Why Your Job Matters When Buying a Home

 

Did you recently change jobs or receive a promotion? Despite what you might have heard, it is still possible to qualify for a mortgage to buy or refinance a home using your new income. The lending atmosphere is rife with misconceptions about job gaps, job changes and occupational changes within the course of an employment time frame. You can get a mortgage if you switched jobs or even changed industries , you just have to approach it the right way to seal the deal.

When determining your ability to pay (and therefore determining how much house you can afford), a lender will calculate your average income based on your pay from the past 24 months. It’s pretty straightforward if you’ve had the same job and same income and pay structure, but if any of those things changed in the past two years — or will change soon, you may face challenges when trying to get a mortgage.
In the past, lenders were ready to strike down loan applications in which there was a job or an industry change. Even real estate professionals will tell you not to change jobs before applying for a home loan. While that very well may be the case for most situations, it is not necessarily so black-and-white.Ty Laffoon
If you have had a job change, no matter what, a lender is going to need the following things from you — and your employer — in order to close on a mortgage: an offer letter, a role change letter if you have a title change and commensurate compensation package change, and the most recent pay stub and verification of employment. Ty Laffoon

How Lenders View Hourly Employees
Hourly employees are under the tightest microscope when it comes to getting a mortgage. Why? An hourly employee may have a set full-time schedule, which is ideal for lending purposes. However, if you work slightly less than a full-time schedule, with hours that fluctuate from week to week, this can muddy the waters. They will use a Verification of Employment that will state the average work week.

Here’s what you’ll need from your employer: a current pay sub and a Verification of Employment. These items could get you an exception due to relocation or an alternative circumstance. In either capacity, a most recent verification of employment can bridge the gap between how many hours worked in the year to date, supporting the new federal ability-to-repay requirements.

How Lenders View Salaried Employees
Lenders love salaried employees the most because a set salary streamlines the income calculation in the qualifying process. If you’re changing from one salaried role to another salaried role, despite a job gap, this should be no problem for qualifying for a mortgage so long as you can explain any gaps in the most recent 24 months.
Each job you’ve held in the past 24 months — even if you’ve held multiple jobs — all have to be detailed and itemized with dates so there is no gap in employment. If there is a gap in employment, the lender will need a written explanation detailing the transition. If you have changed jobs from one salaried role to another salaried role, with a different title and a different position — even within a different industry — that still should be fine for your lender as long as you are paid the same way — a flat salaried income.
What If You’re Salaried With Overtime, Commissions or Bonuses?
Have a new job? Or a new salaried role with big commissions, overtime or bonuses? If you do not have a history of this additional add-on income, it cannot be counted for use when qualifying for a new loan.
Here’s an example of a transition that a lender will find acceptable when calculating average income: A police officer has earned overtime plus salary for the past 24 months, and decides to change jobs to become firefighter with overtime potential. In this case, the overtime will be included in the 24-month average. The overtime, bonuses or commissions must be consistent during that time period for that type of income to be included in the average. A borrower can’t have a history of overtime, then change jobs and now have add-on commission income and expect the lender to include the add-on income in the 24-month average when there is no prior history of it.
Changing From Salary to Hourly Pay
If you are moving from a salary role to an hourly role, the lender is going to have to use your hourly income supported with a pay stub and verification of employment. As long as the change is within the same field and your title and role are similar, you should be in the clear.
Future Promotion or Raise On Deck
Congratulations, you’ve been offered a promotion! But first: Has it actually occurred yet? If not, you will be hard-pressed to get the lender to use the projected income, even if it is guaranteed.
If you cannot provide a pay stub with year-to-date income (usually a 30-day pay stub depending on your specific lender requirement), along with a letter detailing the change, you won’t get approved for the loan. Let’s say, for example, you are searching for the house and you know in the next four months your income is going to increase to $6,000 per month because you’ll have a new role within your company. In order for that $6,000 per month income to be used in the calculation, you’d have to get the details of the raise, including the role change letter and at least one pay stub.
So if you are thinking about getting a mortgage, even if it is further down the road, consider opening a dialogue with a lender now so you can be guided through any income bumps the past or future may hold. It is especially critical for you to get pre approved  with a lender upfront prior to house-hunting. This process includes allowing a lender to review your credit, debt, income and assets to assess your ability to qualify.
This is also a good time to start looking over your credit reports and checking your credit scores so you can address any problems in advance of applying for a mortgage.

Ty Laffoon
Prime Mortgage Loans

The Minutes from Federal Reserve meeting to give clues on when we will see a hike in the rates

 

Can you spare a minute of your time this afternoon for the release of the minutes of last month’s Federal Reserve meeting? It will likely be time well spent — especially if you’re wondering what Fed members were saying behind closed doors at the June 17-18 meeting about when they’ll start to hike short-term interest rates.

The minutes will be released at 2 p.m. ET. Ahead of the open on Wall Street, stock futures were pointing to a slightly higher open, after two days of losses. The Dow Jones industrial average is up 0.1% in pre-market trading.

The timing of interest rate increases is a hot topic on Wall Street, as low rates have been a major propellant of stock prices since the bull market began in March 2009. The start of the next Fed “tightening” cycle is viewed by many investors as an eventual headwind for a market that, many skeptics say, has become addicted to the Fed’s easy-money policies.

“Wall Street will be looking for clues to a timeline for when the Fed could potentially raise interest rates,”

Since the Fed’s last meeting, which included a dovish, or market-friendly, rate outlook from Fed Chair Janet Yellen, financial markets have been reacting to a June jobs report that was a lot stronger than anticipated. The 288,000 new jobs, well above the 215,000 economists’ forecast, and the drop in the unemployment rate to 6.1%, has intensified the rate-hike debate.

After the strong jobs report, a number of Wall Street firms have revised their forecasts for the Fed’s first rate hike, pushing the initial increase forward to the first quarter of 2015, sooner than the prior midyear 2015 prediction. Markets will be seeking clues signaling a sooner-rather-than-later Fed hike. “We will be looking for any signs of a more hawkish tilt.

Ty Laffoon
Business Development Manager
Prime Mortgage Loans

Before you apply for a home loan, make sure your finances are in order Pre Qualify Now

            

       

If you find the perfect house and you're ready to get a mortgage, your financial history may be more important than you think.

"There are so many components of your financial life that impact your ability to secure loans," says , New York. "Whenever you apply for loans, be sure to educate yourself on all your options, and know what's required."

 Massachusetts, agrees. "It's important for borrowers to know what type of activities can lead lenders to view borrowers as high-risk applicants," since this designation can lead to higher interest rates and fees, and may even result in the application being rejected.

Worried your finances will slow down your home buying process? Keep reading to find out which nagging financial issues can come back to haunt you.

#1 - Low (or No) Down Payment

You can pay now or pay later: If you fail to save up a sufficient down payment, it's going to raise the amount of your monthly payments.
"Mortgage loans are generally based on an 80 percent loan-to-value (LTV) ratio, which means that financial institutions will lend 80 percent of the property value/price," according PhD, department chair and professor of finance and real estate

Wall says that lenders prefer for the home buyer to have at least 20 percent equity, or a 20 percent down payment. He refers to this as having "some skin in the game." In other words, a homeowner who has put at least 20 percent into the cost of the home is less likely to walk away or default on the property.
On the other hand, "the lower the down payment, the higher the risk of default and the higher the interest rate charged to the homeowner," explains Waller.
In addition to a higher interest rate, borrowers will also be charged private mortgage insurance (PMI). "On a conventional loan, anything less than a 20 percent down payment will require the homeowner to pay private mortgage insurance (PMI)." If the homeowner defaults, PMI helps lenders to offset the cost of default mortgages.
So how much is your PMI and how long will you be required to have it?
"You are typically required to carry private mortgage insurance until you reach 20 percent equity in your home," says David Bakke, personal finance expert at the consumer-savings website, moneycrashers. com."Private mortgage insurance usually costs around 1 percent of your outstanding balance. So if your current balance is $200,000, you'll pay about $2000 per year."
As a result, Bakke concludes that it definitely behooves you to save for a substantial down payment.
Pre-Qualify at   http://pbsd.primemortgageloans.net

 

#2 - Low Credit Score

"Your credit score is the single most important snapshot of your credit health, and represents all the information on your credit report - including your credit accounts and payment history," says Ken Lin, chief consumer advocate at Credit Karma, Inc.
A low credit score sends the wrong signal to potential lenders, one that may even prevent you for being approved for a loan.
"A low credit score says that you're not a reliable borrower and it may be difficult to get approved at all," warns Lin. "If you are approved, your lender will use your score as one of the primary factors in determining your interest rate."
So what's considered a good or a bad score? "Anything above 760 is normally the top tier of credit, so an 800 score and a 761 will get the same interest rate pricing, says, Michael Metz, mortgage broker at V.I.P Mortgage in Scottsdale, Arizona. "Below 760, every 20 point increment (740, 720, etc.) will cause an additional "hit" to the pricing, resulting in a higher interest rate available to the buyer."

Pre-Qualify at   http://pbsd.primemortgageloans.net

#3 - Bankruptcies or Foreclosures

"Bankruptcies and foreclosures are serious business," says Koss. "If your credit profile and finances have ever dropped so low that you were not able to bail yourself out, it is hard for lenders to think you won't do the same to them."
After declaring bankruptcy or being foreclosed on, the requirements vary for different loan types. For example, "the Federal Housing Authority (FHA) requires you to wait three years after a foreclosure before you can get a home loan - unless there are "extenuating circumstances," like illness or relocation that led to the event," says Joe Parsons, senior loan officer with the mortgage lender, PFS Funding, in Dublin, California.
Also, if a borrower filed a chapter 13 bankruptcy - which means they paid their creditors through the court - the Trustee of the Bankruptcy Court must approve the purchase and the borrower must have made timely payments on the Chapter 13 repayment plan for at least one year, says Parsons.
For Chapter 7 - which means that all debts are discharged, and the borrower is no longer legally liable for them - Parsons says there is a two-year waiting period after the discharge date before a borrower can get another loan.
"For a conventional loan, the waiting period after foreclosure is two years if the buyer makes a down payment of at least 20 percent," Parsons explains. "If they can prove extenuating circumstances, the down payment requirement could be lowered to 10 percent."
Waller adds that getting a home loan after foreclosure is difficult, but not impossible. "Many times, individuals can get another mortgage soon after a foreclosure if they have a significant down payment, like 30 percent to 40 percent of the total cost of the mortgage."

Pre-Qualify at   http://pbsd.primemortgageloans.net

#4 - Late Payments

"When lenders check a borrower's credit, late payments will show up on the report, and it may sound harsh, but one or more late payments show an inability to handle current or past debts," warns Koss.
He explains that a borrower who has a number of late payments on his or her credit report raises a red flag for lenders. "And to offset the risk of loaning money to these borrowers, the lender will charge a higher rate, or turn down the loan request altogether."
Michael Garden, a realtor with the Garden Collaborative in Philadelphia, Pennsylvania, says home loans, car loans, credit cards and many other types of loans will show on your report - as will any late payments.
What's more, if the borrower currently has a mortgage or has had one in the past, the payment history on the mortgage will also be considered. "If a borrower has made more than two mortgage payments more than 30 days late in the past year to two years, it is unlikely that borrower will be approved for another mortgage," warns Garden.
However, all is not lost - especially if you've made strides to maintain on time payments. "As you get further from the late payment, the credit score will improve," says Metz. To speed up the credit score recovery process, he advises consumers not to close late accounts, so there's a visible payment history.
Pre-Qualify at   http://pbsd.primemortgageloans.net

#5 - Debt

"High levels of debt are an indication of risk. Too much debt is a signal to lenders that the borrower may be in trouble or heading toward trouble financially," says Waller.
As a result, "if all of your debts totaled up are more than 36 percent of your gross income, you likely won't qualify for a mortgage, or at least it'll be a lot more difficult," according to Bakke, who says that this percentage will vary depending upon the lending institution.
That may seem like a low number, but Bakke says that according to the Ability-To-Repay rule recently passed by the federal government, your debts can't exceed 43 percent of your income. And some banks don't want to come close to that ceiling, so Bakke says their limit may be as low as 36 percent.
And if an applicant's debt-to-income ratio exceeds the government's 43 percent limit, Garden says it is unlikely that the applicant will be approved for a mortgage loan.
So how is your debt load determined? According to Parsons, "[The lender will] calculate this by adding to the total house payment (principal, interest, taxes and insurance) any debt that will last for more than 10 months. This would include student loans, car payments, credit card payments, alimony or child support, etc."
Parsons explains that the sum, "total debt," is then expressed as a percentage of the gross monthly income.

However, if your DTI exceeds the maximum amount, you may be able to enlist the aid of a family member to be a "non-occupant co-borrower." According to Parsons, "The income and debts (including housing expense) for the co-borrower are blended with those of the occupant borrower. This will often bring the DTI to an acceptable level."

Pre-Qualify at   http://pbsd.primemortgageloans.net

Buying Vs. Renting . Why you should buy

Buying a home might seem like a huge expense, so it's easy to convince yourself that you'll be stuck renting for the rest of your life. But in many cases, getting a mortgage can turn out to be a lot cheaper than what you would spend paying rent month after month.

Pre-Qualify at   http://pbsd.primemortgageloans.net

In fact, a recent study by real estate site, Trulia, shows that "homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas." In fact, buying a home is about 38 percent cheaper than renting, according to the study.

That was certainly the case for homeowner Cary H, who says she always knew she wanted to buy a home sooner rather than later.

"I realized early on after graduating from college that paying rent was basically the same as throwing my money away," she explains. "After 10 years, you've paid your landlord the equivalent to a massive down payment for your own place, and I always thought that was crazy."

H admits that there are cons to owning your own place, such as maintenance and repairs. She also adds that buying a home takes away your mobility. "When you're a renter, you can just pack up and move at any time." But for her, the benefits of homeownership outweighed the drawbacks.

H, who is 35, earns a $43,000 salary as an elementary school teacher in Fort Lauderdale, FL. "I did wonder whether my salary would be enough to qualify for a mortgage, but in the end it worked out fine," she says.

One reason Hqualified is because she has a decent credit score of 670. "I'm aware [my credit score] could be better, and I'm working towards paying off my student loans and improving my score so I can eventually refinance and get a lower interest rate."
Before H bought her current apartment, she rented a one-bedroom, one-bathroom condo for $1,060 per month. "Prices in Fort Lauderdale are ridiculous," she says. "My apartment was very cute and well-located, but it was a lot of money to be paying for something that would never be mine."
Ty Laffoon
Pre-Qualify at   http://pbsd.primemortgageloans.net

Saving for a Down Payment

Even though her rent was high, Henderson says she worked on saving as much money as possible for five years before she made the jump into buying her own home.
"Some months it was just a few hundred dollars. Some months it was close to $1,000," she explains. "I cut corners in so many ways - I now laugh about it when I remember."
For example, Henderson says that for an entire year, she only bought clothes at thrift stores or garage sales. She also planted a tiny herbal garden (including mint, rosemary and basil) in her balcony so she didn't have to buy condiments and would regularly buy food from the discounted section of her local supermarket.
"Those were the foods set to expire within a day or two, so I would just go home and freeze them," she explains. "Sometimes I saved as much as 70 percent off the original price by shopping that way."
H also took odd jobs here and there, such as walking her neighbors' dogs on evenings or weekends or tutoring students in math after work, earning anywhere from $15 to $35 an hour - and saved every penny.
"After five years, I had almost $34,000 in savings, and I was ready to buy," she explains.
Pre-Qualify at   http://pbsd.primemortgageloans.net

Finding Her First Home

It didn't take long before she found the right place, thanks to the help of a local realtor. "Apartments are expensive in Fort Lauderdale, so I thought it would take a while before I got something, but within two weeks, my realtor had found four condo apartments for under $200,000, which was the amount I was pre-approved for."
As for location, all four properties were within 15 minutes walking distance of where she used to rent. "I told my realtor anywhere within 30 minutes of my old apartment would work, so she did great," H explains.
She eventually chose a two-bedroom, one-bath 790 square foot apartment for $169,000 and signed the papers in April 2012. The apartment is part of a small complex and comes with amenities such as a heated swimming pool and a small gym.
"Plus, the condo was being sold completely furnished, so I didn't have to spend any extra money to move in," H says. Pre-Qualify at   http://pbsd.primemortgageloans.net

Saving Money through Homeownership

 Putting down every last penny of the $34,000 she had saved, H  had to get a loan for $136,000 to cover the apartment. To cover her $2,000 closing costs for the loan, she borrowed money from her brother and was able to pay him back within four months.
"I chose a 30-year fixed loan, because I liked the lower monthly payments," she says. At an interest rate of 4.31 percent, her monthly payments (which include $42 in homeowner's insurance and $141 in property taxes) comes out to $858 per month. "That's $202 less than I used to pay in rent every month," Henderson says.
So what is H doing with the $200 difference between her old rent and her current mortgage? She's investing it in stocks.

"My brother works as a stockbroker and has been trying for years to get me to invest," H  explains. "My plan is to do that for the next few years and then see where I stand." Depending on how well she's doing, H  says she might consider continuing to invest or she might take some of that money and put it towards paying off her mortgage.

Ty Laffoon
Pre-Qualify at   http://pbsd.primemortgageloans.net 

10 mistakes that could ruin your open house

No. 1: Hovering
As a seller, your job is to get out of the way. Let your agent and their team interact with the buyers. Nothing scares off buyers faster than getting cornered by a desperate seller. "Buyers don't like it when they are hovered over. Give the buyer some information and let them look through the home on their own."Pre-Qualify at   http://pbsd.primemortgageloans.net
No. 2: Half-baked staging
If you are going to professionally stage your home, stage the whole house, or at least one entire floor. Nothing is more jarring than two elegantly appointed rooms followed by an empty dining room or den,
"Nothing done halfway is ever any good," she says. And unless your agent is a professionally trained stager or interior designer, hire someone who knows what they are doing to handle this sensitive job. Don't let your agent start bringing in his or her furniture for the open house -- it happens more than you would think and it can backfire badly, .Pre-Qualify at   http://pbsd.primemortgageloans.net
No. 3: Rookie agent on duty
Your agent may not be the one to actually show your house. But make sure you are confident your Realtor has a capable and well-trained team,  While you don't want the agent at your open house to bombard potential buyers with information, you want to make sure whoever is there is available to answer any and all questions and is not more concerned with texting or reading a book.
Pre-Qualify at   http://pbsd.primemortgageloans.net
No. 4: Music
You don't need music to sell a house.
At worst, buyers will get suspicious that there is more road noise, or mechanical noise or neighbor noise that you are covering up."
No. 5: Failure to provide marketing materials
All buyers who walk through your house should be able to pick up an info packet to take with them, says W. There's no excuse for running out of copies. Otherwise it's out of sight, out of mind.
Pre-Qualify at   http://pbsd.primemortgageloans.net
No. 6: Smells
Forget heavy air fresheners. Like other attempts to spice up the atmosphere, at best it's a distraction and at worst it may raise questions about what you are hiding.
And yes, while pristine cleaning is paramount, the night before your open house is not the time to plaster your abode with industrial cleaners. The stench of bleach -- and the immediate questions it will raise in a buyer's mind -- will do more damage to your chances than that tiny patch of mold in the corner of the shower.
Skip the cookies baking in the oven as well. Maybe it worked in the 90s, but buyers figured that one out a long time ago,
"You only get one opportunity to make a first impression and if the impression is an overwhelming smell, you lose," she says. "Whether it cookies or disinfectant, if it is noticeable -- and not merely background -- buyers will notice."
Pre-Qualify at   http://pbsd.primemortgageloans.net
No. 7: Leaving jewelry, valuables about
From gawkers to serious buyers, quite a crowd will tramp through your house. Don't tempt anyone's honesty. Besides losing something precious, you could also poison the deal with needless suspicion when something goes missing and everyone is suddenly is a suspect,
No. 8: Pets
Letting your beloved pets hang around on open house day could prove costly. Not only should you put your dog or cat in a kennel for the open house, you need to remove all signs of your beloved animal friends. That means litter boxes as well -- a number one turnoff for sellers.
"The kitty-litter box has no place at an open house,"
No. 9: The wrong temperature
This one's simple: Your house should be warm but not hot in the winter and cool but not cold in the summer. Don't blow it by playing games with the thermostat.
Pre-Qualify at   http://pbsd.primemortgageloans.net
No. 10: Bad photos
If the online photos of your house are dim, blurry, taken at odd angles or of odd rooms, don't be surprised if no one shows up. Bad photos prevent potential buyers from ever showing up in the first place.


Pre-Qualify at   http://pbsd.primemortgageloans.net
Ty Laffoon

Fed's Wild Cards in the next meeting

The Fed's measured reductions in bond-buying sets it up to announce the end of the program in either October or December; it could telegraph the end date this week.

Longer term, the central bank could formally redefine its strategy for returning to a normal policy stance and shrinking its nearly $4.5 trillion balance sheet. The principles were last published exactly three years ago but have grown stale.
Another long shot is an announcement that the Fed has formally adopted a tool now being tested, called an overnight reverse repurchase agreement facility, that could help it drain reserves from financial firms when the time comes to raise rates. The repo tool was likely a focus of the Tuesday morning meeting on medium-term monetary policy. The rates will go up soon. Forwarded by Ty Laffoon

* Where are rates seen in 2015 and the years ahead?

From Mortgage News:


The individual policymakers' expectations, known as the "dots" charts, will reveal whether they still see rates rising in 2015 and hitting 1 percent, on average, by year's end.
Perhaps more intriguing is whether they continue to lower views on where the federal funds rate should settle in the longer-term. In March, the median expectation for the neutral federal funds rate was still 4 percent, but policymakers' dots have recently been edging lower, suggesting rates will not rise as sharply in the years ahead. Posted by Ty Laffoon
The addition to the FOMC of Fischer, who is seen as a dove, could diminish the influence of hawkish officials anxious to tighten policy.

Posted by Ty Laffoon