I was speaking with my Financial Advisor a couple of days ago and his hair was on fire! He is helping his client provide documentation to qualify for a refinance loan of a $250,000 investment property. His client has made over $1 million per year for the last 10 years and has millions in assets, yet the bank is giving him a hard time. Why? Because he has a perceived change of professions. This has thrown the underwriters into a tizzy and the world of government regulation! They become paralyzed trying to figure out how to approve the file. Welcome to my world!Every day we have to explain the unexplainable. The above scenario is a no brainer and this borrower should fly right through the system. Unfortunately, it may not happen. Common sense has left the building in the mortgage market. We now live in a world of income based guidelines that give little, if any, weight to assets.We see it every day where a borrower that has a w-2 income job, with as little as 3.5 percent down and no other assets, can get a loan easier than a highly responsible retired person putting down more than 20 percent with impeccable credit. Showing income is the name of the game in mortgage. Asset based lending is virtually non-existent.General Income RulesThe general underwriting guidelines is a two year history for income.
This includes both employed borrowers and self-employed borrowers. Sounds simple, right?
If you are an employed borrower such as a teacher, engineer, or other 9 to 5 job, it is easy to calculate and determine your income. However, what if you have overtime pay? Bonuses? Commissions? Recent pay raise? Job promotion? New job in same line of work? New job with higher pay in a different field of work? Can this income be used? These scenarios pop up every day.
It gets even more complicated for self-employed, retirement; trust income, investment income, alimony, child support, disability, and other types of income. Because of all the new rules and regulations that have come into play over the last 4 years, experience now makes a huge difference in helping borrowers navigate through the approval process to ensure a successful closing.
Will it Close?
Yes!! The hardest part of our job right now is making sure we have the appropriate documentation to satisfy the government regulation. It doesn’t always make sense. However, every file has become a test case and all “i’s” have to be dotted and “t’s” crossed.
Experience now matters. The “old school” underwriting guidelines have come back into vogue (not a bad thing) and mortgage professionals who grew up during the “full documentation” world as opposed to the “stated income” world, have a much stronger background to analyze income and make the mortgage experience more enjoyable.
Check out our simple 5-Step Blueprint to purchasing a home at homeownershipgateway.com to discover some of the tips and untold secrets to buying a home.
For more information contact: Bill Gaylord, Regional Manager, Gaylord-Hansen Mortgage Group.
A branch of Gateway Funding, DMS, L.P. NMLS #1071.
(858) 776-6830 Direct