My name is Quint Cobb and I am the Managing Director of Loan Operations in San Diego.
I wanted to take a moment and finally address the current state of the housing market and the availability of loans.
I have been very hesitant to write anything other than weekly updates over the last year but now that things have settled down a little bit, I have decided it is finally time to summarize all of our options when it comes to refinancing and purchases in the current market.
As we are all too aware, the last year has been extremely volatile with the housing market and with the availability of loans.
For the last year my team and I have encountered every single imaginable lender and loan scenario imaginable.
With the unprecedented increase in housing value we experienced over the last three years the subsequent market correction brought with it:
Major Changes to the Banks Guidelines as well as to the Availability of Loans.
As you know, many banks have shut their doors and the remaining banks have had to change their loan qualification guidelines to survive.
Over the last 12 months 267 banks have closed their doors.
To see a list of the banks that have closed their doors go to www.mortgageimplode.com
And over the last 12 months, the banks that have survived (were changing qualifications necessary to obtain a loan) weekly and even daily.
Basically everything is tied to home values and risk.
And when values are stable or declining they have to tighten their guidelines to survive.
I am an extremely positive person and during the volatility over the last 12 months the last thing I wanted to do was email my friends, family and clients and talk about all the volatile things that were going on. I was receiving mail and email from others in the industry and they made it sound like the sky was falling.
We just have to make sure we do our homework and submit loans perfectly so that the underwriters don’t have even the slightest reason to deny our loans.
Over the last year we have learned a great deal about what the banks are looking for in borrowers and the qualifications necessary to qualify for a loan.
These attachments go over the 9 basic lending scenarios and the qualifications necessary to get a loan for each scenario:
1) Full Documentation Loans
2) Jumbo Loans
3) Stated Income Loans
4) Cash-Out Loans
5) Purchases
6) Low Credit Scores
7) High Loan to Value Ratios
8 ) FHA loans
9) Loan Modification
Please take your time reviewing this information and give me a call if you would like to go over anything in more detail.
Thank you for your time and I hope that this information is helpful.
I am looking forward to speaking with you soon.
Sincerely,
Quint Cobb
1) Full Documentation Loans
Right now rates are as good as we have ever seen!
The only challenge is to qualify for these rates.
The best way to qualify for the best rates and loans is to provide Full Documentation.
I think there has been a lot of confusion over what Full Documentation means.
Often times my clients say to me, “I can show you all my income documentation”.
Full Documentation not only means showing income information and documentation it also means qualifying for the loan based on your True Documented Income (as opposed to Stated Income).
The bank takes a look at your documented income and compares it to the debts that show up on your credit report (mortgages, credit cards, vehicles, etc).
This is called the Debt to Income Ratio.
Right now for Conventional Full Documentation Loans the banks are looking for a Debt to Income (DTI) Ratio of 45% or less.
People that qualify for Full Doc loans are usually:
1) W2 Borrowers that have to report all of their income
2) W2 Borrowers that have limited tax write offs (bc they are not self employed)
3) W2 Borrowers that have more income than debts that show up on their credit reports
4) Self Employed Borrowers that report more income (even after write offs) than debts that show up on their credit report.
5) The banks want to see 680 Credit Scores or better and some lenders are moving toward requiring 700 Credit Scores or better to qualify Full Documentation.
6) Also many lenders are shying away from borrowers that have multiple properties that show up on their credit reports. (Please call me if you have questions about this).
Full Documentation is the best way to go if one qualifies.
Obviously Full Documentation is easier in areas where median home values and loans are lower than 417 thousand.
Going Full Documentation is more difficult in areas with large home values and large loan amounts.
For example to qualify Full Documentation for a loan of 250k an average household would need to make 6 – 10k per month (depending on exactly how much debt shows up on the credit report). With absolutely no debt other than the mortgage a household could make even less. But with credit cards and car loans and student loans a borrower would have to show even more).
To qualify for Full Documentation the bank divides your debt by your household income (to get your Debt to Income Ratio).
With absolutely no debt other than the mortgage a household could make even less. But with credit cards and car loans and student loans a borrower would have to show even more).
As you can imagine this is why so many people chose Stated Income in areas where home values and loan amounts were higher than 417k.Most banks are moving in the direction of Full Documentation to protect their investments. This is a direct result of Housing Values. When housing values are increasing the banks can afford to have looser guidelines. As Housing Values are decreasing the banks in turn tighten their guidelines.
As you know, interest rates right now are extremely good. The best way to qualify for the best rates and programs is to qualify Full Documentation.
Please call or email me if you have any question or to go over this in more detail.
Sincerely,
Quint Cobb
2) Jumbo Loans
Jumbo Loans are considered loans above 417 thousand dollars. The County Jumbo Lending Limits were raised but most lenders have not made the change yet or they are giving a big hit to the interest rate for going above 417 thousand dollars.
In the wake of the recent market correction many banks are shying away from Jumbo Loans all together.
Jumbo Loans do exist today.
Because by definition Jumbo Loans are larger, banks have to scrutinize Jumbo Loans more than conforming (lower loan amounts).
Right now most lenders are asking clients to provide FULL DOCUMENTATION to qualify for Jumbo Loans.
Obviously Full Documentation is easier in areas where median home values and loans are lower than 417 thousand.
Going Full Documentation is more difficult in areas with large home values and large loan amounts.For example to qualify Full Documentation for a loan of 250k an average household would need to make 6 – 10k per month (depending on exactly how much debt shows up on the credit report). With absolutely no debt other than the mortgage a household could make even less. But with credit cards and car loans and student loans a borrower would have to show even more).
To qualify for Full Documentation the bank divides your debt by your household income (to get your Debt to Income Ratio).
With absolutely no debt other than the mortgage a household could make even less. But with credit cards and car loans and student loans a borrower would have to show even more).
As you can imagine this is why so many people chose Stated Income in areas where home values and loan amounts were higher than 417k.
To learn more about Full Documentation Loans click on the FULL DOC attachment in this email.
It is still possible to get a Stated Income Jumbo Loans (we just need to have large compensating factors such as low Loan to Value Ratios and Large Reserves).
And since several major banks are no longer offering Jumbo Loans under any circumstance, Stated Jumbo Loans are more difficult as well.
The banks want to see 680 Credit Scores or better and most lenders are moving toward requiring 720 Credit Scores or better to qualify for Jumbo Loans.
In conclusion:
It is still possible to get a great Jumbo Loan and it is even possible in some cases to go Stated.
We were able to lock interest rates as low as 5.5% on million dollar loans going Full Doc over the last 12 months.
The problem was that not many people qualify Full Doc on such large loan amounts.
But the rates and loans are there if we can qualify.
Qualifying for a Jumbo Loan is simply more difficult than qualifying for a smaller, conforming Loan.
This is because there is more risk on the bank on large loan amounts.
This is ironic because the banks used to fight tooth and nail to get larger loan amounts.
Now many of those same banks are not even lending on large loan amounts due to their losses over the last 12 months.
Please call or email me if you have any questions about qualifying for a Jumbo Loan.
There are many options available and even if we do not qualify based on the tighter loan guidelines there is an option of Modifying your current loan WITHOUT refinancing.
To learn more about this option, please open the LOAN MODIFICATION attachment in this email.
Please call or email me if you have any questions and if you would like to go over your options in more detail.
Quint Cobb
3) Stated Income Loans
Stated Income loans are loans where clients have the option to “state” rather than provide Full Documentation proving their income.
In order to qualify for Stated Income usually borrowers had to have compensating factors such as low Loan to Value Ratios, Great Credit Scores and Great Reserves.
Over the last 5 years lenders were willing to take more risk as property values were rising or holding steady, which means lenders were more willing to provide creative and more risky products at that time, which means there were so many sources for financing there was always a home to be found for almost any scenario, no matter how difficult the loan was.
Stated Income was always a great option when it came to a difficult scenario (large loan amount, self employed borrower, great reserves, great credit but less than great income, etc).
Now, because property values are falling, lenders are less likely to provide risky or creative products, which means lenders are adhering more strictly to their guidelines.
To be clear: Stated Income Loans still exist; they are just harder to qualify for.
Many lenders are no longer offering Stated Income Loans at all.
But the Lenders that do allow Stated Income are requiring large compensating factors such as low Loan to Value Ratios, Great Credit Scores and Great Reserves.
Stated Income Loans were invented to help Self Employed Borrowers. During the peak of the market Stated Income branched out to include Stated Retired Income and Stated W2 Income.
Right now Stated Income loans do exist they are just much harder to qualify for.
Please call or email me if you have any questions about qualifying for a Stated Loan.
There are many options available and even if we do not qualify based on the tighter loan guidelines today there is an option of modifying your current loan WITHOUT refinancing.
To learn more about this option, please open the LOAN MODIFICATION attachment in this email.
Please call or email me if you have any questions and if you would like to go over your options in more detail.
Quint Cobb
Quint Cobb is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate.
4) Cash-Out Loans
Cash Out refers to a refinance scenario where a borrower is borrowing more money than they currently owe on their loan or loans.
The amount above their current loan amounts is considered Cash Out.
Cash-Out Loans are a great way to use the equity in your home to:
1) Do home improvements,
2) To Consolidate Debt
3) To Buy More Property
4) Or To Invest
Even though there is a lot of volatility in the housing market and lending world, many people have a ton of Equity in their homes that they can use to their advantage.
Although there is a lot of uncertainty in the market right now, for those who qualify there has probably never been a better opportunity to buy Real Estate, to do Home Improvements or to invest than right now.
Now more than ever, Cash is King.
For those that have access to cash the opportunities are incredible.
Home Improvements
(During the peak of the market the housing and building industries hired and trained record numbers of contractors and skilled constructions workers.
Now that the housing market has cooled off, there are many skilled construction workers and contractors that will do incredible work at rock bottom prices.
Consolidate Debt
As we all know, rates are extremely low but many credit card rates are still through the roof.
For those that qualify, this could be a great opportunity to consolidate high interest rate debts into a low rate, low payment, and tax deductible mortgage payment.
Buy More Property
All you have to do to hear about low property prices is to turn on the news.
On the one hand for home owners this depressing news.
But for buyers or investors, the next 12 months could prove to be the best opportunity to invest in real estate in the next 20 years.
With rates as low as they are and with sellers as motivated as they are, for those that have the access to cash, this may be one of the best times in history to invest in Real Estate.
Invest
Having access to cash also allows all levels of investing from starting or investing in a small business to diversifying into real estate, liquid high yield savings, IRA’s, 401k’s and Investment Grade Insurance.
If you have any questions about accessing the Equity in your home please give me a call to go over everything in detail.
Sincerely,
Quint Cobb
Quint Cobb is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate.
5) Purchases
Probably the most popular types of loans right now are Purchases.
Many of my friends, family and clients are calling me to take advantage of the low home prices.
Banks are very motivated to lend on Purchases.
Below is a summary of the types of loans and down payments available for Purchases today:
FHA – Federal Housing Administration Loans allow as little as 3 – 5% down!
Here are the qualifications for FHA purchases.
Owner Occupied – FHA only lends on properties that the borrower intends to live in.
Full Documentation – To qualify for FHA borrowers have to qualify Full Documentation (to learn more about Full Doc open the Full Doc attachment in this email).
3% Down – FHA allows the lowest possible down payment of 3% (no one else even comes close)
Be aware however that the government charges a 1.5% insurance fee on closing so 3% quickly turns into closer to 4.5% down.
Great Rates – FHA loans have great low 30 year fixed rates
Owner Occupied Purchase (Conventional non FHA) 5 – 10% Down
If you are not using an FHA loan and you are planning to move into the property you can get loan with 5 – 10% down.
Right now 100% financing does not appear to be an option.
There still are several banks allowing 5% down.
But there is a catch, 5% down is not allowed in Declining Markets or on Condos. That pretty much eliminates the entire United States, so the rule of thumb on non FHA purchases is 10% Down.
Second Home Purchases 10% Down
Second home pricing is very similar to Owner Occupied.
The only difference is that the property has to be in an area that would be believable as a second home (vacation spot, etc). It can not be down the street from you and be considered a second / vacation home J
Also for Second Home Purchases the borrower has to qualify based on their Debt to Income Ratio and they can not add any rental income to help (because obviously a second home is not a rental or investment property by definition). This can make it harder to qualify the purchase as a second home.
Investment Property / Non Owner Occupied Purchase 10 – 20% down
Most lenders are requiring 15 – 20% down on Investment Properties but I have a program with great rates that will still allow 10% down!
If you are considering looking into buying a new home or buying an investment property please give me a call to go over all of your options in detail.
Sincerely,
Quint Cobb
Quint Cobb is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate.
6) Low Credit Scores
Lower Credit Scores are considered anything less than 680.
Right now to get a conventional loan we really want to have a 680 Credit Score or Higher.
For borrowers with less than 680 Credit Scores the options have narrowed in the last 12 months.
There used to be a home for every loan scenario.
Now banks have tightened and are requiring tighter and tighter loan qualifications.
Over the last couple years lenders were willing to take more risk as property values were rising or holding steady, which means lenders were more willing to provide creative and more risky products at that time, which means there were so many sources for financing there was always a home to be found for almost any scenario, no matter how difficult the loan was or how poor the credit was.
Now, because property values are falling, lenders are less likely to provide risky or creative products, and are adhering more strictly to their guidelines.
For clients with less than 680 Credit Scores there are two options.
1) FHA loans
2) Loan Modification
If you have a Credit Score that is lower than 680 please read the attachments in this email on FHA loans and also on Loan Modifications.
Give me a call or email me to go over all your options in detail.
Sincerely,
Quint Cobb
Quint Cobb is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate.
7) High Loan to Value Ratios
Right now many people are finding it difficult to refinance because the amount they owe is close to or higher than the amount the property is worth (in today’s market).
This is called a High Loan to Value Ratio (LTV).
To determine your Loan to Value Ratio simply divide the amount you owe by the value that you think the house would sell for today (based on recent home sales in your area).
High Loan to Value Ratios are considered anything above 80%.
For well qualified borrowers getting a loan to 90% is not difficult.
But for anything above 90% there are two options.
1) FHA loans
2) Loan Modification
If you think you owe more than 90% of the value of your home (based on current home sales in your area) please read the attachments in this email on:
FHA loans and also on Loan Modifications.
Give me a call or email me to go over all your options in detail.
Sincerely,
Quint Cobb
FHA loans
What is an FHA Mortgage Loan?
An FHA loan is a mortgage loan that is insured by the U.S. government. Since the government insures the mortgage loan, lenders will be more willing to give out loans under more difficult situations. With an FHA loan, the government doesn’t’ actually give you the mortgage loan, a lender does (lenders can be institutions like banks or mortgage brokers). Any money used to pay for the home will come from the lender, not the US government. The government simply insures the loan so that lenders will give out more loans, since they know that if a borrower can’t pay the loan, the government will step in and over it.
The “FHA” stands for the Federal Housing Administration, a government agency which is itself a part of the Department of Housing and Urban Development (HUD). FHA was created in 1934 as a direct result of the Great Depression. During the Great Depression, millions of Americans were unable to make payment on their debts, the banking system failed, and millions of homes were foreclosed.
To combat the growing problem of indebtedness and a lack of homeownership during this period, the United States government set up the FHA, which was designed to provide families with loans so that they could purchase a home. The Great Depression ended in the late 1930s, and since then FHA loans have been used basically for the same purpose: to provide low and moderate income families with affordable housing. FHA loans are also great for first time home buyers, for qualified buyers that want to put less than 10% down and for borrowers with less than perfect credit.
So why should anyone get an FHA loan?
If you don’t qualify for or can’t afford a conventional loan, it is possible that you would qualify for an FHA loan since FHA loans have:
1) Lower Credit Score Requirements (in some cases as low as 530 Credit Score).
2) Lower Down Payment Requirements (as low as 3% down)
3) Higher Loan to Value Ratios for Refinances (FHA loans can go up to 97% of the value of the home).
In order to qualify for an FHA loan that home has to be owner occupied.
(*FHA doesn’t allow 2nd homes *FHA only allows investment properties for refinancing, not purchase and only if the property is currently in an FHA loan and then it will be a streamline).
Please call me to go over FHA Streamline Loans. For clients that currently have FHA loans this is an incredible option to lower your interest rate with no appraisal and no out of pocket costs. It is literally a streamlined loan to lower your rate and payment!
Also the borrower has to qualify Full Documentation. To learn more about Full Documentation click on the Full Doc attachment in this email.
FHA loans like any type of loan do have their challenges. The most significant challenge of FHA loans concerns the loan limits. In areas of the country where homes are expensive, you might not be able to find an FHA loan that can cover the total cost of the house on a purchase. County limits for FHA loans were raised recently however. Please research the FHA limits in your county or call me and I will let you know.
FHA loans were initially meant for people affected by the Great Depression. These days, most individuals who get FHA loans are interested in the lower down payment, the lower Credit Score Requirements or for first time home buyers, or to streamline their existing FHA loans.
If you meet these criteria, then an FHA loan may be right for you.
If you are interested in an FHA loan here is what your income, credit, loan amount and cash reserves should be:
Income – Your income can be relative low, but more importantly it should be steady for the past 2 years. If not the FHA might still insure your loan. But proving a steady source of income is always beneficial. Another nice thing about FHA loans is that you can add as many Non Occupant Co Borrowers as you need to qualify for the income requirements. The income has to be Full Documentation (see that attachment on Full Doc for more info).
Credit – Most people who get an FHA loan have credit that doesn’t meet prime pricing requirements. FHA will take scores as low as 580 and even 530 in certain cases. FHA loans are based on Case by Case basis.
Loan Amounts – FHA loan amounts are based on your county limits. The limits were changed recently so check with your county or call me and I will let you know.
Cash Reserves – It would be best if the borrower had cash reserves that exceeded the 3% down payment that FHA requires. To figure out what your down payment will be, just take the price of the house you wan tot buy and multiply it by 3%.
If you think that an FHA loan may be right for you and could help you refinance or purchase a property, please call or email me to go over all of your options in detail.
I am looking forward to speaking with you soon.
Sincerely,
Quint Cobb
Quint Cobb is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate.
9) Loan Modification
For many of my clients, refinancing is no longer an option because the banks new guidelines are making it almost impossible to qualify for any type of loan.
It is ridiculous to think that people that qualified easily for a loan as little as 12 month ago are being denied for a new loan (even by their current lender) today.
There is finally a real SOLUTION to this nightmare.
If you qualify we can finally help get your rate and payments REDUCED, even your principal balance LOWERED, any prepayment penalties WAIVED all WITHOUT refinancing.
If you qualify this could finally help you or someone you know WITHOUT refinancing.
Below is an article showing that the Federal Reserve Chairman is joining lawmakers urging lenders to help people that do not qualify for refinancing.
LENDERS Urged to Help Homeowners
Treasury Officials Discuss Difficulties with Mortgage Firms
By Renae Merle
Washington Post Staff Writer
Federal Reserve Chairman Ben S. Bernanke has joined lawmakers and Treasury officials in noting the difficulty created by declining home prices.
In some instances, the slump means that homeowners owe more than the house is worth.
In those cases, “the best solution may be a write-down of principal or other permanent modification of the loan,” Bernanke said Monday.
“Realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment”.
Please give me a call or shoot me an email if you are interested in hearing your options and to hear more about lowering your payments or principal WITHOUT refinancing.
I am looking forward to speaking with you soon and hopefully I can help you or someone you know that needs help
Sincerely,
Quint Cobb
QUINT COBB
Managing Director of Investment Loan Operations
Mortgage (Direct Lender and Broker) Commercial and Residential Real Estate (Buy, Sell, Invest) Life Insurance (Protect and Invest) all in ONE place!
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Quint Cobb is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate.
Quint Cobb Finance Weblog 