depreciation or depletion – both are paper losses) for the last two years and averaging that into a monthly amount.   There is an exception to the 24 month average rule and it is not good…. The exception is if your income is lower in the most recent year versus the previous year it is being averaged with, the lower year will be taken on its own and averaged over 12 months.  An explanation for the decrease will be required most likely and if it is significant, evidence that the “bleeding has stopped” might be required as well.  

Example: 

2009      Gross Self Employment Income 0,000 – ,000 of expenses (not including depreciation) is ,000 

2010      Gross Self Employment Income ,000 – ,000 of expenses (not including depreciation) is ,000 net, taxable and qualifying income 

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Ordinarily underwriting would take the 80,000 and the 70,000 net figures and average them. In this case, since the 70,000 is the more current figure 2010, it will also be the qualifying income figure.   

If you are Self Employed and Own a Corporation. 

Whether you are a C Corp or an S Corp, the business tax returns will be required and the corporation will need to be profitable. A loss (not including depreciation) will bring doubt as to whether or not the company can sustain the salary income you might be deriving from it.  S Corp losses and gains will appear on your personal tax returns but the corporate returns will still be required and should be reviewed as you work with a mortgage calculator. 

If you are W-2 Employee Earning Bonus or Commission or Overtime Income. 

You should first determine your base income. This would be your regular hourly rate x 40 hours a week or your regular monthly salary if that applies. Perhaps you are a nurse and work three 12 hour shifts in which case your base income would be your regular hourly rate x 36 hours. Do not use the over time rate in this case for calculating your base income.  In summary your base income is going to be established by using your current regular hourly rate or salary figure…no overtime, stipends, bonuses etc. Raises can be taken into consideration immediately when it concerns base income but will need to be evidenced with a paystub prior to closing.   

Underwriting will determine your qualifying overtime using a verification of employment but you can simply take your last 24 months of overtime and average it to a monthly figure. Keep in mind that you employer is going to have to verify that the overtime is likely to continue in order to use it and if the overtime is declining it may not be considered. If you have doubts don’t include it in your mortgage calculator.  

Please also keep in mind that it is common to claim unreimbursed expenses when you file your taxes. Many people do not even understand these expenses or where they are claimed.  If you itemize expenses on your personal Federal Tax  returns, it is possible that you are claiming expenses for your job that are not reimbursed by your employer. In the industry we call these 2106 expenses because they are broken out on form 2106 but listed in total on your Schedule A.  Typically these expenses will be averaged over 24 months and subtracted from the average gross income figure base pay plus overtime.

The following are general rules in determining income for the online Mortgage Calculator. 

Rule One: Monthly Base Income equals:

Current Salary (even if recent raise) evidenced by a recent pay stub.
Regular Hourly Rate x up to 40 hours a week. 

Rule Two: Bonus, Commission, Overtime  equals:

24 month average if increasing or steady.
Must subtract all unreimbursed job expenses claimed on tax returns 

Rule Three: Self Employed Income equals:

Sole Proprietor – Gross Income minus expenses (excluding depreciation and depletion) for the past two years evidenced by tax returns.  Must have a minimum of two years in business to count.
Corporate Owner – Salary or wage income plus review of two years of Corporate returns indicating the company’s ability to continue paying your income. Business losses (excluding depreciation) indicate that the company may be unable to sustain your income and underwriting will take this into consideration. 

Rule Four: Second Jobs

Must demonstrate a minimum of two years history of holding two jobs continuously in order to have this income accepted.
Income will be averaged over 24 months.      

For questions or comments on this article or about using a Mortgage Calculator or Mortgage Qualifying Calculator please feel welcome to contact us  hugh@themortgagecity.com

What is the Difference between a Home Loan Modification and a FHA Loan Refinance?

If you are one of so many Americans who has fallen victim to the economic recession and is finding it harder and harder to pay your monthly mortgage? If you are, you should make an appointment with a financial advisor who can go over the pros and cons of home loan modification versus FHA refinancing.

There are two options available for homeowners who cannot pay their mortgage loans. They are a loan modification and FHA refinancing. The one you choose depends mainly on who insures your loan. If you don’t know, call your lender and ask. There are three main insurers: Freddie Mac, Fannie Mae, and the Federal Housing Administration (FHA). These companies do not lend you money; they insure it. This means lenders have less of a risk and subsequently will offer you a lower interest rate.

Is there a difference between insurers? Not really. The determining factor is your specific loan and who insures it. There isn’t much difference between a mortgage insured by FHA and a loan insured by Fannie Mae or Freddie Mac. The insurer only really matters when restructuring enters the picture. Loans insured by Fannie Mae or Freddie Mac can participate in the new Making Home Affordable mortgage loan modifications. If the FHA insures the loan, refinancing is available through Hope for Homeowners plan.

With a FHA loan, the homeowner should investigate refinancing. The Hope for Homeowners initiative offers hope to homeowners who have been denied refinancing in the past. Lower property values have disqualified many people from refinancing. When a house loses value, it loses equity. If equity had dropped 20%, homeowners were not eligible for traditional refinancing.

There is a standard procedure for lowering your monthly mortgage payments through a Making Home Affordable loan modification plan. There are incentive payments for both lenders and borrowers that will help lead to favorable loan modification and encourage economic stability. If you have a FHA insured loan, you can get a home modification but not through the Making Home Affordable plan. The programs that deal with FHA loan modifications are not as straight forward, strict and they do not follow the same procedures.

It is not hard to understand the differences between loan modifications and FHA refinancing if you have the right information. Research it and talk to a financial advisor about reducing your home loan.

Nationwide Mortgage Loans offer FHA streamline refinance loans. Streamline refinancing enables FHA borrowers to refinance their present FHA mortgage for an improved interest rate or reduced years for repayment. FHA mortgages are more popular than ever after the Federal Reserve cut rates to the lowest level since the 1940′s. FHA streamline loans require less paperwork so refinancing is quick and easy. Take advantage of reduced FHA rates only available for government customers who can document consistent good loan payments for at least 12 months on their existing FHA loan. Lock in while the rates have reached historic low levels. Visit us at www.bdnationwidemortgage.com or http for more info and a no hassle consultation.

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Home Closing Costs Explained

by teamperks

It is very important for a first time home buyer to choose a right loan when buying their first home, which might have been a long term cherished objective for the person.

Recently I met one of my neighbors in a restaurant and decided to join him, as both us were sitting alone. After the customary family related questions and answers, our topic of discussion turned towards home loans and the home closing costs associated with it. My neighbor had recently purchased a home for his son in a place near Atlanta. He was telling me how he chose his lender and I found it quite interesting. I wanted to share some of his key points, which will be very helpful in choosing the right institution.

Apart from the interest rates, which is going to be a recurring expense on a monthly basis, there is another important one time cost to consider. This is the most important cost required to evaluate institution in the one time cost category, the home closing cost. Every institution has some standard closing cost items which will vary from lender to lender. One example of a standard closing cost is the document recording fees, where the borrowers will pay the local government.

Apart from those standard costs, there are other costs collected. As a borrower you can negotiate with the mortgage lenders regarding these costs. These varying home closing costs incurred by the borrower can include the following:

appraisal fee
origination fee
credit reporting fee
processing fee
underwriting fee

You can expect these home closing costs to range from between 3%-5% of the loan amount.

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Origination Fee

Now, coming back to the varying closing costs, the first fee in that list is the origination fee which is nothing but the fees for getting the initial quote details using the borrower’s data. Sometimes this fee might be used by the lender for some other purposes. This is usually between .5% – 1.75% of the loan amount.

Appraisal Fee

Next in this list is the appraisal fee. This is the fee paid to an external appraiser, usually appointed by the institution. The appraiser will inspect your home and provide the current market value for your house to the lender. This is required to safeguard the lending institution from any unscrupulous borrowers or in case of any interest payment defaults. Most of the lenders charge around 0 for the appraisal fee.

Underwriting and Processing Fees

The underwriting and processing fees are collected for providing services. The underwriting service is used to gauge the credit worthiness of the borrower by looking at the borrower’s credit level, assets, and debt to income ratio.

All the above mentioned fees vary in price and in some cases the borrower can do some bargaining on these fees. By law the loan officer has to provide an estimate of all these fees upfront. This estimate is known as the Good Faith Estimate.

Every institution should provide a list of home closing costs as a Good Faith Estimate right upfront. Some lenders might take some time to provide these estimates as they are trying to buy some time to arrive at the rates favorable to them. It’s always advisable for the borrower to request this estimate as early as possible. Borrowers can then compare this estimate with estimates provided by other lenders. This will give the option of bargaining for a good rate with the mortgage lender. But remember, this is only an estimate. Some mortgage closing costs will change before closing, so watch this.

FHA Loan Refinance – FHA loan requirements for Buying a Home or FHA Loan Refinancing

FHA loan requirements for Buying a Home or FHA Loan Refinancing

FHA loans are now making a comeback and they are here to help many people with their loan and mortgage problems! If you are looking for a FHA Loan Refinance., there are many interesting things covered in the article that you need to know.

The FHA loan is provided by the federal housing administration. They usually run many programs to promote a lot of new house buying.  You can obtain these loans or mortgages by the help of the FHA. You just need to put a small down payment and you are able to purchase a home. These are made to help you qualify for a mortgage but they still have certain requirement making it pretty hard to obtain. FHA is also authorized to offer lenders to take applications, process loan applications, and close and possibly even underwrite the loan.

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What is the loan?

This is a type of loan that helps new time house buyers find loans. The FHA will mostly pay and usually the lenders will make large mortgage loans because they are certain they will get paid back.

What are the FHA loan requirements?

Almost anybody is eligible – with a few limits, however. There are no income limits like other home buyer programs. But there are many limits as to how much you can borrow. You are usually entitles to a small loan price.

Your debt to income ratios also must be good and your credit score must also be good. So the FHA does not like slackers. But you don’t have to be extraordinary either.

Why are there loans so great?

They are to help many borrowers but they aren’t perfect for everybody. The only down payment for FHA loans is 3.5 percent, while their loans have higher down payment rates.

What does the FHA loan offer?

1.    Easier to use

2.    No penalties

3.    Assumable

4.    Leniency at times

5.    Sometime they fund for home improvement.

Why would a FHA loan not be the best option?

Gradually, you may find that these loans are not for you, even though they offer great things. They will not offer lots of money if the mortgage you need is a lot. Sometime the money can cost more than just getting a mortgage from private companies. If you are someone who has good credit, you may find a better loan aside from the FHA loan. Always compare and see what is best. You may or may not find a worthwhile deal with the FHA Loan Refinance.

How To Refinance Your House And Live Like A King! Smart Home Mortgage Refinancing That Will Save You Thousand$

How To Refinance Your House And Live Like A King! Smart Home Mortgage Refinancing That Will Save You Thousand$

How To Refinance Your House And Live Like A King! Smart Home Mortgage Refinancing That Will Save You Thousand$

With the low interest rates and with many homes being underwater, lots of folks are looking to refinance their current home mortgage. But you should do so carefully and for the right reason.

There are many considerations you need to look at prior to refinancing. We’ll examine all of these in this book.

In this guide we’ll take you through all the considerations of

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How to Use a Short Sale to Stop Home Foreclosure and Protect Your Finances

How to Use a Short Sale to Stop Home Foreclosure and Protect Your Finances

Don’t lose your ho me to foreclosure! Do a short sale! Robert Irwin, one of America’s most trusted real estate experts, provides the tools you need to avoid foreclosure—and protect your credit, your wealth, and your peace of mind. How to Use a Short Sale to Stop Home Foreclosure and Protect Your Finances removes the complications and stress often associated with short selling a property. Using real-life success stories, Irwin explains how a short sale works and

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Mobile home refinance loans

www.lendinguniverse.com mobile home refinance loans When the Roman Empire collapsed, the highly developed monetary systems of the ancient world collapsed with it. Subsistence agriculture and petty barter dominated the scene. Money was used only in the trickle of long-distance trade in luxuries…
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Home Closing Checklist

Home Closing Checklist

A concise, quick-reference guide to save money and headaches when closing on a home Fraught with arcane rituals, hidden traps and pitfalls, and confusing legal mumbo jumbo, the closing can be the most harrowing part of the home buying equation. Modeled after Robert Irwin’s popular Home Buyer’s Checklist, this book is packed with checklists, pointers, questions, and tactics that help a home buyer close the deal without losing his or her sense of humor, sanity, or shirt, including:

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Home Buying Closing Costs and Process Explained

by SS&SS

One of the great mysteries of home buying, at least to those who have never been through the process, is closing costs. While nearly everyone has heard of them, few who haven’t had to pay them really understand them. Even some people who have paid them aren’t sure what they spent all that money on.

Closing costs are the various fees that a homebuyer must pay before the mortgage lender will finalize the mortgage. Generally speaking, these costs are about 3 to 6 percent of the amount borrowed. That is in addition to your down payment. Following are some of the components of your total closing costs.

The lender will charge an application fee to cover the costs of completing your mortgage application. This may or may not include the fee for your credit report. They will also charge a loan origination fee, also known as points. This covers the administrative costs of processing your mortgage. One point is equal to 1% of the total amount loaned.

Many lenders offer the option to purchase without points, but keep in mind that this will result in a higher interest rate. There are also lenders who will let you pay additional points to lower the interest on your loan.

Title insurance will be required by your lender. This protects you and the mortgage company in case the seller does not have the legal right to sell it. There could be unknown co-owners of the property, or it could have an unpaid lien against it that would prevent the seller from legally selling it.

An appraisal is also required by lenders. This is to ensure that the home is worth the amount loaned to you to purchase it. A home inspection is not usually required, but it’s a good idea to have one. The cost of the inspection could also be considered part of closing costs.

Homeowners insurance is a standard requirement of mortgage lenders. They will require proof of it and may require you to pay the first year’s premium before closing. Private mortgage insurance may also be required depending on the amount of your down payment, and part of the fee will be included in your closing costs.

Taxes associated with the transfer are usually the buyer’s responsibility, unless other arrangements are agreed upon. You may also have to pay for a survey of the property. You will likely be required to pay the interest accrued between the time your mortgage was originated and the due date of your first payment. Attorney and notary fees may also be a part of your closing costs.

Closing costs are comprised of all of the expenses that must be paid before the purchase of your new home is finalized. Points are a fee charged by your lender that may be somewhat flexible and directly affect your interest rate. Knowing what these terms mean and what fees they consist of can help you be more prepared for them when the time comes.

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