"PROACTIVE" ... The Medicine That Cures During Mortgage Application

"PROACTIVE" ... 

The Medicine That Cures 

During Mortgage Application

I'm presently working with multiple self-employed mortgage applicants ... and as you would probably suspect, the process for these applicants is a bit more detailed in scope.

Why?

There are several reasons.  A few of those reasons are found in an article I wrote just a few days ago entitled, "Self-Employed and Hoping to Finance a Home?  What You Need to  Know ..."

But perhaps the detail that has historically been the largest stumbling-block and biggest frustration for my clients has surrounded the request for/and obtaining of their Federal Income Tax Return.  The COVID-19 pandemic we are now facing has only served to worsen these problems.

Right now, The Internal Revenue Service (from which tax returns are requested), is running on what the IRS website refers to as "a limited staff".  It goes on to state that they are "experiencing delays" regarding paperwork and tax refunds both.  

In many cases, these issues are creating an additional layer of problems for mortgage applicants and lenders during the mortgage process and its underwriting.

Why are they an issue/problem? 

Current lending requirements demand that most, if not all, loan files include a signed 4506-T (IRS Form #).  This form allows and authorizes the Internal Revenue Service (IRS) to confirm the filings of a Borrower (and Spouse/Co-Applicant, if applicable).  

It's important for mortgage lenders to have this documentation.  The Federal Tax Return speaks to the total income earned and claimed by mortgage applicant(s) and filed with the IRS and that's vitally important information for them to have.  

For self-employed applicants ... that often  claim a variety of business deductions ... this step in the mortgage process can present a bit of a dilemma when it comes time to be pre-approved for a mortgage/mortgage payment.  

While filing their taxes, their accountants may have provided them advice regarding their tax responsibilities/payment that ... while beneficial to them in regards to what they must pay in income taxes ... reaped them a verified income that is insufficient for a mortgage lender to qualify them for a loan. Or, at minimum, the price of home they hoped to purchase.

But again, no matter the income challenges a client faces, these tax returns are typically required documentation and the information they contain is significant to a lender.  The delays currently being experienced (courtesy of the IRS and pandemic) when requesting this documentation are definitely adding an additional layer of stress to an already detailed mortgage process.

So what can a self-employed mortgage applicant do to by-pass or reduce the stress added by these IRS delays?

1.  Understand that, if you are self-employed and have decided to buy/finance (or refinance) a home, your tax returns will need to be up-to-date and filed for the previous year

2.  If possible, act proactively and have your (filed) Tax Returns available for your lender at the time of application for mortgage

3.  If Tax Returns are being requested for you by your lender:  Understand that the receipt of the Returns may take longer than they would have in the past because of the delays/issues mentioned above

4.  Prior to signing a real estate contract and setting a date for closing, discuss with your agent and lender what response times are currently being experienced regarding the request for tax returns.  Realistic and attainable dates for closing dial stress levels down considerably 

For Self-Employed Mortgage Applicants:
Proactive action is the "medicine" that cures during mortgage application.

Taking proactive action regarding required documentation is wise.  And currently, action taken should also include and address those changes that have taken place recently in regards to Mortgage Underwriting.  

While I address those recent changes for Self-Employed in my article mentioned and highlighted above, I share them again below.  

Self-employed applying for mortgage will now be required to document:

• Income Verifications:  Self-Employed borrowers' incomes are typically verified using the most recent two years of income tax filings.  In many instances, as a result of the pandemic, those incomes do not show a current or year-to-date accounting, as the prior year's tax return is filed in the CURRENT CALENDAR YEAR.
• Underwriting:  Mortgage Underwriters need to understand the "true picture" of a Self-Employed borrower's income and expenses BEFORE the next Tax Filing.  That information will need to be generated and documented in what is known as a Profit and Loss Statement (P&L)
• Previously just recommended:  Now Profit and Loss Statements will be required for Mortgage Underwriting to review and approve loans for all Self-Employed(s) from the Application Dates of June  11, 2020, and after, until further notice  
• Audited or self-generated Profit and Loss Statements: Borrowers will be required to provide self-generated/and signed Profit and Loss Statements to the current period in 2020.  (P&L must not be older than 60 days old, as of the note date)   

These Statements must include info/reports regarding:

• Expenses
• Net Income (Including the most recent month preceding the date of Loan Application) 
• 2 business depository account(s) statements (no older than the latest 2 months represented on the year-to-date Profit and Loss Statement)
• Business Revenue

*  Until further notice, the above will be required on all Conventional Loan applications to meet Fannie Mae/Freddie Mac standards.

At the risk of being redundant, I again say that any actions (regarding the above) that can be taken proactively and prior to making an application for mortgage will help speed the mortgage process along.  And they will relieve and lower frustration and stress levels throughout a mortgage processing.  

That's a huge advantage a mortgage applicant can provide themself and truly benefit from ...  

* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicagoland ... IL or WI?

Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf.  I'm easily found at:

Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI #216987

American Portfolio Mortgage Corp

NMLS #175656

Direct: 815.524.2280

Cell: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.com

  

             

   

 

  

Gene Mundt, Mortgage Originator, an Originator with 40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking: 

#Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in 

#Chicago and the greater Chicagoland region, including: 

The #LincolnWayArea, #WillCounty, (#NewLenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Channahon, #Romeoville, #Elwood, #Lockport, #Naperville, #Wilmington, #Peotone, etc.),  #DuPage County, the City of #Chicago, #CookCounty, and elsewhere within #IL & #Wisconsin. 

Your Referrals & Testimonials are Greatly Appreciated! 

  

Self-Employed and Hoping to Finance a Home? What You Need to Know ...

Self-Employed and Hoping to Finance a Home?  

What You Need to Know ...

As of June 11, 2020, changes in the processing of SELF-EMPLOYED borrowers have been implemented by Fannie Mae and Freddie Mac ...

Why?

The financial impact meted out by the COVID-19 pandemic.  Uncertainty has befallen many businesses and resulted in a disruption of normal underwriting and lending procedures. 

Many business owners have been/are/will be affected by "fallout" from the COVID-19 virus.  Social distancing, self-isolation(s), and stay-at-home orders have all been put into place as a result of the dangers of the pandemic.  

The Mortgage Industry is one of those that have been affected by the pandemic.  Newly-announced changes have gone into effect as a result of current events.  

Some of those changes that have taken place in mortgage underwriting involve or include:

• Income Verifications:  Self-Employed borrowers' incomes are typically verified using the most recent two years of income tax filings.  In many instances, as a result of the pandemic, those incomes do not show a current or year-to-date accounting
• Underwriting:  Mortgage Underwriters need to understand the "true picture" of a Self-Employed borrower's income and expenses BEFORE the next Tax Filing.  That information will need to be generated and documented in what is known as a Profit and Loss Statement (P&L)
• Previously just recommended:  Now Profit and Loss Statements will be required for Mortgage Underwriting to review and approve loans for all Self-Employed(s) from the Application Dates of June  11, 2020, and after, until further notice  
• Audited or self-generated Profit and Loss Statements: Borrowers will be required to provide self-generated/and signed Profit and Loss Statements to the current period in 2020.  (P&L must not be older than 60 days old, as of the note date)  

       

     These Statements must include info/reports regarding:

• Expenses
• Net Income (Including the most recent month preceding the date of Loan Application) 
• 2 business depository account(s) statements (no older than the latest 2 months represented on the year-to-date Profit and Loss Statement)
• Business Revenue

*  Until further notice, the above will be required on all Conventional Loan applications.

Mortgage Lenders will require that borrowers provide their 2 most recent bank account statements for review.  

These statements must support and/or not conflict with the info provided by the borrower in their current year-to-date Profit and Loss Statement.

Should supporting information be found lacking in some manner:  The Mortgage Lender is required to obtain additional statements or other documentation that will support the information provided from the current year-to-date Profit and Loss Statement.

The above can seem a bit complicated and confusing.  But the message (and my advice) to all Self-Employed considering a mortgage is actually straightforward and clear.

Self-Employed Borrowers are well-advised to seek out an experienced and knowledgeable Lender to discuss financing options well in advance of taking any action regarding:

• The purchase of a home or investment property
• The refinancing of their present home 
• The seeking of a business or personal Line of Credit  

While this sound advice is always provided wisely, it is especially relevant in today's uncertain business environment.  By following this advice a borrower provides themself ample time to document your business revenues/activities thoroughly and to the best advantage as they pertain to application for financing.  

Think of it as "staging" or positioning yourself for loan application ...

The more in advance that guidance from a Lender is sought and the resulting actions begin, the better ... and the more easily and quickly you will successfully navigate your mortgage process ...

* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicagoland ... IL or WI?

Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI License #216987

American Portfolio Mortgage Corp

NMLS #175656

Direct: 815.524.2280

Cell: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.com

  

             

   

 

  

Gene Mundt, Mortgage Originator, an Originator with 40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking: 

#Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in 

#Chicago and the greater Chicagoland region, including: 

The #LincolnWayArea, #WillCounty, (#NewLenox, #Frankfort, #Mokena, 

#Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, 

#Channahon, #Romeoville, #Elwood, #Lockport, #Naperville, 

#Wilmington, #Peotone, etc.),  #DuPage County, the City of #Chicago, 

#CookCounty, and elsewhere within #IL & #Wisconsin. 

Your Referrals & Testimonials are Greatly Appreciated! 

How to Navigate a COVID-19-Era Mortgage Transaction Successfully

How to Navigate a COVID-19-Era 
Mortgage Transaction Successfully

A few weeks back, I wrote an article regarding the need for homebuyers to adopt the right mindset and being ready to "go to work" when approaching, preparing, and entering the home buying process ...  

Over the last few weeks that advice has become even more important and relevant.  The COVID-19 virus and resulting pandemic produced even more challenges for potential home buyers and those now actively seeking homes.

Even with responses coming from Government Officials, financial experts, the U.S. Treasury Department, as well as the Private Financial Sector ... the result of more regulations, more guidelines, more economic stimulus, more financial/credit relief for mortgage-holders (homeowners), have created a time of uncertainty for those who:

• Originate 
• Underwrite 
• Approve 
• Lend 
• Service mortgage loans that are insured by FHA, VA, and the USDA (a/k/a Government Loans).

Along with this current uncertainty has come instability.  Higher costs and higher interest rates have also occurred (although rates can and have fluctuated, as rates are dependant on financial markets and current events/news delivered throughout any given day).

Why?

It's a fact:  Mortgage Lenders are constantly looking for ways to eliminate as much of their risk as possible.  Lenders have been accomplishing that recently by limiting the flow of mortgage money.  But again, this action is taking place during a time when their liquidity has been greatly tested.  

But American homeowners have been "tested" too. They've been laid-off and furloughed in record numbers.  Work-hours and employment have both been cut back drastically for many Americans.  Those working in service-providing industries have been especially hard-hit.

It's for these and other deeply-intertwined reasons that Mortgage Lenders have currently increased credit score minimums to 640 on FHA Loans.  But please note:  Credit score minimums can possibly be even higher in some FHA lending scenarios.  

Many hopeful home buyers recently calling me for mortgage information have noted that they've heard and seen some Mortgage Lenders advertising interest rates for Borrowers with scores as low as 620.  

That is why it's important to note here:  Typically those lower minimum scores are attached to such high closing costs (Points), that low-down-payment borrowers simply can't meet the financial burden/costs of closing on an FHA or VA Loan (or choose not to) at this time.  

In other words:  Potential home buyers are on the sidelines of buying and choosing to wait these higher costs out for the time being.  

In the meantime and as a direct result, demand for these loans has dropped.  The demand will remain low until the Government Loans become more reasonable and more affordable once again.  

Methods of negotiation for current transactions are evolving as a result of the above-mentioned changes.  
I am presently seeing Real Estate Contracts come in that include "Seller-Paid Closing Costs" again.  

And as a result, agents on both sides of the transaction must be prepared.

For Realtors representing Sellers:  It's wise to prepare your clients for offers that might include requests for Sellers to pay closing costs/point (up to 6% on FHA Loans is allowed).

For Realtors representing Buyers:  Mortgage Lenders representing your Buyers, myself included, may suggest that Buyers ask for Seller-paid Closing Costs on Pre-Qualification or Pre-Approval Letters.  

Why?

Seller-paid Closing Cost assistance may be the best (or only) way to make a Buyer's financing work and for them to successfully complete their transaction.  It may be the only route to a successfully completed sale.  Only a thorough and complete analysis by a Mortgage Lender via the pre-qualification/pre-approval process can determine this for sure.

Now is the time to educate yourself regarding current lending trends.  Get and remain flexible ... both if a Buyer and Seller (or Realtor representative).

Why do I say current?

Trends form, changes occur, and fluctuations in interest rates take place all the time.  It's one thing you can always count on regarding mortgages. 

But as quickly as responses and changes arose to address the challenges presented by COVID-19 and rising unemployment, I'm already seeing an "easing" and changes ... although not presently in writing, as of this writing ... may already be taking shape.  

Stay tuned.  More changes will certainly lie ahead ...

But this just highlights why it's so important to get informed, stay educated, and exercise good common sense, good communication, and cooperation.  It's paramount to facilitating transactions.  

Everyone taking part in a transaction must participate in this mindset and do their part to help find solutions that will assist in successfully closing their clients' deals.

* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicago - Chicagoland - IL/WI?

Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI License #216987

American Portfolio Mortgage Corp

NMLS #175656

Direct: 815.524.2280

Cell: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.com

  

             

   

 

  

Gene Mundt, Mortgage Originator, an Originator with 40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking: 

#Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in 

#Chicago and the greater Chicagoland region, including: 

The #LincolnWayArea, #WillCounty, (#NewLenox, #Frankfort, #Mokena, 

#Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, 

#Channahon, #Romeoville, #Elwood, #Lockport, #Naperville, 

#Wilmington, #Peotone, etc.),  #DuPage County, the City of #Chicago, 

#CookCounty, and elsewhere within #IL & #Wisconsin. 

Your Referrals & Testimonials are Always Greatly Appreciated!